CARE: Comments About Responsible Energy

Why Should the U.S. Government Subsidize Corn Ethanol?

Read CARE favorite Dennis Avery to find out why it should not.

JUNE 5, 2012
 CORN Ethanol AND a non-warming Earth BY DENNIS T. AVERY

CHURCHVILLE, VA—The earth has failed to warm at all for 15 years now, and American farmers are afraid of losing the “renewable fuel” mandate for corn ethanol—which has given them record crop prices and incomes since 2007. So, they’re proposing a new entitlement designed to ensure that they’ll never lose money again. Their proposed new federal farm bill would guarantee that farmers’ incomes don’t decline—and if future farm prices rise even more, the Feds’ guarantee would ratchet up too.

Thus, if Congress should decide the planet isn’t parboiling itself after all, the taxpayers would be on the hook for even more farm subsidy than today. Forget about that federal debt problem. Everyone else can pitch in to cut government spending, but farmers shouldn’t have to. Never mind that they’re now earning more than the average American, and have far more net worth.  

Bruce Babcock at Iowa State says the new program could give farmers $8 to $14 billion per year, compared to the $5 billion they’ve been getting in direct subsidy payments— on top of their ethanol subsidies. And if they lose the ethanol mandate, and crop prices fall, the government direct payments will get even bigger.

Gasoline prices have doubled under Obama. Even so, the 10 percent ethanol that the EPA forces into our gasoline—“to save the planet” from fossil fuels—still costs even more than the gasoline. While delivering 35 percent fewer miles per gallon. Recently, the EPA approved mixing even more ethanol into our gas—15 percent instead of 10. Automakers warn they cannot stand behind their engine guarantees at the higher blending rate.

Meanwhile, food prices have soared almost as much as gas prices and for the same reason. As we divert more of our corn from cereals and livestock feed to low-grade auto fuel, we’ve created an instant global food shortage. The price of corn was under $2 per bushel in 2007, but has since averaged nearer to $7. Farmers are making so much money they’ve bid up their own land prices to record levels. Thus they raise their own costs to match their payments.

But aren’t we saving the planet? Nope, not even that. Producing a gallon of corn ethanol produces almost the same level of carbon in the atmosphere as burning gasoline. Moreover, instead of temperatures soaring upward, as the environmentalists claimed they would, the earth’s temperatures have gone down since 2007.

The Arctic ice is returning, as the Russians predicted it would due to the 70-year Arctic Ocean cycle. The Antarctic has been cooling since the 1960s. The greenhouse theory said both poles would melt as CO₂ levels rose, but neither has. The Polar bears are at least 600,000 years old, which means they’ve already been though five warm interglacials with open water at the North Pole. The seals must bask on the beaches, instead of on the ice, and the bears romp down to catch them anyway.

So why subsidize corn ethanol?  

I grew up on a farm, and have worked with farmers all my life. As a group, they are my heroes; but, while corn ethanol over-rewards crop farmers, it penalizes livestock farmers. (driving up the cost of hamburgers and chicken tenders). It’s a wash as far as farm belt votes are concerned. Corn ethanol, unfortunately, is the worst farm program ever conceived because it raises gas and food prices simultaneously.

And, now that we’ve discovered shale gas and oil, guess who’ll get a royalty on every cubic foot of shale gas that gets pumped up from below? Answer: The farmers who own the land above the gas. That reward may go to a different set of farmers, but they’re all equally deserving, right? More to the point, they will all bid their own land values up until they can’t make a profit even at $7 per corn bushel.

What will the senators do to ensure their re-election then?

Dennis T. Avery, a senior fellow for the Hudson Institute in Washington, D.C., is an environmental economist. He was formerly a senior analyst for the Department of State. He is co-author, with S. Fred Singer, of Unstoppable Global Warming Every 1500 Years. Readers may write to him at PO Box 202 Churchville, VA 2442; email to cgfi@hughes.net. Visit our website at www. cgfi.org