Coyote Blog

I have no problem if someone wants to compete out there in the free market producing fuel from corn or switchgrass or whatever.  But we have got to stop the subsidies right now, before it is too late.  Biofuels do absolutely nothing, zero, zippo to change CO2 production, and some studies show they make CO2 output worse when you consider the whole production cycle.  This is not to mention the effect biofuels will have in putting more wild and forest land under the till. 

I can't see any conceivable benefit to the economy from subsidizing biofuels, except some hazy notion of energy independence which has limited economic value and which will never be achieved with biofuels  (we will have jacked up the price of corn so high we can't feed cattle long before biofuels make even a minor dent in oil imports).  My only guess as to true motivation is that people want to spite Exxon and Shell, but if you don't like those companies, you really aren't going to like Archer Daniels Midland. 

Biofuels, given current technology, are a pure product of politics.  They are a massive subsidy of Midwestern farmers that the recipients can claim is not really a subsidy.  If the first presidential primary were in Nevada rather than Iowa, you would never hear a word from politicians about ethanol.

But here is the reason we need to end the subsidies right now.  [emphasis added]

A $400-million integrated biodiesel and ethanol refinery the first
complex of its kind in North America will be built in central Alberta.

Led
by Dominion Energy Services, LLC a Florida-based group with pioneering
ties to Calgary's natural gas marketing sector investors that include
$45-billion US private equity fund The Carlyle Group LLC and affiliate
Riverstone Renewable Energy Infrastructure Fund I, LP said Monday they
have finalized plans for the facility....

Alberta Agriculture Minister Doug Horner noted the "world-class"
Dominion plant follows the provincial government's recent, $239-million
over five years initiative to boost biofuels production. The province
will provide a 14-cent per litre production credit to the facility.  [for those rusty on the metric system, that is 56-cents per gallon or $23.53 per barrel]

Companies are currently building massive subsidy-magnets biofuel plants.  Once these investments are in place, there is going to be a huge entrenched base of investors and workers who are going to wield every bit of political power they can to retain subsidies forever to protect their jobs and their investment.  Biofuel subsidies will be as intractable as peanut and sugar subsidies and protections.

Update:  Radley Balko mentions another great example.  For various post-prohibition reasons that may or may not have made sense at the time, state laws prohibit retailers from buying alcoholic beverages straight from the manufacturer - e.g. Costco cannot buy direct from Anheiser-Busch.  Wholesalers who emerged to fill the legally required middleman role became rich.  Since then, even thought this 3-layered distribution requirement makes zero sense, it has become impossible to change it because the wealthy distributors who owe their fortunes to the requirement block every move to deregulate.