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
    cutter892, 3 Jul 2007 @ 1:50pm

    Re: Re: Ethanol

    Actually corn based ethanol does increase food prices here in the US because corn is used for everything feeding live stock espically cows. Have you noticed the price of milk go up it's because more corn is being used for ethanol and is being taken out of th food supply. The price of corn goes up the farms pay more for it and to compinsate the price of dairy products goes up. It is estimate to meet the congressional mandates for ethanol use every last acre of corn growing land will have to be used. Which means we will have to import all are corn because we are burning it for fuel. On a side note it takes more energy to make ethanol than ethanol actually puts out at the very best it's about even. OH where is the Back to the Future Mr. Fusion when we need it.

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