Sunday, April 12, 2009

Ethanol raises cost of nutrition programs

The Ethanol issue has reared its ugly head again, attempting to gain political traction after a bad year of higher food prices resulting in the “fuel instead of food program.” As much as the ethanol industry would like us to believe food price increases were small and not entirely their fault, the facts have a way of getting in their way. According to AP:

Food stamps and child nutrition programs are expected to cost up to $900 million more this year because of increased ethanol use. Higher use of the corn-based fuel additive accounted for about 10 percent to 15 percent of the rise in food prices between April 2007 and April 2008, according to the nonpartisan Congressional Budget Office. That could mean the government will have to spend more on food programs for the needy during the current budget year, which ends Sept. 30. It estimated the additional cost at up to $900 million.

The CBO said other factors, such as skyrocketing energy costs, have had an even greater effect than ethanol on food prices. Ethanol's impact on future food prices is uncertain … because an increased supply of corn has the potential to eventually lower food prices. (But) The demand for ethanol was one factor that increased corn prices, leading to higher animal feed and ingredient costs for farmers, ranchers and food manufacturers. Some of that cost is eventually passed on to consumers, since corn is used in so many food products.

So with this knowledge in hand, it would seem prudent to take it slow during this near depression, and allow food prices to stabilize. But no, that would be bad for the small speculative ethanol industry.
Supporters of ethanol … say the report was good news. "The report … confirms what we've known for some time: The impact of ethanol production on food prices is minimal and that energy was the main driver…," said Tom Buis, CEO of Growth Energy, an ethanol industry group.
Okay, so how about playing it safe so food prices don’t continue to escalate, costing the government more in food stamps? Forget that too.
Ethanol producers asked the Environmental Protection Agency last month to increase the amount of ethanol that refiners can blend with gasoline from a maximum of 10 percent to 15 percent, which could boost the demand for ethanol by as much as 6 billion gallons a year. They said raising that cap would create thousands of new jobs. The report also looked at ethanol's effects on greenhouse gas emissions … the use of ethanol reduced gasoline consumption by about 4 percent last year and reduced the gases blamed for global warming from the burning of gasoline by less than 1 percent. But the clearing of cropland and forests to produce more ethanol could more than offset those reductions.
So let me get this right. We’re getting an entirely new industry, with government subsidies, so our energy use and environmental impact pretty much remains the same. We’re basically running in place while expecting to get ahead. Beautiful.

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