Semi-Respectable Ethanol

Monday, May 23, 2005

ETHANOL BEGAN as a political product. The idea of powering automobiles with alcohol distilled from corn acquired traction mainly because Archer Daniels Midland Co., the leading ethanol producer, is a big financier of politicians and because Iowa, which serves as Ethanol HQ, hosts that odd and oddly influential event known as the presidential caucuses. But disreputable origins do not rule out a respectable maturity. Like the young delinquent who makes good, ethanol has put on a suit, acquired sophisticated friends and become a pillar of society. Almost.

Ethanol's new acceptability reflects the disgrace of its rivals. Nobody likes the idea of relying exclusively on oil, partly because of the terrorism connection in the Middle East and partly because gasoline is so expensive; it's now cheaper to fill your car with ethanol in some parts of corn country. Meanwhile a supposedly green additive to gasoline called MTBE has been found to pollute groundwater; ethanol, which reduces sulfur and carbon monoxide emissions (albeit at the expense of some extra smog), is taking its place. As a result, U.S. production of corn-based ethanol is growing at 30 percent a year, and other countries are headed in the same direction.

A few years ago, this expansion would have seemed ridiculous. Ethanol was reckoned to be a net energy loser: It took more energy to produce a gallon of the stuff than you could get out of it by burning it. But that's changed thanks to new methods of growing corn, which use less energy-intensive fertilizer, and thanks to more efficient ethanol distilleries. Now researchers at Argonne National Laboratory in Illinois report that you get 25 percent more energy out of a gallon of ethanol than it takes to grow the corn, transport it and distill it. Skeptical researchers still say there's a net energy loss, but they concede that this loss is much smaller than was once supposed. And everyone agrees that next-generation ethanol, made from grass or other raw materials that don't need fertilizer, promises a clear reduction in the use of fossil fuels and a win for the environment.

This good news could have bad consequences, however. The ethanol lobby wants to use the energy legislation pending in Congress to require a floor for national ethanol consumption, an absurd piece of central planning. Moreover, the lobby wants to use its new respectability to defend its subsidies, which remain indefensible. If Congress wants to promote alternatives to oil (because of terrorism) or to all hydrocarbons (because of global warming), it should tax these disfavored forms of energy and let the market figure out which alternatives make sense. Instead, it lavishes a tax break of 54 cents on each gallon of ethanol, a subsidy that comes on top of the federal dollars that flow separately to corn growers.

Ethanol's continuing political nature is reflected in trade policy. If ethanol were part of a serious terrorism or environmental strategy, there would be no reason to require that the ethanol be made domestically. But cheap Brazilian ethanol faces a steep tariff. Despite the improving efficiency of production and despite the genuinely good reasons to break dependency on oil, the nation's ethanol policy really isn't driven by these things. It really is about pork.

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