Ethanol: Our Energy Policy Helps Launch Worldwide Food Riots
It's not often that a U.S. domestic policy change causes worldwide food riots, but that's what our ethanol subsidies have done according to a World Bank analysis. On December 19, 2007, President Bush signed H.R.6 into law with a five-fold increase in the mandated use of ethanol in gasoline. That stood on top of another large ethanol mandate in another H.R.6, enacted on August 8, 2005. Corn prices have jumped from $2/bushel in 2005 to $4/bushel last year, and they've just crested $6/bushel. In 2005, 6% of U.S. corn production went to ethanol; now its up to 23%. Only now are we beginning to realize that we're not achieving any overall energy efficiency with our heavy ethanol subsidies and mandates, we're just helping U.S. corn growers and starving the world's poor.
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Pete, Absolutely correct.
Pete, Absolutely correct. Our ethanol policy is an outrage. We are ripping off American taxpayers and consumers, causing additional hunger around the world, and, contrary to the premise of the scam, doing little to nothing to help climate change (indeed, possibly worsening it). So why are we doing it? Well, cui bono? Large agribusinesses (e.g., ADM) and farm states. So what's the solution? Well, we can't change the Senate to proportional representation to reduce the disproportionate influence of thinly-populated farm states, but we can (1) shift to a mostly publicly-funded campaign system (voluntary, so it's constitutional, but made so attractive that no candidate would opt out), and (2) rotate the first contest in the nomination processes so that Iowa is not always first. A couple of additional notes: - It's not just the price of corn that's causing additional hunger. The price of other crops is going up, too, as farmers switch from those crops (e.g., soy) to corn - In addition to subsidies and mandates for corn ethanol, another outrageous element of our corn ethanol policy is the high tariff we have on sugar ethanol, which is much, much more efficient in terms of energy to produce it vs. energy yielded. See here and here.Ethanol
Brooks:
Rotating early primaries and going to regional primaries might work to lessen the stranglehold agribusiness has on Congress.
I'd be careful about full public funding for presidential campaigns. First, the Supreme Court would knock it down for violating the Free Speech protections of the First Amendment. Second, it would reward independently wealthy candidates. Third, whichever party controlled the Congress and the White House when the formula for determining the funding levels would set the formula to put the other party's candidate out of business.
I agree that the high price of corn is only one piece of the distortion and that the resulting improper mix of crops is a big problem too.
You make a good point about sugar ethanol. We do terrible harm to poor, small Latin American economies with that tariff. To its credit, the Bush Administration has hinted at the need to repeal that tariff on a few occasions, but the virulent reaction each time caused them to beat a hasty retreat.
Pete
Public Campaign Funding
Pete, Thanks for your reply. My vision for mostly public campaign funding would not encounter at least two of the three problems you describe (re: First Amendment and re: wealthy candidates). Re: "First, the Supreme Court would knock it down for violating the Free Speech protections of the First Amendment. There would be no First Amendment violation. First, my suggested system would be voluntary. Second, we could just greatly increase the matching multiple, say providing $10 in public funds for every $1 raised privately (with limits on individual contributions) as long as the campaign stayed within the spending cap. And the spending cap would be set high enough that no candidate other than a billionaire would opt out. Which leads me to... Re: "Second, it would reward independently wealthy candidates." Any candidate staying within the public funding system could receive additional funds to match his opponent's spending if the opponent exceeds the system's spending cap, thus removing any advantage to the wealthy candidate (and probably preventing him from spending more anyway, since he would know that it would not provide such an advantage). Re: "whichever party controlled the Congress and the White House when the formula for determining the funding levels would set the formula to put the other party's candidate out of business." This one may be a concern, but perhaps the system could be relatively simple and uncontroversial enough to gain strong public support, and in turn sufficient pressure on Congress, even if it might benefit one party a bit more than another. If we say, just for example, $10 in public dollars per $1 raised privately, either with some cap on individual contributions, ideally some amount that a middle-class person might be able to afford (e.g, $200) or with no lowering of that individual cap if agreement on that point is too much of an obstacle to a deal. By the way, I'd like to see the amount of public funding provided be quite large, so campaigns have enough to fight against "independent expenditures" by third parties. I'd be glad to see taxpayers fund several billions of dollars of campaign spending each cycle, because it would be the best investment taxpayers have ever made due to savings from reduction/elimination of subsidies, import quotas, special tax breaks, etc., not to mention the benefit of a more representative democracy.Ecological disaster?
"The price of other crops is going up, too, as farmers switch from those crops (e.g., soy) to corn" But you can't plant corn year after year after year. Crops have to be rotated. It will be soy in our fields this year. Last year was a big corn season (choices made by farmers due to fantastic corn prices), but you can't keep putting corn in, you need to rotate with a nitrogen fixer. Corn is very demanding on the soil. Promoting ethanol is terrible policy, on so many levels. The current administration has been a disaster on just about every front. Irresponsible over farming created a dust bowl disaster in the 1930's. http://en.wikipedia.org/wiki/Dust_BowlI'm not talking about some
I'm not talking about some normal or beneficial crop rotation. I'm talking about switching from corn to soy in response to ethanol subsidies, and soy prices rising as a consequence. It's part of the problem of rising food prices.typo: Should have read
typo: Should have read "switching from soy to corn"FYI re: corn and soy
FYI re: corn and soy http://www.nytimes.com/2007/09/19/opinion/19wed1.html?_r=1&scp=1&sq=corn...Minnesota Mom, I think I
Minnesota Mom, I think I misread/misinterpreted what you said above. I thought you were saying that the switch by some farmers from soy to corn was just normal, appropriate crop rotation. Sorry if I misunderstood.Ethanol
Minnesota Mom:
You make an excellent point about soil depletion from overplanting corn.
President Bush tried to finesse the issue in his 2006 State of the Union address by suggesting that ethanol should increasingly be made with wood chips and switch grass, but those alternatives are more costly and less feasible for us so far.
It's amazing how bad policy has so many unintended bad consequences.
Pete
While ethanol policies are indefensible,
let's be clear about it, the problem is oil.Role of ethanol policy in food prices
There are clearly multiple reasons for rising food prices, US ethanol policy being one of them. Increased cost of oil-based inputs, rising demand, crop failures. How does one go about teasing out the influence of ethanol policy on current prices? And for that matter, projecting it forward?Projecting it forward . . .
Hmmm, well it looks like it's having an influence on pork production. Yesterday 200 angry hog farmers met spontaneously in Mankato because they're losing money on every pig they trot to market. This is turning into a whack-a-mole game -- hit one and five more pop up. http://minnesota.publicradio.org/display/web/2008/04/15/hogproducers/Factors in rising food prices
Jonathan, From what I've read, there are three main factors in rising global food prices, although I don't know the relative degree of influence of each factor. They are rising fuel prices, increased meat consumption (it takes much more grain to raise livestock and produce meat than for people to just eat the grain), and rising bio-fuel production (diverting crops from consumption as food).Oh, and that increased meat
Oh, and that increased meat consumption refers to increases mainly from China and India as the middle class in those nations grows and meat becomes a larger portion of their diets.Factors in rising food prices
And local crop failures. My question, though, is: how do we tease out the relative importance of the different factors? Ethanol subsidies were IMO a no-brainer from the get-go, since it was clear from the beginning that they required so much energy input as to be little, if any, better than energy break-even. Add to that the effect on food supply, and it looks crazier and crazier. No doubt we'll hear lots of "who could have predicted?" excuses, but plenty of people did predict. So another form of my question: say that Congress by some political miracle does The Right Thing and rationalizes our biofuel policy (yeah, election year, midwest, ADM, right). But if such a miracle were to happen, how big would the impact be on food prices at the commodity level? Or at least: how would we go about figuring that out? (BTW, it'll be yet another miracle if I manage to get this posted; the captha is incomprehensible.)Food Prices
Jonathan, lol re: the captha -- yeah, sometimes it's like a Roschach test! I realize what you were asking. As I noted, I can't help with that one. Hopefully one of the pros here can (or another commenter). One note: SUGAR ethanol is much, much more efficient in terms of energy in vs. energy out than corn ethanol. Brazil makes plenty of sugar ethanol. And we could be using more of that and less corn ethanol, except that our noble politicians have imposed a high tariff on it to protect the domestic corn / corn ethanol industry. Really lame. It's like Congress is bending us over and holding us down while ADM...well, you get the picture.typos: that should be
typos: that should be "captcha" and "Rorschach" Geez, Brooks, way to screw up a joke with typos.Corn Ethanol Alternative
We should eliminate tariffs on sugar cane ethanol from Brazil. We will get much more energy for the cost without threatening food prices in the U.S and abroad. The U.S. will probably make more money selling our corn overseas than we will save by using corn ethanol for fuel here.
How about buying sugar cane for ethanol, and making ethanol from sugar cane in Cuba. We would bring Cuba into the 21st. century (well, at least the 20th century), start building relations with Cuba (hey...we now talk with and trade with China and Russia!), and we would really have a good start to solving our energy challenge. Check out my EnergyChallenge blog at http://energychallenge.wordpress.com/