Republicans To Cut Ethanol Subsidies ?

A few months ago the Republicans blocked an attempt by the Democrats in Congress to abolish about $20 billion in subsidies given to the big oil companies. At the time, the Republicans said they would not agree to any kind of tax increases (and they considered eliminating subsidies to be a tax increase). Now it looks like they may be changing their minds.

Several Republicans are now talking about abolishing the subsidies for corn-based ethanol (which is about 45 cents-a-gallon). Even some Republicans from agricultural states are ready to go along with this as they hunt for new ways to cut the deficit -- like Sen. Tom Coburn (Oklahoma) and Sen. Dan Coats (Indiana). The ethanol subsidy costs the U.S. government about $6 billion a year.

It's about time for the Republicans to come up with some real cuts to the budget after increasing the deficit by nearly $400 billion a year with their tax cuts for the rich -- cuts that don't involve slashing programs that help ordinary Americans. I doubt if they can get enough of their Republican cohorts to go along with these cuts (since it would take money away from big business), but the subsidy cuts actually make a lot of sense.

There was a time when these subsidies were needed to get the ethanol industry off the ground -- to help pay for research and plant construction. That time is now over, and it is time for the industry to pay their share of taxes. There are those who think this would inhibit the production of ethanol since it would make each gallon a bit more expensive. But this is unlikely to happen thanks to the government's Renewable Fuel Standard which mandates an ethanol mix in gasoline through the year 2022.

And even if it did reduce the use of corn-based ethanol, would that necessarily be a bad thing. The use of corn to make fuel has contributed to food shortages (both for humans and animals) and resulted in higher food prices. As a nation we should be weaning ourselves off of corn-based ethanol and on to ethanol made from waste products.

However, if the Republicans actually get in a subsidy-cutting mood they shouldn't stop with corn-based ethanol. The president recently called for a $4.5 billion cut in subsidies for the big oil companies. I think that should be a minimum figure for cutting those subsidies -- I personally like the $20 billion cut the Democrats had tried to make a few months ago. After all, the big oil company profits amounted to nearly a half-trillion dollars last year, and it is obvious they no longer need the subsidies.

Far too many corporations paid little or no taxes last year due to subsidies and loopholes. It would help bring the deficit down to make them pay their fair share, and it would also help to create new jobs. Currently these corporations don't need to re-invest their profits to lower their tax bills, but if the subsidies and loopholes disappear there will once again be an incentive to re-invest much of their profit (and that re-investment will produce new jobs).

This country is still hurting from the jobs lost by the recession. It makes no sense to give the corporations a free ride while ordinary Americans are hurting.

A Better Way To Make Ethanol

A few years ago, the newest rage to lower the use of fossil fuels was the production of ethanol. The problem was that the ethanol was being produced from corn, and this use of corn cut into the amount that was available for both food and feed. While this may have been good for corm growers, it was not good for everyone else. In a world with huge food shortages, it just makes no sense to use food to produce fuel.

Over at the Zero Energy Construction blog, they are trumpeting a new way to make ethanol. This way produces ethanol from waste products, not food. And considering the amount of waste products thrown away in this society every day, it makes a lot of sense to turn this waste into fuel. Here is the very interesting post (and I urge everyone to make this blog a regular read since the blogger does a good job of staying on top of energy issues):

His method is much cheaper and environmentally friendly than producing ethanol from corn. Daniell's technique involves using plant-derived enzymes to break down orange peels and other waste materials into sugar, which is then fermented into ethanol.

Producing fuel from waste has not only garnered more attention from the media of late, but it is also receiving much more attention from researchers and scientists, as well as politicians and financiers. Daniell and his team have had their research funded by the U.S. Department of Agriculture.

One of the greatest features of using waste for fuel is that it is an abundant resource that will never be in competition with food resources. According to Daniell discarded orange peels could produce up to 200 million gallons of ethanol annually in Florida alone.

Although Daniell's research and technology requires much more testing before it goes commercial, the professor says, "this could be a turning point where vehicles could use this fuel as the norm for protecting our air and environment for future generations."

Was Corn Ethanol A Good Idea ?

Whether they will admit it or not, everyone has known for a few years now that America (and the world) must find an alternative for fossil fuels. One of the biggest uses of fossil fuels is the gasoline that powers our automobiles.

Recently there has been a push to replace much of the gasoline with ethanol derived from corn. The rising price of oil has made ethanol very feasible. In addition, ethanol burns much cleaner and therefore produces less damaging pollution.

It sounded like a great solution. I have to admit, it even sounded good to me. Last year the United States produced 6.5 billion gallons of corn-based ethanol. But in 2007, a new energy bill up the ceiling to 15 billion gallons. It sounded like a win-win situation. Farmers get a new market for corn, and consumers get a cleaner burning fuel.

But there was an aspect that was not considered. What would it do to the food supply? The first person to express doubts was Fidel Castro. Months ago, Castro warned that this would add to world food shortages -- especially in third-world countries. But Castro is not well-liked in this country, so no one listened.

Now it looks like he could have been right. But the effect is not being felt only in third-world countries. Food prices are rising everywhere. The 6.5 billion gallons produced last year did not reduce exports of corn (for food and feed) last year, but it did contribute to rising prices because their was less corn available for bidding on.

Imagine what production of 15 billion gallons will do (and even that is only a fraction of what would be needed if we were serious about replacing gasoline).The more ethanol we produce from corn, the more the price of corn will rise -- both food and feed corn.

When food corn rises in price, it creates more demand for other grains and their price also begins to rise. When feed corn rises in price, it will also drive up the price of meat. As the prices rise, the third-world cannot buy as much and shortages will be larger. The rest of us will feel the rise in prices when we go grocery shopping.

Now this is not the only factor in the rising food prices. Higher energy costs, droughts, and the rising consumption of meat and dairy foods in many places (like China) are also contributing factors. But the production of corn-based ethanol is becoming a major factor.

Maybe it's time to rethink food-based ethanol. While those who came up with the idea didn't take it to its logical conclusion, the marketplace certainly did. If ethanol is to be a real alternative, it must be made from non-food sources.