Dark days for ethanol?

The ethanol industry is fighting back against attempts to curtail billions of dollars in tax credits for ethanol companies that expire at the end of the year. The industry this week unveiled a series of ads aimed chiefly at big oil.

But ethanol has bigger opponents than oil these days. Brazil, for example, is lobbying Congress to reduce tariffs on ethanol made with sugar cane, which it says is more environmentally friendly than ethanol made with corn (as it is in Minnesota).

The Environmental Working Group notes that trees are cut down in Brazil to make way for sugar cane. And, it claims, the ethanol industry here takes credit for creating jobs that already existed:

The most egregious example comes in studies sponsored by another ethanol lobby group, the Renewable Fuel Association (RFA).2 The RFA consultant allows corn-ethanol to take credit for all the economic activity generated by growing corn, which was happening in commercial bulk long before the advent of ethanol. Over half (53%) of the jobs credited by the RFA consultant as being created by the corn-ethanol industry are in fact jobs that already existed for growing the corn that was already being produced for food and feed. Independent analysts rightfully criticize the RFA for dramatically over-estimating the employment impacts of their industry.

Other jobs that the industry did create in Minnesota are disappearing. An ethanol plant in Buffalo shut down just last week.

And Minnesota is cutting its subsidies to ethanol producers. Producer payments were cut by $4.4 million in order to help plug the large budget deficit in the state.

It’s a big fall for the industry, which brought big profits to farmers in the early part of the decade and had as much political clout as any industry in the country.

  • vjacobsen

    I say good riddance. Here is an industry that asked for handout after handout from the government, then went to small town locals (via newspaper ads and meetings) and asked them to buy stakes in their ethanol plants for $10,000 a pop. As taxpayers, we have been cheated out of TONS of money, and they want more. The small town farmers walked away from much more solid investments, and now, in too many cases, are left with very little. We all lose in the end.

  • John O.

    The perception seems to be that the percentage of corn diverted to ethanol production that used to go towards cattle feed and food has generated higher food prices.

    On the ethanol side, one of our vehicles does have the “flex-fuel” option where ethanol can be used in place of unleaded gasoline. Our experience (no perceptions here, just reality) is that fuel economy goes down by roughly 20 percent, so the net expense is roughly the same. This takes into account the lower cost per gallon of ethanol and the lower MPGs. The “externality” here is the limited availability of ethanol.

    When that vehicle is taken on a trip, regular unleaded is the fuel of choice–especially if we are driving across states like South Dakota, North Dakota or Nebraska which are sparsely populated in non urban areas. In the end, the promise of ethanol appears to be little more than a payday for a few and higher food prices for all.