The full story 0f ethanol seems to be that ethanol subsidies are a complete waste. One can't expect a lobbyist to walk into a farm belt congressperson's office and say, "Sir or madam, ethanol subsidies don't reduce our dependence on foreign oil, alleviate air pollution, or benefit the country in any other demonstrable way. A large portion of the money goes directly into the coffers of a single multibillion-dollar corporation. Some experts say that manufacturing ethanol consumes more energy than the fuel produces. In fact, all the ethanol industry dependably generates is profits for itself and campaign contributions for you. Can we count on your vote?"
Corn belt states began subsidizing ethanol after the Arab oil embargo of 1973. The federal government joined the party a few years later. The Energy Tax Act of 1978 authorized an excise tax exemption for biofuels, chiefly gasohol (a gasoline blend containing at least 10 percent ethanol). Another federal program provided loan guarantees for the construction of ethanol plants, and in 1986 the U.S. even gave ethanol producers free corn. It's estimated that the excise exemption alone costs U.S. taxpayers as much as $1.4 billion per year.
The immediate beneficiaries of ethanol subsidies have been corn farmers and, more significantly, the Archer Daniels Midland Corporation of Decatur, Illinois, better known as ADM. The world's largest grain processor, ADM produces 40 percent of the ethanol used to make gasohol. As might be supposed, the company and its officers have been eloquent in their defense of ethanol and generous in contributing to both political parties. The politicians have been generous right back. The libertarian Cato Institute estimates that every dollar of ADM's ethanol profit costs taxpayers 30 bucks.
One might not mind spending the money if it bought us something--energy independence, say, or cleaner air. But based on current evidence, it doesn't. Ethanol contains only about two-thirds as much energy per gallon as gasoline, so cars using ethanol blends get lower mileage. Though ethanol can reduce carbon monoxide emissions, the fuel may well produce more of other air pollutants. True, the ethanol industry drives corn prices up, which helps farmers--but a 1986 USDA study found we'd be better off mailing the farmers checks rather than propping up an entire industry with tax dollars. (Ethanol has since been touted as a substitute for MTBE, an additive that makes gasoline burn cleaner but also causes groundwater pollution. However, skeptics claim that due to improvements in engine technology, it'd be better just to dispense with such additives altogether.)
The capper, though, is the claim that it takes more energy to make a gallon of ethanol than you get by burning it. One of the most vocal proponents of this view is Cornell University ecology professor David Pimentel. In an analysis published in 2001 in the peer-reviewed Encyclopedia of Physical Sciences and Technology, Pimentel argued that when you add up all the energy costs--the fuel for farm tractors, the natural gas used to distill corn sugars into alcohol, and so on--making a gallon of ethanol takes 70 percent more energy than the finished product contains. And because that production energy comes mostly from fossil fuels, gasohol isn't just wasting money but hastening the depletion of nonrenewable resources.
These findings were denounced by ethanol producers and their allies. Michael Graboski, a professor of engineering at the Colorado School of Mines, published a rebuttal of Pimentel's paper, saying he used obsolete data, etc. Pimentel in turn rebutted the rebuttal. The debate has gotten pretty technical. I make only a few observations: (1) Pimentel seems to have tweaked his calculations--in an August bulletin from Cornell, he says making a gallon of ethanol takes 29 percent more energy than it provides, not 70 percent. (2) That conceded, the guy is no flake, among other things having chaired a U.S. Department of Energy panel that investigated ethanol economics (and reached similar conclusions) in 1980. Graboski, on the other hand, is a consultant to the National Corn Growers Association. (3) Given that ethanol production involves the conversion of massive amounts of energy from one form to another, the contention that the process is an efficient way to make fuel seems to fly in the face of basic physics--so much so that I'm inclined to regard the subsidy program, and the fact that it has survived for a quarter century, with something approaching awe. Money-wasting government schemes are hardly rare. But how many do you know of that flout the second law of thermodynamics?
