Another Government Failure: Ethanol

From NCPA:
Ethanol’s advocates have long argued that increasing the amount used in
gasoline would be a boon to the economy, reduce our dependence on
foreign oil and improve air quality.
Yet, more than two decades and tens of billions of dollars in subsidies,
tax credits and fuel mandates have done little other than enrich the
agribusinesses that produce ethanol, says H. Sterling Burnett, a senior
fellow with the National Center for Policy Analysis.
Indeed, the economic impact of ethanol subsidies is negative. One report
by the U.S. Agriculture department determined that every $1 spent
subsidizing ethanol costs consumers more than $4.
There are several reasons for this, says Burnett:
o Every bushel of corn devoted to ethanol production leaves less
for human consumption and animal feed — thus people pay more for
corn, beef, poultry and pork than they would absent the
subsidies.
o And prices for other goods are also higher since farmers, in
pursuit of lucrative subsidies, devote more acreage to corn
rather than other, unsubsidized, produce.
o Additionally, the costs of growing, distilling and blending
ethanol into gasoline makes it cost 51 cents more per gallon to
produce than regular gasoline.
The clamor for increased use of ethanol also raises the specter of the
current problems surrounding the use of MTBE, the fuel additive that oil
producers began blending with gasoline in the mid-1990s to meet stricter
clean-air standards. Although not carcinogenic in humans, MTBE has
caused huge problems recently because it leaks from storage tanks and
contaminates local water supplies.
Absent federal subsidies and mandates, ethanol would likely disappear
from the marketplace. Like so much of the pork Congress bestows upon
special interests, ethanol is bad for the economy, consumers and the
environment, says Burnett.
Source: H. Sterling Burnett, “Ethanol benefits makers, legislators who
support their cause,” Billings Gazette, June 5, 2005.

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