Can The Ethanol Market Stand On Its Own Two Feet?

from the etha-what? dept

Soaring energy prices have created an ideal climate for alternative energy investment, as evidenced by the boom in that space. You'd think, then, that with the market doing a good job of sorting things out, there'd be little need for the government to intervene. But while entrepreneurs and VCs are seeking to build sustainable, profit-making businesses, the ethanol industry has sought to profit from the largesse of the US taxpayer. The industry has been helped by direct subsidies as well as indirect ones, such as laws that impose added costs on its rivals. While many people champion higher CAFE standards in order to protect the environment, the ethanol lobby has been a particularly big booster of them, because of a 1988 law carved out an exception for vehicles that could run on ethanol. Meanwhile, this favorable treatment towards the industry causes problems in other pockets of the economy. Increasingly, companies have to be concerned with "agflation", the soaring price of agricultural commodities due to the heightened demand for corn (which, as you learned in econ 101, increases prices for corn substitutes, like rice and wheat). If ethanol is going to be a meaningful energy source in the future, it needs to stand on its own in the market. Otherwise, the existing setup appears to be just more counterproductive agriculture subsidies, cynically concocted in the name of national security and the environment.

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  1. identicon
    yack39, 3 Jul 2007 @ 2:38pm

    Ethanol

    There are actually two products being produced by Ethanol refineries. One is the alcohol and the other is the grain meal. The ground corn without the ethyl alcohol is still used to feed animals. The feeding of livestock has not been effected. There is a decrease in fuel efficiency, but it is a newer technology movement. All automobile manufacturers are working on increasing fuel efficiency. I am sure they can work on creating more efficient flex fuel vehicles as well. I think a solution would be to run hybrid vehicles - electric with and ethanol back up.

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