The energy plan that US Sen. Hillary Clinton (D-NY) recently made part of her presidential campaign requires perspective available from a national biofuels program already in place, which she would expand. Like the biofuels program, her plan makes promises it can’t fulfill and would create problems no one should ignore.
Problems that shouldn’t have been ignored when Congress enacted sales mandates for lavishly subsidized biofuels are now painfully evident. Dominated by ethanol from corn as a gasoline additive, the program is raising the price of food. Incredibly, ethanol supporters deny this. But the US Department of Agriculture is clear on the subject.
“As the ethanol industry absorbs a larger share of the corn crop, higher prices will affect domestic use and exports, providing for more intense demand competition between domestic industries and foreign buyers of feed grains,” notes a September article in the USDA publication Amber Wave. Expansion of corn-growing acreage reduces land available for other crops, including soybeans, demand for which is being lifted by biodiesel production. So prices of those crops rise, along with prices of eggs and meat-especially pork and poultry. “While the ethanol boom can be expected to bring higher incomes to farmers and reduce government outlays for farm programs, it will also most likely mean higher food prices for consumers,” says the USDA article.
Water threats
The push to burn food for fuel also is raising the need for water for irrigation and threatening water quality through increased use of fertilizer and pesticide. “If projected future increases in use of corn for ethanol production do occur, the increase in harm to water quality could be considerable,” said an October report by the National Academy of Sciences. “In addition, expansion of corn production on fragile soils can increase loads of both nutrients and sediments. It is vitally important to pursue policies that prevent an increase in total loadings of nutrients, pesticides, and sediments to waterways.”
Meanwhile, biofuels sap the national treasury with subsidies of 51¢/gal for ethanol and $1/gal for biodiesel, costs that grow as mandates expand. Rising food prices, environmental and supply threats to water resources, and a growing fiscal burden are a lot to pay for a program that can’t-no matter what its supporters say-meaningfully extend energy supply or improve air quality.
Yet Clinton proposes more of the same with a hugely expanded biofuels mandate-and worse. As she has done before, she proposes to raise taxes on the oil and gas industry to create a $50 billion “strategic energy fund” (OGJ, June 12, 2006, p. 19). She thus would start by limiting investment in economic energy to pay for energy that can’t otherwise compete. Then she’d raise vehicle fuel efficiency standards to 55 mpg by 2030, helping automakers meet the goal by issuing $20 billion in “green vehicle bonds.” Her plan includes a number of other manipulations, but that $70 billion is what should raise alarm.
The Clinton program would create a slush fund for political favors, subject to the type of parochial influences that bred the biofuels swindle. And, like biofuels, it’s grounded in ludicrous promises, including cutting oil imports in 2030 by two-thirds and slashing emissions of greenhouse gases in 2050 by 80%. Those are formulas for hardship. Displacing imported oil with costlier domestic alternatives is, by definition, expensive. And cutting greenhouse gases by as much as Clinton proposes would be even more so.
Political opportunity
Yet Clinton calls climate change “one of the greatest economic opportunities in the history of our country.” The opportunities would be for political friends with exotic energy to peddle and no one else; witness the wealth transfer now under way from taxpayers and food consumers to corn growers and distillers.
Politicians will say anything. The hard fact is that their energy errors hurt people by imposing unnecessary costs. And they always err when they make energy choices best left to markets because they, unlike markets, base decisions on political expediency instead of economics and physics.
The biofuels fiasco is just the latest example.
