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Drunk on ethanol

The U.S. is fueling a potential disaster by cobbling together an energy policy based on corn.

August 20, 2007

'Gasoline is going -- alcohol is coming. And it's coming to stay, too, for it's in unlimited supply. And we might as well get ready for it now."

Those words might have come from President George W. Bush, or just about any member of the U.S. Congress, or every major presidential candidate from both parties. All are euphorically drunk on ethanol (a fancy name for grain alcohol), seen as the miracle fuel that will simultaneously solve our global warming problem and end our reliance on foreign oil. Actually, though, they were uttered by automotive pioneer Henry Ford nearly a century ago.

Ford might have been a visionary, but he was badly mistaken about ethanol. Unfortunately, so are Bush et al.

Alcohol is best taken in moderation, and that applies to cars as much as people. Ethanol isn't all hype -- it's a promising alternative fuel that could stretch gasoline supplies and cut emissions. But as politicians try to outdo one another by approving ever-bigger ethanol subsidies, production mandates and research grants, few are considering the environmental and economic effects of a massive, rapid rise in ethanol production. These are so severe that unless the mania ends soon, they could far outweigh any gains.


Food for fuel

The United States is the world's top producer of ethanol, most of which is made from corn. The bulk of our home brew is used as a fuel additive to make gasoline burn more efficiently; such use took off a few years ago after it was found that the more commonly used additive, methyl tertiary butyl ether, was contaminating groundwater. California is among more than two dozen states that have banned or restricted MTBE, with most replacing it with ethanol. It's also blended into a fuel called E85, a mix of 85% ethanol and 15% gasoline.

Corn-based ethanol is cleaner and more energy efficient than gasoline, though not by much. Studies agree that it reduces greenhouse gases, even if they differ on the magnitude. Yet it also can increase emissions of dangerous pollutants, especially at high concentrations. A recent Stanford University study showed that E85 produces so much ozone, a key ingredient in smog, that if it were used in Los Angeles instead of gasoline, it would raise ozone-related deaths 9%.

Nonetheless, Congress sees the kernel of something much bigger in ethanol. The 2005 energy bill mandated that production nearly double, to 7.5 billion gallons a year, by 2012; we're on track to easily pass that goal. In his State of the Union address in January, Bush upped the ante by calling for 35 billion gallons of alternative fuels (meaning mostly ethanol) by 2017. The Senate responded by passing an energy bill in June mandating 36 billion gallons of renewable fuels by 2022.

One problem here is that there's no such thing as a free lunch. In fact, when you produce such enormous quantities of corn-based ethanol, lunch gets more expensive for everybody. As demand for corn to make ethanol has soared, corn prices have shot up, nearly doubling their year-earlier level in early 2007. Other crop prices have risen too, because farmers are planting corn in fields that otherwise would have been used for crops such as soybeans or wheat. Prices for meat, eggs and dairy products are rising because animal feed is more expensive, as are prices for processed foods using corn and soft drinks made with corn-based sweeteners.

According to the consumer price index, grocery-store food prices rose 8% in the first half of this year. It's unknown how much of that hike is attributable to corn, but it was undoubtedly a factor. A recent study by Iowa State University estimated the per capita cost of higher corn prices at $47 over the last year, meaning that the nation has paid $14 billion in higher consumer prices for its ethanol obsession, not counting the $2.7 billion in tax credits given to the industry last year.

Higher food prices are hard on low-income Americans, but they're even harder on the developing world. If more corn goes to ethanol, far less will be exported, spurring ever-higher world prices because the United States is the world's top corn grower. This is already causing an outcry in Mexico, which relies on U.S. corn for tortillas and other staples. In countries where the typical citizen makes less than $5 a day, an increase of even a few pennies can be devastating.

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