If you're worried about energy prices today — just wait. Come winter some say we'll see an energy crunch rivaling that of 2000-2001 — maybe worse. And with those concerns comes a new round of examination on how America can gain energy independence.
When it comes to energy independence though, there's little debate in farm country where the answer lies — it's in ethanol. Farmers from coast to coast dream of the day when Americans can tap into the grain bin rather than an oil patch to satisfy the nation's energy fix.
This spring, the U.S. Senate passed an amendment to its comprehensive energy bill that would triple usage of renewable fuels by 2012. This is the second year in a row that the Senate has overwhelmingly passed a renewable fuels standard (RFS).
The National Farmers Union has advocated the RFS for years as a means to stabilize farm income, boost economic opportunities in rural America, improve the environment and promote energy independence.
The problem is that as the icon of renewable fuels, ethanol is yet to fully deliver on its promise.
There's debate over ethanol's net positive air quality benefits, there's evidence it may lead to soil and water degradation, and ethanol probably does not contribute significantly to energy independence.
Then, there's the question of whether ethanol production actually raises the price of the corn, though many corn growers believe it does.
What is known though, is that ethanol as a gasoline additive is a boon for producers such as Archer Daniels Midland, which receives a federal subsidy of 53¢/gal. of ethanol. That's topped-off by additional subsidies of up to 30¢/gal. tossed in by some states.
Studies critical of ethanol's energy and environmental effects were published by David Pimental in the Encyclopedia of Physical Science and Technology (2002 3rd edition, vol.2). The conclusion supports previous research that, even with improved technology, conversion of corn into ethanol by fermentation is a net energy user.
Simply put, without the billions of dollars in taxpayer's subsidies paid over the last few years, ethanol would have trouble flowing from farm country to the gas pumps of America. Ethanol is a farmer's dream, and ethanol policy is nirvana for farm state politicians.
In his essay, “Political Forces Keep Ethanol Alive,” (PERC Reports, June 2003) Gary Libecap, a fellow of the Bozeman, MT-based Political Economy Research Center (PERC), takes on the entrenched ethanol constituency. He exposes this subsidy-riddled industry and challenges us to look at ethanol objectively.
“Ethanol illustrates the workings of the political process when there is an entrenched, well-organized beneficiary and technical information that makes it difficult for general voters to assess the issue,” says Libecap. “Only in helping corn growers and ethanol producers does it pull through as advertised.”
America's love for ethanol pre-dates the 1973 Arab oil embargo, but it was that event and others that gave ethanol the fuel it needed to grow into a national political issue. Forecasts of $4/gal. of gasoline in the early 1980s furthered the idea that ethanol made sense — even if it did cost twice as much to make as its fossil-based counterpart.
The actual subsidies began when “gasohol” became a reality with the Energy Tax Act of 1978, which authorized exemptions from the federal highway excise tax for biomass-derived fuels. Later, income tax credits, loan guarantees and state-based incentives added to the billions pouring into the ethanol issue.
In 1986, according to Libecap, the USDA released a study concluding that ethanol could not survive without “massive government subsidies.” And even as a succession of laws passed mandating use of renewable oxygenates as gasoline additives, controversy arose over the need to use any oxygenates to meet clean air standards.
Ethanol advocates, led by the giant industrial producers, never have dropped their environmental claims, however. And ethanol advocates embrace the view that the oil establishment has its own brand of subsidies and protection. They say the price of our country's Middle East military presence needs to be factored into the cost/benefit ratio measuring energy independence.
Ethanol's environmental and economic arguments will continue. Rural America's love for ethanol is real, but the romance is tainted by the fact that ethanol exists as a welfare child. Can that child be weaned to where it can live and breathe on its own — or will it continue to be a draw on the resources of our nation?
We recognize also that there are new generations of promising farm-based biofuels and lubricants on the horizon. These oilseed-based products are superior to their petroleum-based cousins in virtually every way, including the fact that they can reduce vehicle emissions dramatically.
Unlike ethanol, these fuels do deliver on their environmental promise and appear to be more competitive in the marketplace. That means not only reducing the need for taxpayers' help, but truly adding to this nation's energy independence.