Is Ethanol on the Wane?

With rising food prices and increased awareness of the environmental costs of corn-based ethanol, it should only be a matter of time before politicians reconsider their support for ethanol mandates, right? Perhaps this is starting to happen. The WSJ reports that two dozen Republican Senators, including John McCain, are asking the Environmental Protection Agency to ease existing renewable fuel mandates.

he lawmakers said the mandates are contributing to a sharp increase in food prices. Sen. McCain has been a critic of ethanol subsidies.

"With the price of everyday meat, chicken, bread and eggs rapidly increasing, we are asking the EPA to use the flexibility that Congress gave them, because so many families cannot afford the increasing prices at the grocery store," said Sen. Kay Bailey Hutchison (R., Texas). An EPA spokesman couldn't be reached to comment.

EPA spokesman Jonathan Shradar said the agency "will review waiver requests and respond according to the law."

The move by the Republican Senate group is the latest sign that Washington's support for turning corn into motor fuel is wavering in the face of soaring food prices, despite the popularity of ethanol subsidies in farm states critical to the November election.

Yet as the story notes, it is unlikely that the federal government will take action this year. Not only is this an election year, but President Bush has also reiterated his support for biofuels.

Some argue that the problem is not ethanol, as such, but ethanol made from corn. Over at Cato-at-Liberty, Indur Goklany considers the prospects of cellulosic ethanol, and finds claims that switchgrass or some other crop could alleviate our ethanol woes to be "wishful thinking."

If cellulosic ethanol is indeed proven to be viable (with or without subsidies), what do people think farmers will do?

Farmers will do what they’ve always done: they’ll produce the necessary biomass that would be converted to ethanol more efficiently. In fact, they’ll start cultivating the cellulose as a crop (or crops). They have had 10,000 years of practice perfecting their techniques. They’ll use their usual bag of tricks to enhance the yields of the biomass in question: they’ll divert land and water to grow these brand new crops. They’ll fertilize with nitrogen and use pesticides. The Monsantos of the world — or their competitors, the start-ups — will develop new and genetically modified but improved seeds that will increase the farmer’s productivity and profits. And if cellulosic ethanol proves to be as profitable as its backers hope, farmers will divert even more land and water to producing the cellulose instead of food. All this means we’ll be more or less back to where we were. Food will once again be competing with fuel. And land and water will be diverted from the rest of nature to meet the human demand for fuel.

Does this mean that biomass – and farmers — should play no role in helping us meet our energy needs? Not necessarily. If farmers can profitably grow fuel rather than food through their own efforts, so be it. But we shouldn’t favor growing one over the other either through subsidies or indirectly through government mandates for so-called renewable fuels. And if anything should be subsidized or mandated, it shouldn’t be growing fuels. That would inevitably compete with food.

Goklany's point that biofuel production and food production necessarily compete is unassailable, but that hardly means (unsubsidized) biofuels are a bad idea. All sorts of land-uses compete with food production, including habitat conservation. And as Goklany's own research shows, increases in agricultural productivity has enabled us to produce more food while setting more land aside for nature at the same time. In any event, Goklany is surely correct that subsidizing biofuels produced from corn, switchgrass, or anything else, will distort agricultural markets at the expense of consumers.