Crystal Eth: America’s Crippling Addiction to Taxpayer-Financed Ethanol
In 2011, rising oil prices and global unrest over escalating food prices highlighted the public policy questions surrounding government promotion of corn-based ethanol as a transportation fuel. Corn-based ethanol is unlikely to significantly reduce America’s dependence on imported oil, has a negligible ability to reduce green- house gas emissions and contributes to environmental degradation in coastal waters. The public policies that promote or encourage ethanol production have significant impacts on America’s future energy use, efforts to curb global warming and the global effort to reduce hunger. These transportation biofuel incentives will be tied to corn-based ethanol for the near future, as only corn-based ethanol is currently commercially viable in the United States.
This paper explores how the growth of corporate consolidation in the corn-based ethanol sector has been an unintended result of America’s renewable transportation fuel politics, policies and subsidies:
- First, the paper examines the significant political contributions and lobbying efforts of some of the largest corporate ethanol refiners to garner ever-larger subsidies. While far from an exhaustive study of all contributions, these large firms provide case studies of corporate efforts to influence legislation and policy.
- Second, the paper estimates that ethanol refiners have received at least $22.8 billion in total government financial support between 1999 and 2008.This includes the $16.7 billion in the “blenders” tax credit, a $3.6 billion in savings from buying artificially cheap corn, $2 billion in effective subsidy from the first two years of the renewable fuel standard as well as at least $500 million in support from state governments.
- Third, the paper analyzes the negative effects of a rapidly consolidating ethanol refinery market in the hands a few large corporate operators.
- Last, the paper outlines key policy alternatives to corn-based ethanol like cellulosic ethanol and algae-based biodiesel, which could be more efficient, environmentally friendly and financially viable than corn-based ethanol. The paper examines the current level of government support for these technologies and whether more investment in these alternatives may be warranted.
Many of the subsidies provided by state and federal policy makers for ethanol production may not have had the intended effects of energy independence and the revival of America’s rural areas. In fact, as the 2009 economic collapse undermined the ethanol industry, it sought a federal bailout. After decades of government support, in 2009 the ethanol industry requested $1 billion in short-term credit and as much as $50 billion in loan guarantees to expand the number of refineries in the United States. Alternative biofuels may provide a better opportunity to accomplish these goals at a lower economic and environmental cost.