The stupidest federal subsidy.

The conventional wisdom debunked.
July 19 2005 8:12 AM

Corn Dog

The ethanol subsidy is worse than you can imagine.

Running on empty: Is ethanol the answer?
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Running on empty: Is ethanol the answer?

For the last generation, ethanol has been America's fuel of the future. But there has never been more hype about it than there is today. Green-energy analysts like Amory Lovins, environmental groups like the Natural Resources Defense Council, neoconservatives like James Woolsey, and farm groups like the American Coalition for Ethanol are all touting the biofuel.

Making ethanol, they claim, will help America achieve the elusive goal of "energy security" while helping farmers, reducing oil imports, and stimulating the American economy. But the ethanol boosters are ignoring some unpleasant facts: Ethanol won't significantly reduce our oil imports; adding more ethanol to our gas tanks adds further complexity to our motor-fuel supply chain, which will lead to further price hikes at the pump; and, most important (and most astonishing), it may take more energy to produce a gallon of ethanol than it actually contains.

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The greens, hawks, and farmers helped convince the Senate to add an ethanol provision to the energy bill—now awaiting action by a House-Senate conference committee—that would require refiners to more than double their use of ethanol to 8 billion gallons per year by 2012. The provision is the latest installment of the ethanol subsidy, a handout that has cost American taxpayers billions of dollars during the last three decades, with little to show for it. It also shovels yet more federal cash on the single most subsidized crop in America, corn. Between 1995 and 2003, federal corn subsidies totaled $37.3 billion. That's more than twice the amount spent on wheat subsidies, three times the amount spent on soybeans, and 70 times the amount spent on tobacco.

The stickiest question about ethanol is this: Does making alcohol from grain or plant waste really create any new energy?

The answer, of course, depends upon whom you ask. The ethanol lobby claims there's a 30 percent net gain in BTUs from ethanol made from corn. Other boosters, including Woolsey, claim there are huge energy gains (as much as 700 percent) to be had by making ethanol from grass.

But the ethanol critics have shown that the industry calculations are bogus. David Pimentel, a professor of ecology at Cornell University who has been studying grain alcohol for 20 years, and Tad Patzek, an engineering professor at the University of California, Berkeley, co-wrote a recent report that estimates that making ethanol from corn requires 29 percent more fossil energy than the ethanol fuel itself actually contains.

The two scientists calculated all the fuel inputs for ethanol production—from the diesel fuel for the tractor planting the corn, to the fertilizer put in the field, to the energy needed at the processing plant—and found that ethanol is a net energy-loser. According to their calculations, ethanol contains about 76,000 BTUs per gallon, but producing that ethanol from corn takes about 98,000 BTUs. For comparison, a gallon of gasoline contains about 116,000 BTUs per gallon. But making that gallon of gas—from drilling the well, to transportation, through refining—requires around 22,000 BTUs.

In addition to their findings on corn, they determined that making ethanol from switch grass requires 50 percent more fossil energy than the ethanol yields, wood biomass 57 percent more, and sunflowers 118 percent more. The best yield comes from soybeans, but they, too, are a net loser, requiring 27 percent more fossil energy than the biodiesel fuel produced.  In other words, more ethanol production will increase America's total energy consumption, not decrease it. (Pimentel has not taken money from the oil or refining industries. Patzek runs the UC Oil Consortium, which does research on oil and is funded by oil companies. His ethanol research is not funded by the oil or refining industries *.)

Ethanol poses other serious difficulties for our energy economy. First, 8 billion gallons of ethanol will do almost nothing to reduce our oil imports. Eight billion gallons may sound like a lot, until you realize that America burned more than 134 billion gallons of gasoline last year. By 2012, those 8 billion gallons might reduce America's overall oil consumption by 0.5 percent. Way back in 1997, the General Accounting Office concluded that "ethanol's potential for substituting for petroleum is so small that it is unlikely to significantly affect overall energy security." That's still true today.

Adding more ethanol will also increase the complexity of America's refining infrastructure, which is already straining to meet demand, thus raising pump prices. Ethanol must be blended with gasoline. But ethanol absorbs water. Gasoline doesn't. Therefore, ethanol cannot be shipped by regular petroleum pipelines. Instead, it must be segregated from other motor fuels and shipped by truck, rail car, or barge. Those shipping methods are far more expensive than pipelines.

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