Ethanol and 'free markets': Do they mix? 

“Our belief is that from a competitive standpoint, ethanol is most competitive if we have that level playing field,” says Rob Skjonsberg, top lobbyist for ethanol giant POET.

Check out this ethanol article from Prairie Business to see a bunch of subsidy-dependent businessmen and lobbyists talking about a "free market."

Ron Lamberty at the American Coalition for Ethanol objects to the federal regulations curbing the percentage of ethanol allowed in standard gas pumps (the limits are based on concerns that high levels of ethanol could damage a car's emissions control).

Leading ethanol lobby Growth Energy is talking about phasing out the tax credit for ethanol and replacing it with subsidies for "infrastructure, ethanol blender pumps, flex fuel vehicles, and dedicated pipelines."

Much of the discussion is about what subsidies, regulations, or mandates today could create the conditions in which ethanol could survive on its own. Ron Lamberty of ACE seems to suggest that Congress should force or encourage carmakers to make cars that can run on high-ethanol blend (candidate Obama wanted to outlaw new cars that don't run on E-85). Lamberty says, "Until we can actually compete on a fair level, we have to have policies that help ethanol compete. If it were legal to use more ethanol, people would. Right now, the U.S. is using as much as it legally can.”

This last quote seems misleading to me. Ethanol demand right now is driven entirely by the ethanol mandates from the 2005 and 2007 energy bill. If ethanol lobbyists were talking about giving up the mandate, the tax credit, the state and local subsidies, and the favoritism in Corporate Average Fuel Economy law, I'd listen to what they wanted in return. But this building out of infrastructure seems the worst possible deal. Large infrastructure investment in a technology that really might be unsustainable -- that is, running cars on alcohol squeezed from plants -- seems like a big waste that coudl spur future waste.

So I have a different deal to offer. I'd prefer a really free market, but if our government is going to intervene to promote domestic fuel, let's do this: (1) We repeal all current ethanol subsidies except for the tariff on imported ethanol. (2) We repeal any EPA laws that limit the blend-ratio of ethanol. (3) We place a tariff on all imported oil. Then we let the market decide the most efficient way to replace our consumption of foreign oil.

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Timothy P. Carney

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