Ethanol – Insanity Ensconced

George Rebane

A perennial wet dream of the liberals is a world of internal combustion engines, all running on renewable and sustainable ethanol.  This unsanitary and polluting notion was unmasked years ago, but as with global warming, science had nor has anything to do with government mandated ethanol in our lives.  An early piece that describes this rank idiocy is ‘Ethanol Faces Facts’, and since then the evidence against converting food crops into fuel has become a torrent.

A reader sent me this report from Europe detailing how those environment loving Germans have come to reject ethanol – ‘German Ethanol Requirement Turns Into a Debacle’.  There we learn that -

Never mind that burning ethanol is an environmental debacle that leads to the destruction of forests and food shortages that lead to higher prices and more hunger worldwide, but it also burns less efficiently and causes damage to many cars. It is yet another well-intentioned program that is making things only worse. Nobody in Germany wants the stuff – neither the drivers nor the environmentalists.

This is one more topic that progressives would rather not talk about.  But there is a snowball’s chance in hell that Congress will remove federal ethanol subsidies.  Before popping a cork to celebrate, we recall that the government’s mandate to include an increasing percentage of ‘renewable‘ fuel in our gasoline is still firmly in place – Damn the torpedoes and all that!!

Comments

[Larry Wirth]

Gasoline is for fuel, alcohol is for drinking!

[Steve Frisch]

I support the removal of subsides for corn based ethanol.

[Todd Juvinall]

We have an agreement on ethanol.

[George Rebane]

SteveF - are there any forms of ethanol for which you would support continued subsidies; if so, given the mandates for blending ethanol, why?

[Walt]

George,, I noticed you use a fuel additive. ( for diesel)
I have never seen that stuff before. Can you give me some background
on it?

[George Rebane]

Actually Walt, my 2011 GMC 2500HD diesel requires a urea based exhaust scrubbing fluid, not a fuel additive. I understand that this is required for GM and Ford pick-ups this year, and then for all diesels in 2012. Europe has had this exhaust cleaner for years.

The confusing part is that the 2013 diesels are supposed to be improved to a level of cleanliness that no longer require the urea scrubber. For this reason the government's assurance that "all" diesel stations would carry the fluid has turned out to be a lie. We suckers now have to buy it from special dealers and add it ourselves else our engines will stop running. No fueling stations want to set up a distribution and dispensing system for something that lasts less than two years. The hope is that the urea scrubber requirement will be disabled in 2013.

The urea fiasco is nothing but another of the growing and countless government diktats, insane in their inception and doubly so in implementation, that impede the lives of an once free people.

[D. King]

"It is yet another well-intentioned program that is making things only worse."

From the link:

“A 35% reduction of CO2 has to be shown. Yet the indirect impacts on landuse are not even included in the calculation, and if you do that, then the entire CO2 reduction is wiped out completely.”

We're sorry!

[Paul Emery]

George

You may be wrong on this. Grover's team may mess it up in the House when he tries to add amendments on unrelated topics that will kill the majority. Remember, Republicans view the elimination of subsidies as tax increases.

From Rueters

"Many Republicans have ruled out tax increases, though some have said they would support ending narrowly-tailored tax breaks like the ethanol tax credit. The ethanol tax credit is part of a package of dozens of business and individual tax breaks that Congress usually renews each year. Thursday's vote could spell trouble for some of the others.

Thirty-three Republicans joined 38 Democrats in voting to eliminate the ethanol tax credit. Two independents who usually vote with the Democrats also supported the measure."

[stevenfrisch]

I support research and development for cellulosic ethanol. It's not really commercially viable yet, but if it could be made commercially viable it may create a high prized value added product that, by utilizing the same logistical network, may help make biomass to electrical generation viable.

http://online.wsj.com/article/SB10001424052748704803604576078202329991370.html

[George Rebane]

PaulE, am not aware of and don't agree with Republicans who view end of subsidies as tax increases - if so, then they are ideological slimebags. Can you cite some name, rank, and serial numbers?

[George Rebane]

SteveF - I too am in favor of the cellulosic type of ethanol. Am a bit amazed that Valero is playing the subsidy game on it, as if the risk of bringing it to market were too high for self-funded development. Hasn't Brazil demonstrated that cellulosic (switch grass) ethanol is commercially viable in its entire production and distribution pathway?

[Paul Emery]

I was referring to subsidies for oil companies. I don't have time tonight but tomorrow it will be easy to find

[stevenfrisch]

George, do a web search on Grover Norquist warning Republicans that reducing subsidies for ethanol is a tax increase, and a violation of his pledge.

Brazil is a great example, both switchgrass and sugar cane byproducts, the hulls, are used. We culd be doing the same with woody biomass and using the byproducts form fuel treatment projects to reduce the cost of forest land management, when the technology catches up. I consider this a legitimate role of government funding for research and development.

[bill tozer]

If we really wanted more ethanol we would drop the high tariffs on imported ethanol from Brazil. But, noooo. We can't compete with higher grade ethanol made from sugar cane and imported ethanol would make all the 'pie in the sky' domestic corn based ethanol even more unprofitable than it already is. What to lose some money? Buy stock in Pacific Ethanol, sucker.

[George Rebane]

Thanks SteveF. Have never maintained that Repub politicians are angels, and here is a good example - 'whatever it takes to get me re-elected'.

But that, of course, brings up the aspect of democracy in which a sufficiently large cohort of voters sharing an ideology, worldview, or temporary belief have a 'right' to vote in someone who will represent that notion, no matter how misguided, in legislature. Look at the patently insane behavior of California voters, and the result they have cooked up and continue to do so with gay abandon. Should they now somehow be disenfranchised? I think not. Hence Franklin's famous answer to the kind of government the Founders gave us - "... a republic, if you can keep it." And in keeping it, we have failed almost completely.

Re govt funding of cellulosic ethanol - I'm on the fence on this one (I do believe that govt can and should fund certain kinds of research, especially directed toward national security). My ethanol problems revolve around the net cost-benefit of the technology applied to the entire stream from acreage to combustion chamber, and the games we are playing with blocking the import of ethanol as Bill Tozer points out. Any illuminating thoughts here?

[Paul Emery]

Here's a start George

CNN

"On a mostly party-line vote, the Senate on Tuesday defeated a Democratic measure to strip major oil companies of about $20 billion in tax subsidies over the next 10 years and use the savings to pay down the deficit.

Three Democrats and two Republicans crossed sides in the 52-48 vote, preventing the bill from reaching a required 60-vote threshold for passage."

[Paul Emery]

Here's more from ATR

In The Christian Science Monitor, Gail Russell Chaddock explores the GOP definition of tax hikes: “What precisely constitutes a tax increase? The answer may not be as obvious as it seems, and the ensuing debate is opening a surprisingly public wedge between two GOP icons of fiscal restraint. Here's the nub of the Republican family feud: Is it ever permissible to end a tax break (or a tax deduction) for an industry or some other subset of taxpayers, without also finding offsets so that government revenues won't rise as a result? Grover Norquist, of the antitax group Americans for Tax Reform (ATR), says no, period. By his calculus, any repeal of a tax break means more revenue for government, which will always spend it, and less freedom for Americans.

Read more: http://www.atr.org/daily-media-spotlight-may-a6192#ixzz1PpxQY43s

[George Rebane]

PaulE, this started on the proposition that 'a subsidy removed is a tax increase'. There is no doubt that ONLY removing a subsidy does increase government revenues. That is why most Republican proposals for removing subsidies are coupled with commensurate tax reform. The intent is to get the government out of the business of picking, or worse, making winners/losers in the American economy. Where are we going with this?

[Paul Emery]

George

I question your interpretation that a subsidy removed is a tax increase. Apparently you think that the budget can be balanced only by cutting spending not increasing income. It is obvious by the shift in Republican attitudes that this is becoming a fringe idea and is not being taken seriously by anyone with even remotely established economic credentials.

Saying you have to couple the elimination of subsidies with unrelated tax reform measures is eliminating this one slight ray of hope that there can be some bi-partison agreement on budget and tax reform. I don't see why subsidies can't be judged on their merits. Of course, that's where the billions of special interest dollars ply their influence and what you propose is , in my opinion, a perfect example. You are proposing exactly what Grover and his crew are championing and who can guess what kind of money flows through that group (the ATR).

Here's more about Grover Boy from http://crooksandliars.com/taxonomy/term/2552,1258

"Americans for Tax Reform, sponsor of both efforts, with Grover Norquist prominent at rallies, on their videos and in their literature. Norquist's Americans for Tax Reform was the organization Abramoff used to launder money, along with several others. Norquist was also very happy to be the "tax objector" voice in Abramoff's PR blitz, provided a substantial contribution was made to ATR for his services."

These observations were commonly accepted during the Abramoff fiasco. You will of course will dish this as left wing trash so I anticipate having to do more research into Grovers influence on Republican policy. Hopefully, he is being marginalized now that serious work needs to be done.

[George Rebane]

PaulE, please reread my comment. Nowhere on RR have I ever claimed that removing a subsidy is a tax increase. Most of the kerfuffles on blogs occur because we don't really pay attention to what the other says.

Judging subsidies "on their merits" is where all the crap begins. Everyone has their own notion of merit. No one wants to define and negotiate a commonly accepted utility (note how quickly you dropped the idea some time back when I went to the trouble of defining a rigorous utility on healthcare that would allow the judgment of alternative policies on their merit), so the only alternative seems to be a blanket policy such as 'no subsidies'.

But if we were to attempt an objective definition of merit for subsidies ..., nah! it's much more fun to go around in circles like on a merry-go-round.

[Paul Emery]

George

You should have included in your blog that in your opinion in order to remove the subsidy on ethanol other offsets in taxation would have to be included so there won't be an increase in general revenues. If you subscribe to the ATA pledge this must be included. But then, perhaps you don't subscribe...

[Paul Emery]

sp ATR (Americans for Tax Reform)

[bill tozer]

Good points all. Think the taxpayers are subsidizing domestic corn ethanol to the tune of $1.78/gallon. That's a boat load of good dollars being thrown down the the bottomless pit just to have a product that gives you less gas mileage and consumes 100s of thousands of acres of good farmland and can't be piped. Ethanol must be trucked or shipped, so the transportation costs and pollution for the said transportation is harmful to the ole environment. Add to that the petro based fertilizer being dumped on our farmland and it is easy to see why Save the Earth has come out against ethanol as "degradation of the planet". Cut the subsides and let ethanol stand or fall on its own merits. I am all for bio-mass fuel, yet the eco-nuts have blocked even one tiny stick from Federal lands to be used at the Loyalton bio-mass plant. So much for forest thinning and fire prevention, resulting in all that rather nasty choking smoke that pollutes our precious air during forest fire season. Had my heart set on getting a job as a solar panel installer when I get too old to do real work. But a young friend who is in that trade told me he has worked for 3 solar panel companies in the greater Sac region and every one of them has gone out of business. Poor guy, having no steady work and 4 mouths to feed with an degree in environmental studies is a crying shame. Bet it all looks just peachy on paper.

[George Rebane]

PaulE, please reread my 1019am comment; I did acknowledge "commensurate tax reform" with subsidy removal.

But in truth I am at wits end on how such additional windings on the Gordian knot of our tax system would work out. There lives no human today who can predict the fiscal implications of any piece of legislation that would result from just applying the written laws. And in this assertion I do not include the machinations piled on top as affected humans attempt to game the resulting system.

To me the only solutions going forward demand that total tax reform (resulting in a grossly simplified code) be part and parcel of any reasonable escape from nation-quaking financial disaster.

BillT - good perspective on the larger picture. How do you feel about what SteveF recommends, govt funding of research on cellulosic bio-fuels?

[Paul Emery]

George
What is your opinion of the Fair or Consumption Tax (Cain)

[bill tozer]

George, I am all for research, or rather, I am not anti-research. That would be shooting oneself in the foot. But there is a world of difference between R&D and enacting legislation that costs billions of dollars and reaches beyond the point of diminishing returns. When I was a boy, ocean algae was going to feed the world. Sometimes government funded research works out, sometimes it doesn't. Sometimes it is downright boneheaded, such as spending half a million to observe shrimp on a treadmill. Ironically, the gov't grants and tax breaks given to California companies to develop and expand alternative energy was used by many solar manufacturers to relocate and build plants outside of California. Thus, in essence, California taxpayers help fund the flight of green CA firms to other states. But I digress. Research? To quote the inscription under The Thinker in the movie Animal House, "Knowledge is Good".

[George Rebane]

PaulE, I believe taxing consumption instead of production has always been a good idea. But getting from here to there is a path that will lead through blood in the streets. Any fair tax with the Family Consumption Allowance will not work - bureaucracy and fraud.

I also believe that a fair tax that unburdens investment returns will give rise to unheard of productivity levels, and therfore, low prices. The prices would drop enough to 'pay' the attached fair (sales) tax. In any event, quality of life at all levels of income would go up.

But the pernicious cons of that tax would be a massive loss of politician, lawyer, and accountant power. Large corporations, sucking on unheard of straws of corporate welfare, would go into extremis - shape up or shut down. It's hard to imagine the tsunami that such a proposal would have to swim against to succeed.

Instead what might emerge instead is an atrocity of a 'fair tax' with enough exceptions and loop holes so as to completely castrate its original intent. Out of the skillet and into the fire.

[Todd Juvinall]

I am a consumption tax fellow too but I have misgivings on the politicians will to abide. The reason the fair tax is not my favorite is because the politicians get to determine the amount. Just like Obama raising the budget 25% in two years then saying he wants to cut it is very snaky. The amount to use for setting the tax, any tax, must be realistic and not onerous.