Fwd: Ethanol's a Big Scam
- Ethanol's a Big Scam, and Bush Has Fallen for It
By Kevin A. Hassett
In his State of the Union address, George W. Bush called for an
intense effort to develop more efficient alternative fuel
sources. "We will also fund additional research in cutting-edge
methods of producing ethanol, not just from corn but from wood chips
and stalks or switch grass," the president said. "Our goal is to make
this new kind of ethanol practical and competitive within six years."
Bush should have known better. In a capital city that is full of
shameless political scams, ethanol is perhaps the most egregious.
There has probably never been a specific topic around which so much
disinformation is spread. Ethanol lowers our reliance on fossil
fuels! Ethanol helps clean the environment! Ethanol will save the
Such sound bites work wonders when it comes to raising money. And the
amount involved is mind-boggling. The federal government subsidizes
ethanol producers with a tax credit of 51 cents per gallon of fuel
ethanol; those subsidies will total about $1.4 billion this year.
The Energy Department and the Agriculture Department spend tens of
millions of dollars every year on biomass-based energy research and
development. This is in addition to the billions of dollars--more
than $4 billion in 2004--the U.S. provides in subsidies for the
production of corn, from which most domestically produced ethanol is
If you look at the facts, the spending makes no sense whatsoever.
Consider how ethanol is produced. Corn is grown, harvested, and
delivered to an ethanol plant. There the corn is finely ground and
mixed with water. After fermentation, a mixture that is about 8
percent ethanol must be repeatedly distilled until it is 99.5 percent
Growing and harvesting the corn, and heating and reheating the
fermented corn to produce ethanol of a high enough quality to replace
some of the gasoline in your car requires an enormous amount of
energy. How much?
Adding It Up
A recent careful study by Cornell University's David Pimentel and the
University of California at Berkeley's Tad Patzek added up all the
energy consumption that goes into ethanol production. They took
account of the energy it takes to build and run tractors. They added
in the energy embodied in the other inputs and irrigation. They
parsed out how much is used at the ethanol plant.
Putting it all together, they found that it takes 29 percent more
energy to make ethanol from corn than is contained in the ethanol
It's not that corn is a bad source for ethanol. The other sources
mentioned by the president look even worse. Wood biomass takes 57
percent more energy to produce than it contains. Switch grass takes
about 50 percent more.
Ethanol is just a highly uneconomical product. Some other authors
have disputed these findings, but they invariably come up with more
favorable calculations by excluding some of the costs.
Indeed, no matter how expensive fossil fuels become, ethanol will
never be economical because it takes so much fossil fuel to produce.
It might be possible that someday technological processes will emerge
that make production of ethanol less reliant on fossil fuels, but the
billions in subsidies to this point have left us with a process that
is still a disgrace and an absurd waste of energy and taxpayers'
At least ethanol reduces pollution, right? Maybe the subsidies are
worthwhile because they will buy us a cleaner environment.
Guess again. First, corn production, according to Pimentel and
Patzek, "uses more herbicides and insecticides than any other crop
produced in the U.S."
And the Environmental Protection Agency has cited ethanol plants
themselves for air pollution. In a letter to the industry's trade
group, the EPA noted that pollution was a problem in "most, if not
all, ethanol facilities." These plants produce large quantities of
waste water as well.
Ethanol itself contributes to air pollution. Cars emit more air
pollution when they run on gasoline containing ethanol than they do
when running on gasoline alone. Our environment would be greener if
we stopped relying on ethanol.
The arguments against ethanol are so persuasive you have to ask
yourself: Why does Congress keep throwing money at it?
The answer appears to be that elected officials from corn- growing
states such as Iowa and Illinois see it as a cash cow for their
The ethanol business is a pretty good source of cash for the
lawmakers too. The political action committee of Archer Daniels
Midland Co., the world's largest producer of corn-based ethanol fuel,
gave $69,000 to federal candidates for the 2004 elections, according
to the Center for Responsive Politics.
In 2002, before such unlimited "soft money" donations were outlawed,
ADM gave $1.8 million to political parties. Its political action
committee gave close to $200,000 to individual campaigns and
ADM spread the money around wisely that year, to beneficiaries
ranging from Republican House Speaker Dennis Hastert of Illinois to
Democratic Senator Tom Harkin from Iowa. Beneficiaries in 2004
included Hastert as well as Democratic Senator Kent Conrad of North
Where's the Race?
Let's summarize the economics this way. Exxon Mobil Corp. had $36
billion in net income last year. If an alternative fuel source could
be developed that would compete for that business, the potential
rewards would be enormous. There would be a race to get there first,
and firms would be lining up to do ethanol research. We wouldn't need
But even with decades of federal subsidies, private companies still
haven't developed an economical ethanol, and public sector progress
Bush's speech holds out hope that finally, after all those wasted
billions, we are just six years away from a quality product. But it
seems unlikely that the magic formula will soon be discovered. Folks
have been distilling things for years. How much technical progress
could the process possibly undergo?
The fact is, ethanol is a scam that allows farm states to extract
resources from everybody else and pretend to be virtuous while doing
so. We would all be better off if Congress just wrote these states a
check with no strings attached. At least then we wouldn't be wasting
all that energy.
Kevin A. Hassett is a resident scholar and the director of economic
policy studies at American Enterprise Institute.
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