Monday, October 8, 2007

Eat or Drive?

A spate of articles in the past few weeks have called into question whether the 'Ethanol boom' is going bust. Judged largely from the downward trends of the stock performance of many ethanol biofuel companies, but drawing also from long-standing criticisms of ethanol subsidies as a deeply flawed government policy, there has been a clamor that ethanol, in America, at least, has been a failed energy policy. The reason for this failure is laid partly at the feet of the policies themselves, in creating subsidies for a fuel that has not yet found sufficient use, and partly at the implementation of the policies, specifically, in the lack of investment made in fostering the demand side of the market for ethanol, and in creating the delivery infrastructure for bringing ethanol to the consumer. Every critique of ethanol has, at some level of subtext, a questioning of the motivations of the public policy. Was it driven by smart energy policy, or simply to satisfy the powerful agribusiness constituencies which control so much of the farmland in the US? As observers like Daniel Gross in Slate have concluded:
Critics of ethanol have long argued that ethanol production subsidies are a half-baked industrial policy scheme intended to reward politically powerful farmers in the Midwest. The gulf between the rich incentives for creating ethanol supply and the poor incentives for creating wholesale and retail distribution suggest the critics were absolutely right.
An early death-knell, perhaps, but one made the more interesting by a complementary article in the New York Times that emerged at the same time, describing how the diversion of corn crops into biofuels have driven up the price of the commodity, essentially pricing buyers, trying to secure corn for food aid programs, out of the market. One ill-advised, if well-intentioned public policy inadvertantly gutting another (as foreshadowed in a lengthy Foreign Policy article from earlier in the summer).

Not that this most recent set of concerns signals that giant of a catastrophe. Unfortunately, neither food air nor ethanol have proven to be fundamental solutions to the problems of hunger and energy supply that they are trying to address. The silver lining, in this case, is that the situation is more bleak.

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