The Politics of Ethanol

I am a big fan of alternative sources of fuel: nuclear, coal, hydrogen, bio-fuels, etc. Of course the best fuels to use would be renewable energy sources. I have often wondered why we haven’t been more pro-active in developing other sources. Moving away from oil would be the best way to solve the problems in the Middle East. Terrorists and terrorist supporters would be nothing without funding.

I know that Brazil has used sugar ethanol as an automotive fuel for many, many years. In fact, General Motors makes the cars that run on sugar. Have you ever wondered why our ethanol was based on corn rather than sugar? Or why we don’t use both sugar and corn? James Surowiecki wrote an article in the New Yorker that explains some of this.

What’s stopping the U.S. from doing the same? In a word, politics. The favors granted to the sugar industry keep the price of domestic sugar so high that it’s not cost-effective to use it for ethanol. And the tariffs and quotas for imported sugar mean that no one can afford to import foreign sugar and turn it into ethanol, the way that oil refiners import crude from the Middle East to make gasoline. Americans now import eighty per cent less sugar than they did thirty years ago. So the prospects for a domestic-sugar ethanol industry are dim at best.

We could, of course, simply import sugar ethanol. But here, too, politics has intervened: Congress has imposed a tariff of fifty-four cents per gallon on sugar-based ethanol in order to protect corn producers from competition. A recent study by Amani Elobeid and Simla Tokgoz, scientists at Iowa State University, projected that if the tariffs were removed prices would fall by fourteen per cent and Americans would use almost three hundred million gallons more of ethanol.

But that isn’t likely to happen anytime soon: the Bush Administration proposed eliminating the ethanol tariff this past spring, but Congress quickly quashed the idea — Barack Obama was among several Midwestern senators who campaigned in support of the tariff—and the sugar quotas appear to be as sacrosanct as ever. Tariffs and quotas are extremely hard to get rid of, once established, because they create a vicious circle of back-scratching—government largesse means that sugar producers get wealthy, giving them lots of cash to toss at members of Congress, who then have an incentive to insure that the largesse continues to flow. More important, protectionist rules flourish because the benefits are concentrated among a small number of easy-to-identify winners, while the costs are spread out across the entire population. It may be annoying to pay a few more cents for sugar or ethanol, but most of us are unlikely to lobby Congress about it.

It really angers me when politicians pander to special interests at the expense of our safety. Just remember that Bush, whose family made their money in oil, has pushed the country toward alternative fuel and other policies which reduce dependency on foreign oil, and Obama, the face of the Democrat’s future, thinks things are just fine the way they are with the current socialist policies.

Technorati Tags ethanol, sugar, corn, terror, Barack Obama