NCPA - National Center for Policy Analysis

ETHANOL GOLD RUSH CARRIES COSTS

May 10, 2007

Thanks to a host of generous ethanol subsidies, we have seen a stampede of American farmers planting corn in place of other crops to cash in on the ethanol craze, says USA Today.

For non-farmers, though, the consequences are less cheery.  They get to pay for the corn twice -- once through taxes to fund a 51-cent-per-gallon federal subsidy, then again at the dinner table because as more corn goes for ethanol, less is available for food and feed, boosting prices.

At a time when global agricultural supplies are at their tightest levels in decades -- and likely to get tighter as the result of rising living standards in the developing world -- America is taking vast amounts of farmland out of food production.  Consider:

  • Last year, about 4.9 billion gallons of ethanol were produced.
  • Within a couple of years, that number is projected to rise to about 12 billion gallons, thanks to a building boom in ethanol plants.
  • A proposal in Congress would mandate an increase in ethanol production to 36 billion gallons within 15 years.
  • That amount of ethanol, using current technologies, would consume virtually America's entire corn crop.

Even assuming breakthroughs in so-called cellulosic ethanol -- which is made from grasses, wood chips and such, and now costs much more than corn-derived ethanol -- world food supplies would be stressed.

The benefit from all of this is far less clear than ethanol's newly enriched boosters would have you believe, says USA Today.  In its first major report on bioenergy, the United Nations concluded that while ethanol and other biofuels can help reduce global warming and create jobs for the rural poor, the benefits may be offset by other environmental problems and higher food prices.

Source: Editorial, "Our view on alternative energy: Ethanol gold rush carries costs to your table," USA Today, May 9, 2007.

 

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