Ethanol
are we actually paying fuel suppliers to abide by the law?
Eric LaMont Gregory

The US Senate has rejected legislation to end billions in tax breaks for ethanol subsidies and oil companies.  The attempt to end ethanol subsidies failed by a vote of 40-59, US Senator Portman from Ohio voted in favor of continuing the subsidies to the oil and ethanol industry.

In the midst of a global food shortage, perhaps we might want to consider that the benefits of lowering gas prices by a few cents, might not outweigh increases in the cost of food.

A short history of Corn-Based Ethanol

Corn-Based Ethanol was embraced by industry and by federal lawmakers who saw it as an easy, money-maker and bipartisan environmental win, respectively.  Although it was well known that corn-based grain ethanol requires huge inputs of fossil fuels to plant, harvest, fertilize, spray with pesticides, ferment, and transport.  

In addition, there are certain unintended consequence, such as, rainforests being burned down around the world to clear land to grow more corn for ethanol.  At the same time it is well known that Celluloid-based ethanol,  made from the waste fibers of plants and even manure, is far greener.  But corn-based ethanol, still heavily supported by Congress and the Obama administration, now consumes a third of all corn grown in the United States.  This despite the fact that 1 acre of sugar cane produces 8 times as much ethanol as 1 acre of corn.

This fact, makes sugar cane and other sources of feedstock for ethanol production much more attractive than corn.  First the starch from corn has to be converted into sugar which uses a lot of energy before the sugar can be turned into ethanol.  In addition, the entire stalk of the sugar cane plant can be converted whereas only the kernel of the corn plant is available to be turned into fuel.

The conversion ratio, that is fuel produced to feedstock used also favors sugar cane.  Sugar cane produces 8 gallons of ethanol for every one gallon of fossil fuel used in the production process, while the ratio for corn is 1.3 gallons of fuel for every gallon of fossil fuel input.  And therefore, the need to subsidise the corn-based ethanol industry.
 
The sugar islands off the southern coast of the United States struggle to employ the citizens of those islands, and they cannot compete with other sugar producers whose scale of operations are more favourable.   As energy islands they would be much, much better off.   The structural problems most of these islands face will be gtreatly eased when they adopt the US dollar as their national currency, which is already the only currency for most major purchases, and stop bankrupting themselves for the priviledge of having a local leader's image grace their paper notes.

$22.6 billion in ethanol subsidies have been funded by the tax-payer since 2005, and that figure is set to grow by another $31 billion over the next three years.

The ethanol subsidy, the Volumetric Ethanol Excise Tax Credit (VEETC), was introduced as a means of providing incentives for fuel suppliers to mix ethanol with gasoline.

The motive for the ethanol subsidy is however unclear, since the 2007 Renewable Fuel Standard, requires fuel suppliers to mix ethanol into their gasoline. 

Some commentators have suggested that we are actually paying fuel suppliers to abide by the law.  If so, this constitutes a novel approach to compliance strategies.

Soaring food prices are the result of a number of factors, such as, declining value of the US Dollar, bad weather, increased demand, and high oil prices.  Nonetheless,  the USDA's most recent corn forecast suggests that corn supplies will be down this year due, in part, to bad weather and the fact that the share of corn going to ethanol is increasing.

In the United States, 35 percent of corn in 2010 went to the production of biofuels, and that figure is expected to increase in 2012 to 38 percent.

Not only those concerned about the food supply are raising questions about the ethanol policy in the United States, but the scientific community has weighed in as well.

When a careful study of the complete lifecycle of the emissions of ethanol is undertaken it is not as green and clean as environmentalists had hoped.

Any reduction in emissions turns out to be problematic because corn production requires a significant amount of fossil fuel inputs for farm operations, including the natural gas used in fertilizer production.  In fact, fertilizers used for corn production generate a substantial amount of nitrous oxides, a potent global warming pollutant, as the unused fertilizer breaks down in corn fields.

It is time for the American people to re-visit the issue of ethanol.