Ethanol, Florida Style

It is difficult to imagine that we would have the extensive, absurd subsidies of corn ethanol that we have today if it were not for the fact that Iowa is the first stop on the presidential campaign trail.  Every four years, here-to-fore fiscally sober and rational candidates stand up on Iowa TV and pledge to support ethanol subsidies.

But today it appears the primaries are finally over (it appears that Ms. Clinton will bow out tonight) and so attention now focuses on the general election.  And though I am not really an expert, I would presume the election will again turn on a few states including Ohio, Pennsylvania and, of course, Florida.

It appears that Florida Democrats have a plan to parlay their swing state status into pork, in the same way that Iowa has done for years.  The only difference is the issue is not ethanol, it's subsidizing beach-front homes:

As hurricane season begins, Democrats in Congress want to nationalize a
chunk of the insurance business that covers major storm-damage claims.

The proposal -- backed by giant insurers Allstate Corp. and State Farm
Mutual Automobile Insurance Co., as well as Florida lawmakers --
focuses on "reinsurance," the policies bought by insurers themselves to
protect against catastrophic losses. The proposal envisions a
taxpayer-financed reinsurance program covering all 50 states, which
would essentially backstop the giant insurers in case of disaster.

The program could save homeowners roughly $500 apiece in annual
premiums in Florida, according to an advocacy group backed by Allstate
and State Farm, the largest writers of property insurance in the U.S.

But environmentalists and other critics -- including the American
Insurance Association, a major trade group -- say lower premiums would
more likely spur irresponsible coastal development, already a big
factor in insurance costs. The program could also shift costs to
taxpayers in states with fewer natural-disaster risks....

The legislation passed the House with bipartisan support, 258-155, late
last year, despite a presidential veto threat. Although a Senate vote
is unlikely this year, proponents are trying to make it a litmus-test
issue in the presidential race. The two Democratic contenders, Sen.
Hillary Clinton of New York and Sen. Barack Obama of Illinois, in their
recent visits to Florida -- a key swing state -- have both voiced
support for the plan.

Big winners would be coastal states, particularly Florida, where more
than half of the nation's hurricane risk is centered. Currently,
property-insurance rates in Florida are among the highest in the
nation. Florida also has a struggling state reinsurance fund that would
be helped by a federal program....

Florida's status as a presidential swing state has helped the plan win
support from Sens. Clinton and Obama. Sen, Clinton is one of the bill's
co-authors, along with Democratic Sen. Bill Nelson of Florida.

Florida Democrats' effort to make a federal disaster fund a big issue
in this year's presidential race was one reason the state moved up its
primary election to January from March, defying party rules. (That move
is partly what's behind the current, heated battle between the
Democratic candidates over how to count Florida's delegates in the
nominating race.)


  1. rmark:

    So basically I live in fly over country and subsidize expensive real estate. Yes, a tornado could blow away my mobile home - but you just sweep the pieces into a dumpster and roll in another home.

  2. Bob Smith:

    I live in Florida, and I think this is a bad idea, as is the state reinsurance program. Unfortunately Jeb Bush was term-limited out of office, because our nominally Republican governor Crist, who pushed for the program, is really a McCain-style liberal who does little or nothing to restrain the liberal tendencies of Republican legislators.

  3. Corky Boyd:

    Forget the esoterica of encouraging people to move to high risk areas, this is about political pressure that messed with a market rates and the state of Florida is paying the price for it. Now as most people who screw up financially, Florida wants the Feds to bail them out.

    After hurricane Andrew nailed the Miami area in 1992, many insurance companies stopped writing homeowners insurance because of the risk. The state realized the housing market would collapse without homeowners insurance and devised a plan to lessen the impact. They divided homeowners insurance into two categories, windstorm (for wind damage from named tropical storms) and non windstorm general insurance coverage. Flood was already covered by the Feds.

    They set up a state windstorm insurer of last resort, Citizens. Rates were set so Citizens wouldn't undercut private companies, to encourage new entry and develop a competitive market. It was on its way to success when the disastrous years of 2004-5 hit. Because of the damage losses, which threatened the very existance of some insurers, they upped their rates substantilly for both categories. The state retaliated by proposing lower rates by making tnational companies factor in lower non-Florida loss factors.

    The insurance industry balked. The state then targeted Allstate, one of the few still offering both forms of insurance. They harrassed them with subpoenas for all sorts of internal documents, most of which they provided. It was a politically motivated witchhunt. Finally Allstate said enough is enough and said no more docs. The state then banned Allstate from writing any new insurance (overruled temporarily).

    Finally the legislature seeing there would be no resolution for rate relief by fiat, and time running short before the 2007 hurricane season, backtracked.

    Citizens was to substantially lower its rates on the questionable assumption there would be a lower risk than the past 15 years experience factor. But when they got the reinsurance rates (Lloyds etc.) they found why the commercial companies needed the rate hikes. The realization hit there was no way to grant rate relief and still have reinsurance.

    So they went naked, exposing the state to potentiallly hundreds of billions in claims. That's where the Feds come in with subsidized reinsurance.

    Being a swing state has its advantages.

    Corky Boyd
    Sanibel, FL
    (Ground zero for Cat. 4 hurricane Charley)

  4. Neolibertarian:

    First, I lived in Florida for a while, my parents live near Punta Gorda and my aunt and uncle live in St. James City, so I saw tons of homes smashed up by Charley and the rest. But I have trouble seeing why the rest of the country should subsidize living down here. Everywhere has its risks and rewards, and if you can't take the balance in your area, then move. All those people who stayed in Buffalo or New Jersey shouldn't have to pay to rebuild your house AND pay for their heating costs (of course, people in the warm states have to pay heating assistance to cold states, though the cost between these two programs is substantial).

    It's especially crazy that the insurance companies want to have insurance for their insurance. So basically, they collect the premiums and the government comes in if they have a major crisis?

    I'm really glad (since I switched registrations to vote for him) that McCain came out against Florida's insurance panhandling. He was still endorsed by Crist, even though Rudy and Romney (I believe) both endorsed his plan. It was especially satisfying that Romney got trashed despite caving in on the plan, falling all over himself with Rudy to explain why agricultural subsidies are good even though we need to cut spending, and trying to justify spending billions of dollars to give Michigan some more manufacturing jobs.

  5. Phil:

    Southern Resurgence

    Here is an idea that the Republicans, oil, tobacco companies will hate.

    How about we plant sugar cane in the states of Florida, Georgia, Mississippi, Alabama and Louisiana. We encourage them to stop planting tobacco which is killing millions. Sugar cane is 7 times more efficient than corn in making ethanol.

    You want proof that it works? Just google Brazil and find out for yourself. Now, you won’t be using a food product or even displacing a food product……

    Completely renewable and no one is hurt except for those purveyors of death the tobacco companies.

    I would sure like to know the idiot who decided to use corn (a food product) and doomed ethanol to failure. Had to be an oilman!

    OH! This could all be done in one year……….No more dependence on foreign oil.

    Cars are already to go, made by Chevy! They are called flex-cars and burn any combination of oil and ethanol.

  6. Phil Waste:

    Here is an article from Bloomberg. Debunking common myths about ethanol.
    May 27 (Bloomberg) -- Sometimes two things look pretty much the same, like a Cartier diamond and a Home Shopping Network cubic zirconia.
    There's a world of difference between the two.
    The same is true of ethanol made in the U.S., mainly from corn, and ethanol from Brazil derived from sugar cane. They look the same, though that's where the similarities end between what I like to call ethacorn and ethacane.
    Although ethacane doesn't produce a fraction of the negative economic, environmental and social problems that ethacorn does, as international food prices soar and environmental concerns mount, both are being thrown into the same pinata to get hammered. Ethacorn deserves the beating, not ethacane.
    It's hard to know whether those wielding the sticks are just temporarily blindfolded or whether they have an interest in defending the fossil-fuel industry or the agricultural subsidies of rich nations.
    There are four main arguments against the wide use of Brazilian ethacane:
    -- Food prices are being driven out of sight as farmers grow more-profitable sugar cane instead of other crops.
    -- Amazon rainforest is being destroyed to make way for cropland.
    -- Ethacane pollutes as much or more than oil-based fuel.
    -- Cane production uses the equivalent of slave labor and is morally unjust since it takes food from the mouths of the poor to put in the gas tanks of the rich.
    Myth Busting
    Each of these points is a myth.
    To start with, let's make a broad point. ``Brazil has the oldest, most advanced and efficient ethanol programs in the world,'' according to the report of an international conference on biofuels in February 2007 at the Woodrow Wilson International Center for Scholars in Washington.
    That brings up the first question: If ethacane were responsible for higher food prices, wouldn't food cost more in Brazil than elsewhere? It doesn't.
    According to the United Nations Food and Agriculture Organization, or FAO, Brazil is one of the world's cheapest producers of corn, soybeans, beef, chicken, pork, milk and rice. In a clear sign of agricultural competitiveness, Brazil is also a leading exporter of food.
    ``When we talk about the influence of biofuels on the economy of grains, we are talking about the corn from the U.S., not the sugar cane from Brazil,'' said Abdolreza Abbassian, secretary of the Intergovernmental Group on Grains within FAO. A recent study by the International Monetary Fund shows that Brazil's ethacane hasn't been responsible for higher international food prices.
    Room to Spare
    Brazil also has all the room needed to grow sugar cane and increase agricultural productivity without tearing down a single tree in the Amazon. Five hundred years ago, the Portuguese learned that the Amazon isn't the best region to grow sugar cane, which requires a long dry season.
    Out of 320 million hectares of arable land in Brazil, only 3.2 million hectares, or 1 percent, are used to grow sugar cane for ethanol. Moreover, Brazil has 100 million hectares of underutilized pastures suitable for agriculture. That's more land than France and Germany combined.
    While every hectare, equal to about 2.5 acres, of Brazilian pasture feeds one cow, in many countries there are as many as six cows per hectare. If Brazilian ranching becomes slightly more intensive, the country could easily boost production of food and biofuels without destroying the forest.
    Reverse Malthus
    Proving economist Thomas Malthus wrong, in the past 15 years, Brazil increased the amount of land used to grow grains by 21 percent, while production soared 119 percent.
    Arguing that ethacane pollutes more than fossil fuels is ludicrous. While oil already costs $130 a barrel and will eventually run out, ethacane is renewable, cleaner and more efficient.
    In comparison with gasoline, ethacane reduces the emission of greenhouse gases by more than 80 percent, according to the U.S. Energy Department.
    As for efficiency, ethacane produces 8.2 joules of energy per unit of fossil-fuel input, compared with 1.5 joules for ethacorn and less than 1 joule for diesel and gasoline.
    Ethacane is twice as productive as ethacorn -- 6,800 liters per hectare for the former and 3,100 liters per hectare for the latter. It also produces 24 percent more fuel per hectare than the beet- or wheat-based ethanol common in Europe.
    Manual Labor
    The argument that ethacane pollutes the environment because the cane must be burned before being manually harvested is a nonstarter. In the state of Sao Paulo, which produces 62 percent of Brazil's ethanol, more than half of the cane is already harvested mechanically and manual cane-cutting will be abolished by 2014. That should also put an end to the argument that cane harvesting relies on the equivalent of slave labor.
    Nor does ethacane take from the poor and give to the rich. Agricultural subsidies in wealthy nations do that.
    Far more problematic than any of these issues is the U.S. Congress's refusal to eliminate a 54-cent tariff on each gallon of imported ethanol. This levy was introduced in 1980 to protect U.S. makers of corn-based ethanol from competitors such as Brazil, which can produce ethacane for 22 cents per liter, while U.S. ethacorn costs 35 cents per liter. Lifting this tariff would ease the demand for corn and take a step toward easing pressure on food prices.
    Brazil is threatening to challenge the U.S. tariff at the World Trade Organization. Pascal Lamy, the director-general of the WTO, has already said Brazilian ethacane ``isn't competing with food'' and ``is more respectful to the environment than the corn-based ethanol in the U.S. and Europe.''
    Sooner or later, the WTO might have the chance to decide whether the world can finally have a real substitute for oil. Until then, we'll have to live in a world where fake goods are passed off as the real thing.
    If you want to end the oil shortage convince Congress to eliminate the tariff on imported ethanol until we get our own ethanol or ethacane operation going. Force Congress to allow the import of Chevy flex-cars as they would sell like hotcakes. Force Congress to force the oil companies to add an additional pump is gas station that would be for ethanol.
    The solution is not to drill offshore, in this you are dead wrong and only playing into the hands of the oil companies.

  7. Miklos Hollender:

    "There is only one thing rails can do that buses can’t do better, faster, and more flexibly, and that is spend a lot of your money."

    Then why was there an explosion of private railroads in the XIX. and early XX. century, (until the federal government started to f**k with them)? That's one thing to say that public planners cannot get anything right, and another thing to say buses are always more efficient than railroads - that sounds quite ridiculous to me.

  8. jelena:

    Ethanol is a sustainable energy resource. ethanol can provide the liquid fuel for increasing energy. Ethanol production is growing so quickly and the farmers expect to sell as much corn to ethanol plants.the advantage of ethanol is reducing greenhouse gas emissions.

    Florida Drug Rehab

    Florida Drug Rehab

  9. Phil Waste:

    If Ford and Chevy want to survive? I hope you do, so why don't you put E85 pumps in all your dealerships and advertise your flex-fueled cars which you have been making for years now?

    Start pushing sugar cane and sugar beet ethanol which is 7 times more efficient than 'corn' ethanol and it doesn't rob our food supplies.

    You can do it now or be forced to do it later. Make your choice.

  10. Aditi:

    Of course peoples are looking towards the alternative energy in that one is ethanol The process now is unproven and expensive.
    Addiction Recovery Florida

    Addiction Recovery Florida