The ethanol craze’s sobering harvest - East Valley Tribune: Opinion

The ethanol craze’s sobering harvest

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Posted: Saturday, May 10, 2008 10:44 pm | Updated: 10:04 pm, Fri Oct 7, 2011.

The ethanol craze just might set a record for fads that fizzled before they got fully under way. The sooner the better, in our view.

Ethanol is an example of a commodity that might have some value, but with an artificial market created almost entirely by government mandates and subsidies, it is almost impossible to know what the real value is.

One thing is becoming increasingly obvious: that the government-created value is not only much smaller than the real value, but that the disruptions created by government interference are creating dire side effects that far exceed whatever real value is created by the increasing production of ethanol.

The International Food Policy Research Institute estimates that biofuel production (European governments have fed the fad as well) accounts for between one-quarter and one-third of the recent spike in global commodity prices.

Ethanol benefits from a 51-cents-a-gallon tax credit, and also other incentives that according to Texas Republican Sen. Kay Bailey Hutchinson add up to about $1 a gallon. There's also a mandate to increase the use of ethanol and other biofuels to roughly five times their current (already artificially high) levels, that is, to 36 billion gallons by 2022.

It's not surprising that two dozen Republican senators on Friday asked the Environmental Protection Agency, including presumptive presidential nominee Sen. John McCain, to ease requirements to blend more ethanol into motor fuels. The EPA, which has discretion, should do so immediately.

The government can't control droughts in Australia or growing affluence in China. But it has control over the ethanol mandates and subsidies that are literally creating starvation in poorer countries. Even a temporary moratorium on ethanol incentives would help.

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