December 30, 2011

"The left-right coalition against corn ethanol has been growing for some time..."

... and Congress just adjourned "without extending the $6 billion annual tax subsidy for blending corn ethanol into gasoline and the steep import tariffs on the industry's foreign competitors."

What accounts for the change? I would have guessed that neither party is worried too much about what people in Iowa want right now, but the linked article cites the growing evidence showing that ethanol can't compete in the market "without mandates, subsidies, tax exemptions, and tariffs" and it's not even green — it increases net carbon emissions.


traditionalguy said...

When the eminent Keystone Pipeline full of oil sands petroleum is here, it is hard to pretend anymore that ethanol is a way to defeat OPEC.

When the true price of a free market gallon of gas in the USA has become a dollar, then turning food corn into ethanol at three dollars a gallon is harder and harder to pretend to be needed.

Brian Brown said...

the growing evidence showing that ethanol can't compete in the market "without mandates, subsidies, tax exemptions, and tariffs"

Just like other "green energy" technologies.

Why it is almost as if the government is not a good arbiter of winners and losers in the market place or something.

Funny that, huh?

edutcher said...

Have you seen food prices lately?

In an economy where 1 in 6 households is on food stamps, a lot of incumbents will be looking for work if prices don't come down.

KCFleming said...

edutcher has it.

Congress never cared before that ethanol (or any other product or service) can't compete "without mandates, subsidies, tax exemptions, and tariffs."

Hell, that's what Congress does. It's their primary purpose in life, doling out these favors.

And the greens don't give a shit that their favored processes use less energy or not. They want energy to become more expensive and so decrease its use.

Obama himself said so.
"Under my plan of a cap and trade system, electricity rates would necessarily skyrocket.

...if you can’t persuade the American people that yes, there is going to be some increase in electricity rates on the front end, but that over the long term, because of combinations of more efficient energy usage, changing lightbulbs and more efficient appliance, but also technology improving how we can produce clean energy, the economy would benefit.

What remained unspoken, and no one will say aloud, is that the subsidy massively increased food prices and has contributed worldwide to starvation and political unrest.

So they chickened out. Prices actually increased and that threatened their electability, so they caved.

Tank said...

Whenever Obama, or Newt, or Mitt, or any of the other politicians start talking about gov't creating jobs, gov't / private industry partnerships, gov't "investments" for the futher ...

think ethanol.

The perfect example: can't compete, costs more, does the opposite of what is intended (hurts the environment).

machine said...

What about the times when government subsidies payoff? Like Bain Capital?
The tax breaks handed out by the Walker administration?

I think overall the government has a winning record...we only hear about the losers.

Michael said...

" like Bain Capital"???

What subsidies did Bain Capital receive?

machine said...

"The history of Staples, a company that Bain grew from a single store, is a hallmark of the Romney record. Staples’ rapid growth, however, drew on substantial state subsidies.

In 1996, Tom Stemberg, a close Romney business partner leading Staples, met with Maryland Gov. Parris Glendening, a Democrat, to negotiate a package of taxpayer sweeteners to build a new distribution center in Hagerstown. The Glendening administration, using a “Sunny Day” fund of discretionary development money, awarded Staples $2.3 million in grants and low interest loans."

Staples is a government/private partnership success story... story...government/private partneship...

MadisonMan said...

I'll be interested to see what this does do to corn prices, as an absentee -- sort of -- landlord for a corn/soybean farm.

I don't think we sell our corn for ethanol directly, but we must benefit from the inflated demand.

Scott M said...

Staples is a government/private partnership success story... story...government/private partneship...

And you think a 2.3 million dollar subsidy, the kind municipalities do all the time, is somehow relevant the OMG-sized corn ethonol industry why?

KCFleming said...

Tax breaks are not subsidies, except to people who think the government owns all income and gets to decide what you keep.

machine said...

The point was that government subsidies can is done all the time...

Ethanol subsidies didn't work...they should cease.

machine said...

So when a municipality waives a local tax in order to entice a company to relocate there, the government is not subsidizing the company's re-location costs?

KCFleming said...


The local tax is stupid, and the city waives it in recognition that it prevents businesses from locating there.

But they can't see how waiving this would benefit all businesses, or don't give a shit how it impairs the city.

bgates said...

Staples’ rapid growth, however, drew on substantial state subsidies.

Staples had a market cap of well over $3 billion when it got "$2.3 million in grants and low interest loans", which could be $10K in grants and $2.29 million loaned at 0.25% below prime for all your quote tells us.

Besides, it caused less trouble when Democrats wasted relatively small amounts of money on their corporate clients during the roaring economy enabled in part by the sound fiscal stewardship of Newt Gingrich's House than it does when vastly larger sums are shovelled to Democrat cronies during Obama's disastrous mismanagement of government finances.

machine said...

"sound fiscal stewardship of Newt Gingrich's House"

that's funny...thanks for the morning giggle...

Jose_K said...

don't think we sell our corn for ethanol directly, but we must benefit from the inflated demand... there has been an inflated demand for years. but nobody has been abble to proffit on it. In the USA, they rather collect the money of subsidies.Goverments taking out lands out of production with Endangered species Act and other silly laws did not help either. The same goes for Europe where subsidies are even higher and they are punished for producing more. The third world without genetic modified seeds , capital plus bad policies and no respect for private property neither.
Without the aggregated demand and with demand failing around the world because of the crisis the prices must go down taking farmers to the ruin worldwide but benefiting consumers.
The solution: go ahead with Doha and get rid of subsidies and of "aid" using cheap overproductions of food

roesch/voltaire said...

I don't know of any energy source that could exist without government subsidies. But things have changed and now producers in Iowa and Wisconsin, according to Renewable Fuels Assc. claim: "When asked if the industry needs that same tax credit now, Dinneen said, "No, you don't. In today's environment, no, you don't need it."

Jose_K said...

Tax breaks are subsidies when they are handed to certain groups. If taxes go down, they must go down for all, not only for the bussines in line with preferences of the govermnent or that bought a pubblic offiacil, lobbied it. Tax breaks are a form of crony capitalism.

Browndog said...


You could write a book on the level of corruption surrounding ethanol subsidies-

For now, I'll bring awareness to my very one-

Splash and Dash

Read it. You'll be flabbergasted.

Google "splash and dash" for more...

enjoy your headache

Wince said...

package of taxpayer sweeteners to build a new distribution center in Hagerstown.

Don't these "sweetners" usually pay for permanent town infrastructure improvements that would otherwise be imposed on the first-in private developer?

bagoh20 said...

"I don't know of any energy source that could exist without government subsidies."

Just think about that statement. No government subsidies and the planet turns out like a light bulb.

I suppose what you mean is that once you give one subsidy, no other source can compete, but even that isn't true unless every source was equal in cost to start with.

Calypso Facto said...

I don't know of any energy source that could exist without government subsidies.

Like BagO, I find that statement flabbergasting. There were no energy sources before socialistic government subsidies? Lucky for us we have such a benevolent overlord to provide us with energy then!

MadisonMan said...

but nobody has been abble to proffit on it.

So what are those annual checks I get?

Is my mother-in-law secretly laundering money for someone?

Known Unknown said...

If I had the power, I would eliminate all subsidies and tax breaks and loopholes.

I would also institute a low flat tax rate on all incomes, replacing the current structure.

I would be very unpopular with everyone, and never get elected to any office.

bagoh20 said...

A subsidy is proof that something is stupid, and that someone in power doesn't know it or doesn't want to.

I hereby coin it a "stupidsidy".

Dad29 said...

The tax gimmick was ~$6Bn/year.

The 10% (going to 15%??) mandate is a helluvalot bigger than that.

They're giving up the dime to get the dollar.

Pastafarian said...

MadMan: "I'll be interested to see what this does do to corn prices..."

Me too. I'm not sure if they'll come down right away, either to their levels before the ethanol boondoggle; or if they'll go much lower than that, given how many more acres are planted in corn now (many people didn't renew their CRP contracts to take advantage of record prices); or if they'll remain high, and the market will be distorted long-term, the same way the used car market was ruined (from a consumer's POV) by cash-for-clunkers.

This third scenario seems likely to me; farmers geared up to plant hundreds of acres of corn will still have new equipment and land to pay for, that they purchased on the assumption that the gravy train would never end, and those expenses will be passed on as overhead.

I'm betting on a soft landing over about ten years to prices just a little higher than they were before the gold rush. So that means we'll still see high food prices as a result of all this nonsense for another decade.

Dumb Plumber said...

I don't know of any energy source that could exist without government subsidies

These things that provide energy exist without any government help and have existed for quite some time now.

Trees...very nice for heat in the winter, renewable and provide shade to mitigate heat in the summer.

The Sun. That big ball of heat up in the sky.


Biff said...

"the linked article cites the growing evidence showing that ethanol [as an energy source]... increases net carbon emissions."

When I said this years ago to my green friends in Cambridge, I was told to shut up, since the science is settled.

Somewhere along the way, when ethanol's limitations became so obvious that even the green crowd couldn't ignore them, my Cambridge pals started saying that the subsidies were nothing more than a populist sop to those hicks in Iowa -- that's almost an exact quote from one of them -- and that ethanol subsidies were diverting resources away from more worthy alternative energy programs, like solar power.

Just remember, the (social) science is settled!

Scott M said...

Just remember, the (social) science is settled!

You didn't remind them of their previous statements? What kind of blog commenter are you?

Guildofcannonballs said...

Dead children account for the change in attitude toward ethanol.

I recall Kid Rock singing "can you imagine what it's like to starve to death?"

David said...

"It increases carbon emissions."

This is not a newly discovered fact. It was just one of those Inconvenient Truths.

David-2 said...

Dad29: Exactly. Given a choice of rewarding a favored group (industry, primary voters, whatever) via a tax subsidy that has to be renewed every year with a vote, or a one-time-lasts-forever mandate, they'll obviously prefer the latter.

They can still remind the beneficiaries of the taxpayer's money that they're responsible for it.

SunnyJ said...

WI farmers begged for the ethanol subsidies...knowing they could not loose. It would drive the per bushel price of corn through the roof which would create food demand for the other grains/beans etc. When the false market being demanded by the EPA requiring set % of ethanol to be mixed coming into play with a 10 yr window...even when the bottom of the false market drops out and it will eventually, they are guaranteed a minimum price by other ag subsidies long in place. The farmers around me 100% supported Obama or McCain before he was selected because they both supported all of this. There has been no risk in these markets.

Farm land has quadrupled in price and is being purchased as investment, along the lines of gold for a reason. Investors are betting these false markets will continue. Obama and progs have built them into all of their favorite crony capitalist doners sectors. There's a reason top speculators like Jim Rogers have been all about commodities and ag land.

2012 will introduce risk. Fasten your seat belts, it's going to be a bumpy these big money doners are not going to sit quietly by and watch their cash cow government guarantees be pulled out from under them.

SunnyJ said...

@Pastafarian...they buy hedge contracts...the options markets support this...CRP or no, they will get paid the price they need to cover their costs, including extensive write offs to purchase that equipment...and pressure on the banks to work with them to prevent default. Farming will never see the 70's NFO strikes, milk dumps or anything like it again. Young farmers are tech smart (tractors that determine the acidity in the soil they are fertililizing and tell the spreader how much down to the ounce is just one example)and the big farms are invested heavily in our current tax policies and accounting. It's a different world out here.

But, hey...I'm happy to tell you we still have a pony in our pile of horseshit!

JAL said...

Not to mention ethanol has jacked up the prices of all kinds of other things -- everything from tortillas to horse feed. And ruins small internal combustion engines and older vehicles.

I want a President who wants America to be energy independent. That would lower fertilizer and food costs would go down.

Where is the practical plan from these presidenital wannabees and congress critters?

Mr. Perry -- speak up.