There Are Big Problems With Ethanol, Namely Corn Supply

Today, the part will be played by President Bush when he discusses ethanol with his Brazilian counterpart. Ethanol (or grain alcohol, as collegiate connoisseurs prefer to call it) is the main ingredient in the Bush administration's alternative-energy policy. And just like all of Bluto's midnight schemes, it's one of those dares that seems destined to end with a hangover.

It's easy to see the appeal: Like the flat tax or missile defense, biofuels suggest a simple solution to a complex problem. Like missile defense, they cater to our faith in technological progress. Instead of drilling rigs blighting coastlines, biofuels evoke vistas filled with amber waves of grain. Just like that, dirty, bloody Mideast crude turns out to have a clean homegrown substitute. It's a fairy tale of course, like so many others featuring magically prolific plants.

The reality is that it's costly and incredibly inefficient to unlock energy stored inside plant cells, relative to the effort needed to distill comparable volumes of fuel from crude, even crude as expensive as it is today. The reality is that making biofuels from Brazilian sugar cane is much easier, cheaper and kinder to the environment than using Midwestern grain. The reality is that we care about all those principles so much as to impose a stiff tariff on Brazilian ethanol, lest it displace our homebrew.

The end result is that corn, traditionally America's most abundant natural resource, has turned into the focus of a scarcity scare, with futures prices nearly doubling, in just eight months. So taxpayers end up subsidizing this folly thrice: Once in federal payments to corn producers that totaled almost $9 billion last year, again in a tax credit of 51 cents per gallon for ethanol producers and a third time in the supermarket checkout line.

According to U.S. inflation data, consumer prices for the food consumed at home rose 1.2% in January, more than in the previous 11 months combined. Whether that's a blip or not remains to be seen. But poultry and pork producers are already squealing about the increases in feed costs.

Meanwhile, the U.S. Department of Agriculture expects ethanol's claim on the corn crop to increase by 50% this year, sucking up more than a quarter of the national output. Legislation passed in 2005 requires the use of "renewable fuels" to rise by more than 50% from current levels by 2012.

But that's nothing next to the presidential State of the Union pledge to boost renewable fuel use eightfold from current levels by 2017, by which time Bush will presumably be growing switch grasses and other combustible fodder in Crawford, Texas.

The acreage dedicated to corn cultivation is expected to increase 10% nationwide this year, and farmland prices are up sharply. In fact, land prices in the choicest parts of the U.S. corn belt have risen by as much as 20% in the last six months, according to the New York Times.