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Tuesday, June 02, 2009

More on the Ethanol Mess

Ethanol makes no sense in terms of energy costs, and is questionable from an environmental perspective.

If you missed it, the Wall Street Journal served up a spot on editorial today titled “Ethanol’s Grocery Bill.” It highlights findings from two recent government studies. The entire editorial is worth reading, but here are three key points:

• “The biofuels industry already receives a 45 cent tax credit for every gallon of ethanol produced, or about $3 billion a year. Meanwhile, import tariffs of 54 cents a gallon and an ad valorem tariff of four to seven cents a gallon keep out sugar-based ethanol from Brazil and the Caribbean. The federal 10% blending requirement insures a market for ethanol whether consumers want it or not -- a market Congress has mandated will double to 20.5 billion gallons in 2015.”

• “The Congressional Budget Office reported last month that Americans pay another surcharge for ethanol in higher food prices. CBO estimates that from April 2007 to April 2008 ‘the increased use of ethanol accounted for about 10 percent to 15 percent of the rise in food prices.’ Ethanol raises food prices because millions of acres of farmland and three billion bushels of corn were diverted to ethanol from food production.”

• “A second study -- by the Environmental Protection Agency's Office of Transportation and Air Quality -- explains that the reduction in CO2 emissions from burning ethanol are minimal and maybe negative.”

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

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