NPR’s “Morning Edition” has finally caught on to the ethanol boondoggle. It’s doing a three-part series on ethanol that started yesterday. And it gets into some of the real issues, especially relating to corn ethanol. CEI has been pointing out that the ethanol program involves a mandate setting the amount of ethanol that must be blended with gasoline, a tax credit that goes to blenders of ethanol, and a steep tariff on imported ethanol. (See CEI video, “The Insanity of Ethanol Policy.”)
NPR got this issue right:
The question is: Does it deserve a multibillion-dollar tax credit, on top of a tariff, on top of a huge and growing mandate to use it?
NPR’s second installment brought up the food vs. fuel issue, that is, all the incentives to grow corn for ethanol production are decreasing the supply of corn available for food and for feed and driving up those costs.
Here’s what a prominent agricultural economist said to NPR:
“I don’t see why we can really justify subsidies, when all that does is raises cost of producing food,” says economics professor Bruce Babcock, of Iowa State University.
Ethanol policies increase the cost of food at least 1.5 percent, Babcock says. And the impact on meat prices is significantly greater.
It’s economics 101, he says. Ethanol plants increase the demand for corn, driving up the prices for other buyers – like livestock producers. International demand is up, too – and we’re exporting more ethanol than ever before. Many grain farmers are seeing record incomes this year.
Yet how did policymakers deal with ethanol in the lame-duck Congress? In the omnibus tax bill, they voted to extend the ethanol tax credit and the tariff on ethanol imports for one year. Ducks and pork are a tasty treat for politicians.
HT: Iain Murray