Explain to Me Again Why Ethanol from Corn for Driving Cars Makes Sense

Perhaps it’s time to start paying attention when the AEI-Brookings Joint Institute, that bastion of conventional Beltway thinking, starts bad-mouthing producing ethanol from corn as a replacement for gasoline. However, as I got further into this, I found that AEI/Brookings is still very much part of the problem. Hat tip to Environmental Valuation and Cost Benefit News for the link.

The results from a study just released by the Joint Institute (link not up yet) “strongly suggests that the case for ethanol is lacking”. Their analysis is based on data from “a recent Environmental Protection Agency report on the economics of mandating the production of alternative fuels”. The AEI-Brookings press release doesn’t say which EPA report they are talking about, but I suspect it’s this one. Under the Energy Policy Act of 2005, the EPA is responsible for developing regulations to ensure that gasoline sold in the United States contains a minimum volume of renewable fuel. The Renewable Fuel Standard program will increase the volume of renewable fuel required to be blended into gasoline to 7.5 billion gallons by 2012. The Renewable Fuel Standards program was developed in collaboration with refiners, renewable fuel producers, and many other stakeholders (with the refiners and renewable fuel producers around, one wonders how prominent the “other stakeholders” were in the rulemaking).

The AEI/Brookings report cites the statistic that using all of the corn grown in the U.S. for distilling ethanol would offset about 12% of the gasoline demand, based on the 2005 demand level. That statistic comes from a life cycle analysis of biofuel production from corn and soybeans, published last year by researchers at the University of Minnesota. In addition, while there may be modest reductions in greenhouse gas emissions from biofuels production (soybean biodiesel is the better alternative than corn-produced ethanol in this regard), any biofuel production has other impacts, including degradation of soil quality, ecological impacts from fertilizer and pesticide runoff, and depletion of nonrenewable water resources. The UMN study identified many of these impacts, but did not appear to incorporate them quantitatively into the life cycle analysis – a difficulty with LCA is aggregating dissimilar impacts into an overall metric. The other issue arising is the rise in food prices, both from converting corn production to ethanol and from the overall rise in energy prices.

The AEI/Brookings press release offers some helpful suggestions, such as discontinuing the tax credit for domestically-produced ethanol and removing the tariff on imported ethanol (if fermenting ethanol from corn is such a great idea, the market will validate it, right?). It suggests putting research emphasis into other endeavors to increase energy security and influence climate change. The examples for these other endeavors that it offers are a bit weak – geoengineering the atmosphere and biomass for electrical generation. What about upgrading urban mass transit? Read down a ways to Charles Pierce’s item about an intercity rail concept which makes entirely too much sense.

But the following statement by AEI/Brookings was just too much for me:

Congress might never have bet so much of the taxpayers' money on corn-based ethanol if an unbiased accounting of the consequences had been available early on.

. . . [momentary pause in blogging]. . .

. . . sorry about that, I’m back now. I was laughing so hard that I think I pulled a muscle. It goes beyond sheer naïveté to suggest that facts would get in the way of a splendid way of making money, with today’s Congress.

And, as for the AEI/Brookings closing recommendation. . .

We could use a separate agency, shielded in part from political considerations, whose sole mission would be to analyze the costs and benefits of regulations and government programs. Without such an agency, interest-group logrolling will continue to trump science and economics in major policy choices.

. . . words fail me. It sounds like something a policy wonk would say after a couple of bong hits. There’s no recognition in such a statement that the “political considerations” are a major part of the “ethanol problem”, and that campaign finance and lobbying reforms, along with a rejuvenated mainstream media that gave a shit about journalism, might also be helpful here. I think we're doomed.

If I had to speculate as to what the game here really is, the AEI/Brookings Joint Institute is attempting to establish its bi-partisan cred, by wagging its finger at Congress, the big growers and the renewable fuels industry, while at the same time offering up a completely toothless solution. As I said earlier, part of the problem.