Tuesday, April 1, 2008

The Clean Energy Scam - TIME

The cover story of Time magazine (see The Clean Energy Scam - TIME) reveals the startling discovery that the ethanol fuel frenzy is a scam.

(In related news, Jimmy Hoffa has disappeared, they've found the Titanic, and Princess Di was in a car wreck. And your eyes aren't going bad. That's a blurry copy of the Time cover.)
"An explosion in demand for farm-grown fuels has raised global crop prices to record highs, which is spurring a dramatic expansion of Brazilian agriculture, which is invading the Amazon at an increasingly alarming rate.
Propelled by mounting anxieties over soaring oil costs and climate change, biofuels have become the vanguard of the green-tech revolution, the trendy way for politicians and corporations to show they're serious about finding alternative sources of energy and in the process slowing global warming. The U.S. quintupled its production of ethanol--ethyl alcohol, a fuel distilled from plant matter--in the past decade, and Washington has just mandated another fivefold increase in renewable fuels over the next decade."

If you were visiting this site back in November, and demonstrated the patience to keep coming back, you already knew this. Here are a few more quotes from late-to-the-party Time magazine:

"People don't want to believe renewable fuels could be bad," says the lead author, Tim Searchinger, a Princeton scholar and former Environmental Defense attorney. "But when you realize we're tearing down rain forests that store loads of carbon to grow crops that store much less carbon, it becomes obvious."
The growing backlash against biofuels is a product of the law of unintended consequences. It may seem obvious now that when biofuels increase demand for crops, prices will rise and farms will expand into nature.

It's that damn Law of Unintended Consequences again. It should be repealed. If you're current on your Prozac, you might have the nerve to look at what Barack and The Clintons are saying, but breathe deeply:

The best place to see this is America's biofuel mecca: Iowa. Last year fewer than 2% of U.S. gas stations offered ethanol, and the country produced 7 billion gal. (26.5 billion L) of biofuel, which cost taxpayers at least $8 billion in subsidies. But on Nov. 6, at a biodiesel plant in Newton, Iowa, Hillary Rodham Clinton unveiled an eye-popping plan that would require all stations to offer ethanol by 2017 while mandating 60 billion gal. (227 billion L) by 2030. "This is the fuel for a much brighter future!" she declared. Barack Obama immediately criticized her--not for proposing such an expansive plan but for failing to support ethanol before she started trolling for votes in Iowa's caucuses.

Get it? Iowa is the first caucus state, therefore they get subsidies out the ying-yang. (A painful spot for subsidy storage, but profitable.) Still don't believe me? Read on. This is all written by Michael Grunwald, BTW. Great writer....

If biofuels are the new dotcoms, Iowa is Silicon Valley, with 53,000 jobs and $1.8 billion in income dependent on the industry. The state has so many ethanol distilleries under construction that it's poised to become a net importer of corn. That's why biofuel-pandering has become virtually mandatory for presidential contenders. John McCain was the rare candidate who vehemently opposed ethanol as an outrageous agribusiness boondoggle, which is why he skipped Iowa in 2000. But McCain learned his lesson in time for this year's caucuses. By 2006 he was calling ethanol a "vital alternative energy source."

Well, McCain tried. But can you freakin' believe that IOWA will be a net importer of CORN? That's how profitable this scam is ! ! ! Talking about hauling your coals to Newcastle. We're paying people to destroy the earth in the name of saving the earth ! ! ! I swear I'm not making this up ! ! ! Farmers are subsidizing the politicians in exchange for subsidizing the farmers, and it's all being done with a Virtuous Green Politically Correct Glow.
Ok, I'm calming down now. One of the 3 weiner dogs has hopped in my lap. My breathing is getting slower, and my heart rate is back under control.

Back to Time magazine, and further vindication of The Whited Sepulchre circular payoffs theory of subsidies. Heck, you can take out the word "ethanol" and replace it with any subsidized commodity. The logic still holds:

Members of Congress love biofuels too, not only because so many dream about future Iowa caucuses but also because so few want to offend the farm lobby, the most powerful force behind biofuels on Capitol Hill. Ethanol isn't about just Iowa or even the Midwest anymore. Plants are under construction in New York, Georgia, Oregon and Texas, and the ethanol boom's effect on prices has helped lift farm incomes to record levels nationwide.
Someone is paying to support these environmentally questionable industries: you. In December, President Bush signed a bipartisan energy bill that will dramatically increase support to the industry while mandating 36 billion gal. (136 billion L) of biofuel by 2022.

Congratulations. You've bought 36 billion gallons of this stuff, whether you wanted to or not. There's one mis-statement in the paragraph above. There is no "ethanol boom". There is only a government mandate that you purchase ethanol.

So if I could figure out this scam back in November, and Time Holy Magazine put it together in April, can Nancy Pelosi and Trent Lott be far behind?

Yeah. Probably.


Anonymous said...

Zbeth says:
You didn't mention the increase in alcoholism from alcoholics siphoning off ethanol from automobiles.

LarryE said...

The key line was in the first quote from Time:

the trendy way for politicians and corporations to show they're serious about finding alternative sources of energy

That should tell you pretty much what you need to know.

Steve said...

I'm with you that this is looking like a racket. But on a larger scale:

Speaking of subsidies, what say you about the shocking amount of subsidies paid to big oil as discussed this week on cap hill? Subsidies for ethanol, I believe, are comparitavely small potatoes.

Big oil is printing money and the government is paying them subsidies??? For a non-renewable scarce resource??? Where's the logic here?

Maybe I'm your garden-variety ill-informed reactionary, but I smell collusion in the oil business. From what we're told: in the short term, demand is fairly constant, supply is aplenty yet raw material costs are skyrocketing. Why wouldn't one rogue oil company cut margins in half and take all the business, which would ulimately drive all costs down?

I never got much further than Econ 202 so I'm you folks can enlighten me.

Also, I'm completely ignorant of the genesis of subsidies to big oil, yet I'm hand-wavingly shriekingly nonplussed. Why did this ever happen in the first place? And if there was cause once to subsidize, why not revoke subsidies when they're making massive profits?

Ignorant and confusedly,

The Whited Sepulchre said...


As best I can tell, it's just like the infamous mohair subsidy. I promise this is all true. During WW2, we couldn't keep up with goat hair production for military uniform insulation, so we subsidized it. Once we subsidze anything and allow an industry to grow and flourish based on Socialized Risk and Privatized Profits, the subsidy is almost impossible to defeat in Congress. The few millionaires that the subsidy created lobbied Congress to defend "The Amurrican Fiber Industry" for decades after the military switched from Mohair to Synthetic fibers. This subsidy only costs you a couple of bucks a year, so you're not going to lobby Congress to do anything about it. Especially against the well-organized, well-funded Mohair lobby. (It's a ridiculous phrase, but put it into Google....)

Here's the depressing story in full: http://www.greenscissors.org/agriculture/mohair.htm

As best I can tell, there is absolutely no economic difference in subsidy via cash payments vs. subsidy via tax breaks. Most of the oil/gas Free Lunches are from tax breaks, if I remember correctly.

Here's the fun part: look at how Congress is grandstanding and hauling Big Oil execs to the hot seat to testify.....It's because we tend to vote for regime change when prices start spiking. Congress has to be seen doing SOMETHING, but they're not about to eliminate Big Oil's freebies. Here, in my opinion, is why:
Imagine a scenario where Big Oil had to suddenly pay the exact same tax rate as everyone else, got no more grants for developing or exploring, and the expense of that tax hike was immediately passed on to the consumer. We'd vote Thomas Jefferson out of office if he presided over that move.

That's why these subsidies will never, ever go away. Even if leveling the playing field would let other possible forms of energy possibly grow and compete.

Even Big Oil's Free Lunches only cost you and me less than $1000 per year. Are you going to drop everything you have going on to fight it in Congress? No one else is either.

I could go on about the Free Lunches given to George W. Bush and Jerry Jones with their new sports arenas. We took most of the risk, putting up the tax dollars for stadiums technically owned by the city of Arlington. They take the profits.

Socialized risk, privatized profits. Give a man a fish, and you've fed him for a day. Teach a man to fish, and you've fed him for a lifetime. Make everyone else give him fish, whether they want to or not, and he'll eventually dominate the fish industry. I just now thought that up.

No Econ 202 necessary.

Steve said...

That Mohair story is hilarious. I like the phrase Socialized Risk and Privatized Profits.