Sunday, 1 January 2012

Two US ethanol subsidies died last night. UPDATE

Ended: The US 45 cents/gallon to subsidize the diversion of corn to ethanol.
Ended: The US 54 cents/gallon penalty to block cheaper, cleaner Brazilian ethanol.
Keep lifting the dead hand of smarter-than-you government.
The subsidies expired at midnight December 31st to the tune of six billion per year, "A program that badly distorted the global grain market, artificially raised the cost of agricultural land and did almost nothing to curb greenhouse gas emissions." The pernicious mandate to produce increasing billions of ethanol fuel remains on the books, though minus a few teeth tonight. Also still on the books, $1.01/gallon subsidy to convert wood scrap to ethanol.  The industry isn't screaming because the price of gas is so high these days, they can make it without the subsidy.

The corn process is calculated to reduce emissions by 20% while the penalized sugar cane process in Brazil reduces them by 56% compared to gasoline.  It takes much less energy to ferment natural cane sugar than to break corn starch down to sugars first and then to ferment them.   Four gallons of ethanol are needed to match the energy of three gallons of gasoline.  Instead of "peak oil", the US is becoming an exporter again.

Less Government is a good place to start any analysis, putting every intervention to the Sunset Clause test.
A humorous take on that from Jay Leno: “The payroll tax extension passed the House and Senate by unanimous consent. This was a procedural move allowing it to pass, even though most members of congress were already home for the holidays. They weren’t even there! Only 12 people out of 535 were there and they got it done. Imagine how much they could do if we got rid of all of them?”

UPDATE:  So far through September of 2011 (the most recent data available), the U.S. exported 7.2 percent of its total ethanol production to Brazil.  Brazil, the very country whose cheaper-to-make sugar cane-based ethanol is the supposed reason we have the tariff.

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