Coyote Blog

Last week I tried to explain why the choice of plant, whether it be a food plant or a non-food plant, that is used to make ethanol is mostly irrelevant to whether ethanol mandates raise fuel prices, at least with current technologies.  I wrote:

Food prices rise not because food is converted to ethanol per se, but
because the amount of grains going into the food supply decreases.  The
issue is the use of farmer's time and resources and the use of prime
cropland to grow plants for fuel rather than food for consumption.  The
actual crop used to make the fuel, whether corn or switchgrass, does
not matter to food prices -- it is the removal of farmers and cropland
from food production that matters.  The only way cellulosic ethanol is
likely to improve food prices in substitution for corn is by being more
efficient per acre in fuel yields than corn  (which may turn out to be
the case, but has not yet been proven in this country).  But even so,
incremental improvements in yield don't help much, because we are
talking about enormous (40-50% or more) amounts of US cropland that
would have to be dedicated to fuel, whatever the plant technology, to
meet the current ethanol mandates.

I almost didn't post this the first time around, because I thought it was so obvious.  But on Sunday the NY Times blundered right into the same silly assertion:

This does not mean that Congress should give up on biofuels as an
important part of the effort to reduce the country's dependency on
imported oil and reduce greenhouse gas emissions. What it does mean is
that some biofuels are (or are likely to be) better than others, and
that Congress should realign its tax and subsidy programs to encourage
the good ones. Unlike corn ethanol, those biofuels will not compete for
the world's food supply and will deliver significant reductions in
greenhouse gases.

Of course, the ability to produce such biofuels with these magic powers has never actually been demonstrated, but I am all for them when and if someone invents them.  Efficient conversion, for example, of corn stalks, rather than corn itself, to fuel would be great and would solve this trade-off.  This technology does not exist today -- and only a lot of hand-waving can translate cellulosic ethanol successes in switchgrass to corn stalks.  Also recognize that even this has costs hidden to us non farmers, because corn stalks are used for a variety of purposes today.  My guess is that cellulosic ethanol from corn may be economically feasible, but only after some genetic modifications of the plant itself.

A week or so ago, I discussed federal energy subsidies and hypothesized, without a lot of facts, that a lot of them go to failing alternative energy projects rather than to oil company shareholders.  I asked readers if they had any more information, and the discussion is here.

But ask and ye shall receive, and the WSJ has an article today on federal energy subsidies and where they go.  The answer is:  in bulk dollars, a lot of them go nuclear, hydro, and traditional fossil fuel production.  However, it is interesting to look at them on an output basis:

For electricity generation, the EIA concludes that
solar energy is subsidized to the tune of $24.34 per megawatt hour,
wind $23.37 and "clean coal" $29.81. By contrast, normal coal receives
44 cents, natural gas a mere quarter, hydroelectric about 67 cents and
nuclear power $1.59.

The wind and solar lobbies are currently moaning that
they don't get their fair share of the subsidy pie. They also argue
that subsidies per unit of energy are always higher at an early stage
of development, before innovation makes large-scale production
possible. But wind and solar have been on the subsidy take for years,
and they still account for less than 1% of total net electricity
generation. Would it make any difference if the federal subsidy for
wind were $50 per megawatt hour, or even $100? Almost certainly not
without a technological breakthrough.

By contrast, nuclear power provides 20% of U.S. base
electricity production, yet it is subsidized about 15 times less than
wind. We prefer an energy policy that lets markets determine which
energy source dominates. But if you believe in subsidies, then nuclear
power gets a lot more power for the buck than other "alternatives."

The same study also looked at federal subsidies for
non-electrical energy production, such as for fuel. It found that
ethanol and biofuels receive $5.72 per British thermal unit of energy
produced. That compares to $2.82 for solar and $1.35 for refined coal,
but only three cents per BTU for natural gas and other petroleum
liquids.

I will repeat what I said in my earlier post, just so no one is confused about my position:

I personally don't care where [the subsidies go]. I am all for eliminating all
of this subsidy mess, equally, whether it's for oil exploration or
energy-from-donkey-poop or for CEO salary enhancement.

I am exhausted by people making policy suggestions by looking at small parts of complex inter-related systems in isolation.  One such example is the recent response of some ethanol mandate defenders to recent charges that corn-based ethanol is net harmful to the environment and its mandated and subsidized use is driving up world food prices.

The response by some (certainly not in the corn lobby, of course) has been that our problems would all be solved if we switched to cellulosic ethanol, which is generally made from non-food plants.  Supporters argue that this eliminated the food for fuel problem.

Huh?  Sure, in the narrowest possible sense, I guess, since we are no longer using food crops but rather grasses and such to make ethanol.  But at any reasonably holistic level of analysis, this is simply absurd.  Food prices rise not because food is converted to ethanol per se, but because the amount of grains going into the food supply decreases.  The issue is the use of farmer's time and resources and the use of prime cropland to grow plants for fuel rather than food for consumption.  The actual crop used to make the fuel, whether corn or switchgrass, does not matter to food prices -- it is the removal of farmers and cropland from food production that matters.  The only way cellulosic ethanol is likely to improve food prices in substitution for corn is by being more efficient per acre in fuel yields than corn  (which may turn out to be the case, but has not yet been proven in this country).  But even so, incremental improvements in yield don't help much, because we are talking about enormous (40-50% or more) amounts of US cropland that would have to be dedicated to fuel, whatever the plant technology, to meet the current ethanol mandates.  And remember, the net effect on fossil fuels may still be zero no matter how much land is dedicated, since no one has demonstrated large scale ethanol operations in the US that don't use more fuel to produce the ethanol than they produce. 

Postscript:  Related to this topic of thinking about economic systems narrowly, Lubos Motl discusses the supposed positive green impact on the economy in light of the open window fallacy.

Time, not always my favorite publication, hit on a couple of points I have made recently in an article called the Clean Energy Scam.  This article has been around for a few weeks but I am only just now getting to it.

First, I made the point just the other day that inordinate focus on global warming is crowding out other more important environmental issues, sucking the oxygen out of causes like private land trusts that are attempting to preserve unique areas.  As Time says:

The Amazon was the chic eco-cause of the 1990s, revered as an
incomparable storehouse of biodiversity. It's been overshadowed lately
by global warming

Much has been made of Brazil's efforts to reduce imported oil.  Too much credit has been given to ethanol -- most of Brazil's independence came from a number of domestic oil developments.  However, Brazil has been a leading promoter of ethanol through government policy, and this focus on ethanol has had a lot to do with deforestation in the Amazon, as rising crop prices due to biofuel mandates have spurred a rush to clear new land.  Now, US and European ethanol policies are just accelerating this trend:

This land rush is being accelerated by an unlikely source: biofuels. An
explosion in demand for farm-grown fuels has raised global crop prices
to record highs, which is spurring a dramatic expansion of Brazilian
agriculture, which is invading the Amazon at an increasingly alarming
rate.

it never made any sense that a fuel that requires more energy to produce than it provides could ever be "green," but only now are the politically correct forces accepting what I and others have been saying for years:

But several new studies show the biofuel boom is doing exactly the
opposite of what its proponents intended: it's dramatically
accelerating global warming, imperiling the planet in the name of
saving it. Corn ethanol, always environmentally suspect, turns out to
be environmentally disastrous. Even cellulosic ethanol made from
switchgrass, which has been promoted by eco-activists and eco-investors
as well as by President Bush as the fuel of the future, looks less
green than oil-derived gasoline.

The rest of the article is quite good.  I don't like to criticize where other people choose to spend their charitable dollars, but it is just amazing to me that environmentally-concerned people could give $300 million to Al Gore just to squander on advertising.  (By the way, Al Gore claims to have not only invented the Internet, but to have "saved" corn ethanol from government defunding).  I think about how much $300 million could have achieve in private land trusts trying to buy up and preserve the Amazon, and I could cry.  But all I can do is plug along and give what I can.  I donate to both the Nature Conservancy and World Land Trust.

Everyone wants to blame their industry's poor economics on banks or the oil companies: (via a reader)

Truckers angry about the high price of fuel staged a rolling protest on
Tuesday, using their big rigs to slow traffic to a crawl on the New
Jersey Turnpike.

The protest was part of a loosely organized
nationwide effort by independent truckers to draw attention to the high
prices they face....

"The gas prices are too high," said one of them, Lamont Newberne, a
34-year-old trucker from Wilmington, N.C. "We don't make enough money
to pay our bills and take care of our family."

Newberne said a
typical run carrying produce from Lakeland, Fla., to the Hunt's Point
Market in The Bronx, N.Y., had cost $600 to $700 a year ago. It now
runs him $1,000...

"The oil company is the boss, what are we going to be able to do about
it?" said Rotenbarger, who was at a truck stop at Baldwin, Fla., about
20 miles west of Jacksonville. "The whole world economy is going to be
controlled by the oil companies. There's nothing we can do about it."

Well, we talked the other day about how oil industry profits, even at this historic high, amount to twenty cents of current gas and diesel prices.  But lets take a more direct comparison.  I looked at Google finance for ExxonMobil and Knight Transportation (a large trucker based here in Phoenix).  If you sum up sales and net income for 2006 and 2007, ExxonMobil earned 10.2% of sales.  During the same period, the trucker earned 9.9% of sales.  This is a statistical dead heat.  So it is kind of hard to say that trucking companies are suffering at the hand of oil companies when they earn the same profit margins.

So what might be the problem?  The article gives a big fat hint that it might not actually be an oil company problem:

Jimmy Lowry, 51, of St. Petersburg, Fla., and others said it costs
about $1 a mile to drive one of the big rigs, although some companies
are offering as little as 87 cents a mile. Diesel cost $4.03 a gallon
at the Jacksonville-area truck stop.

I would certainly be willing to believe that trucking companies are paying independent drivers a price per mile that hasn't kept up with fuel costs.   In particular, it may be that the independent truckers have the same problem that Bear Stearns had, ie their revenues are tied into long term contracts while their costs float short term.  I'd certainly be bargaining for either higher mileage rates or a new rate structure with a fuel surcharge.

Over the coming months and years, you are going to see a ton of stories like this for somehow storing or reprocessing CO2:

 

If two scientists at Los Alamos National Laboratory are correct,
people will still be driving gasoline-powered cars 50 years from now,
churning out heat-trapping carbon dioxide into the atmosphere "” and yet
that carbon dioxide will not contribute to global warming.

The scientists, F. Jeffrey Martin and William L. Kubic Jr., are
proposing a concept, which they have patriotically named Green Freedom,
for removing carbon dioxide from the air and turning it back into
gasoline.

The idea is simple. Air would be blown over a liquid solution of
potassium carbonate, which would absorb the carbon dioxide. The carbon
dioxide would then be extracted and subjected to chemical reactions
that would turn it into fuel: methanol, gasoline or jet fuel.

This process could transform carbon dioxide from an unwanted,
climate-changing pollutant into a vast resource for renewable fuels.
The closed cycle "” equal amounts of carbon dioxide emitted and removed
"” would mean that cars, trucks and airplanes using the synthetic fuels
would no longer be contributing to global warming.

Although they have not yet built a synthetic fuel factory, or even a
small prototype, the scientists say it is all based on existing
technology.

You are going to see a ton of stories like this from academia because academics respond to incentives like everyone else -- faced with billions of dollars available for funding research into carbon-neutral technologies, they are going to publicly promote their ideas in an attempt to garner this funding.

The first question you should always ask is about the energy balance.  I am sure that this is technically possible.  Today we can create hydrogen fuel from sea water, but it is atrociously expensive from an energy standpoint.  The problem, then, is whether it makes any sense from a cost and energy balance point of view.  This is a good hint that it does not:

Even with those improvements, providing the energy to produce gasoline
on a commercial scale "” say, 750,000 gallons a day "” would require a
dedicated power plant, preferably a nuclear one, the scientists say.

We have to be suspicious that the carbon benefits come from the nuclear plant they require, not the process itself.  In fact, one is left to wonder why we would go through so much effort at all rather than just charge electric cars directly from the nuclear plant.  My sense is we are much closer on battery technology than on this stuff.

From an AP report:

The widespread use of ethanol from corn could result in nearly twice the greenhouse gas emissions
as the gasoline it would replace because of expected land-use changes,
researchers concluded Thursday. The study challenges the rush to
biofuels as a response to global warming.

The researchers said that past studies showing the benefits of ethanol in combating climate change
have not taken into account almost certain changes in land use
worldwide if ethanol from corn "” and in the future from other
feedstocks such as switchgrass "” become a prized commodity.

"Using good cropland to expand biofuels will probably exacerbate
global warming," concludes the study published in Science magazine.

Promoters of biofuels often hold up Brazil as an example of a model ethanol mandate.  Forget for a moment that in fact ethanol still makes up only a small percentage of the transportation fuel market in Brazil.  Think of all those satellite photos we used to see of farmers burning the Amazon to expand cropland:

I know that correlation is not equal to causation, but the fact is that this land clearing, which has always one on, really accelerated after the Brazilian ethanol mandates and subsidies.  My prediction is that careful academic work in the coming years will pin the blame for a lot of the destruction of the Amazon on ethanol.

Moonbattery has a fitting conclusion:

The study's findings aren't likely to change government policy, since
ethanol mandates are a political boondoggle that only dupes expect to
have any effect on the climate. If the first caucuses were held in
Hawaii, they'd be forcing us to run our cars on macadamia nuts instead
of corn.

If the word "environmentalist" wasn't so corrupted, I would consider myself to be one.  For years, the main charity I have supported with my money and my advocacy has been private land trusts like The Nature Conservancy.  Just because I don't think that governments should quash individual rights to force people not to develop their own land does not mean that I don't think certain pieces of land are worth protecting from development.  But I do it the old-fashioned way -- I and others spend money to buy that land.  Here is more on why I (mostly) like  groups like the Nature Conservancy and here is a post wherein I lament the shift in charity from spending your money to achieve goals to spending money to lobby the government to force other people to achieve your goals.

Of course, my claim to be an environmentalist just because I, you know, spend my money and time on private conservation efforts would be laughed off because I take the wrong stand on certain litmus test environmental issues (e.g. global warming, of course).  In this world, someone who buys a silly and environmentally worthless $19.99 carbon offset has more environmental street-cred than I do.

So I guess it is nice, at least for once, to be in agreement with those "real" environmentalists:

The government's bid to make fuel consumption more environmentally
friendly will involve petrol and diesel being mandatory blended with
2.5pc biofuel from this April and the country's leading supermarket
chain is aiming to use twice this amount at over 300 of its petrol
stations.

But campaigners believe this is not the green alternative people think they are getting.

Jenn
Parkhouse from Norwich Friends of the Earth said: "From April, people
will have no choice but to contribute to the destruction of forests,
the eviction of small farmers and rising food prices which will mean
more hunger.

"More and more people now realise the need for a
strong movement to stop the destruction caused by the biofuel industry
and the legislation which encourages it."

If flying a fuel-laden passenger jet into a building is not considered sufficient cause for a building structure to fail, then surely the failure of eight 1/2-inch steel plates is not sufficient to bring down a large structure.  Right?

Remind me to not cry any tears next time GM complains about government regulation:

In an audacious move Sunday, General
Motors demanded that the federal government step in and create a
national ethanol fuel station infrastructure at the same time the
company announced that it has invested in Coskata, a cellulosic ethanol
startup company.

 

Coming on
the heels of federal legislation that set national mandates for ethanol
production, GM's strategy amounts to federal guarantees for its
investment in the ethanol industry.

 

"We
need to grow E85 (ethanol) stations," said GM CEO Rick Wagoner at a
Detroit Auto Show news conference. "It is time for the U.S. government
to do it through regulation."

The article goes on to document the strong rent-seeking history of Coskata.

One small bit of good news is that the media seems to finally be catching on to the ethanol subsidy farce.

It's great that our politicians have discovered the need for new energy
technologies. But it appears that Washington is determined to put its
money"”our money"”on the wrong horse. Right now, researchers are studying
a host of energy solutions, including hydrogen, high-mileage diesel,
plug-in hybrids, radical reductions in vehicle weight and cellulosic
ethanol (made from cornstalks, switchgrass or other nonfood crops). It
is far too soon to say which of these holds the most promise. But,
instead of promoting experimentation and competition to find the best
solutions, politicians seem ready to declare ethanol the winner. As a
result, our nation could wind up with the worst of both worlds: an
"alternative" energy that is enormously expensive yet barely saves a
gallon of oil.

OK, I was mad at the waste of tax dollars for ethanol programs that do nothing for the environment or to reduce net fossil fuel consumption.  I was mad that a technology that in no way reduces CO2 production but does introduce radical new land-use-related environmental problems could be sold as an environmental panacea, rather than the corporate welfare it truly is.  I was mad we have decided it is more important to subsidize corn farmers than to continue to provide the world's poor with cheap food.  And I was flabbergasted that Congress could call for production of more corn-based ethanol than is physically possible with our entire corn crop.

But I really am mad now that ethanol subsidies are making craft beers rarer and more expensive to make:

A global shortage of hops, combined with a run-up in barley prices, is
sending a chill through Arizona's craft-beer industry.

The hops shortage threatens to boost prices, cut into profits and close
down brewpubs. It could change the taste and consistency of treasured
local ales.

In Bisbee, "hop heads" already are weaning themselves from Electric
Dave's India Pale Ale. Dave Harvan closed his 7-year-old Electric
Brewing Co. in November, citing the scarcity and high cost of
ingredients.

So why aren't as many farmers growing hops and barley?  Because the government is paying them ridiculous jack to grow corn so we can burn food into our cars:

Papazian attributed the barley prices to ethanol subsidies that have
raised the price of corn, the main ingredient in the alternative fuel.
As a result, farmers have switched to barley for livestock feed, which
has pushed up prices.

The hops situation is more complex. Years of overproduction and low
prices led farmers to replace hops fields with more profitable crops.
Add to that corn subsidies that have caused farmers to replace hops
fields with corn, a drought in Australia that affected yields and heavy
rains in Europe that ruined much of this year's crop.

Here is a snippet from the energy bill that just passed the House:

On Thursday, just over a year after winning the majority, Democrats in
the House of Representatives voted through an energy bill that
represents a stark departure from the administration's approach. It
would raise vehicle fuel efficiency (Cafe) standards for the first time
in over 30 years, by 40%, to 35 miles per gallon for both cars and
light trucks and SUVs. A renewable energy standard mandates that
utilities generate 15% of their power from renewables by 2020. It would
set a renewable fuel standard aiming to generate 36 billion gallons of
ethanol a year by 2022. A tax package would roll back some $13.5bn in
oil industry subsidies and tax breaks to help pay for $21bn worth of
investments in clean energy development, mainly in the form of
investment tax credits for wind and solar, along with the development
and purchase of plug-in hybrid vehicles. And it would raise efficiency
standards for appliances and buildings.

Let's look at a couple of pieces very quickly.  Recognize that this is based on 10 whole minutes of research, far more than a busy Congressman could possibly be expected to muster.

1. They want 15% of power generation from renewables by 2020.  I am not sure if this includes hydro.  If it does, then a bunch of Pacific Northwest utilities already have this in the bag.  But even if "renewable" includes hydro, hydro power will do nothing to meet this goal by 2020.  I am not sure, given environmental concerns, if any major new hydro project will ever be permitted in the US again, and certainly not in a 10 year time frame.  In fact, speaking of permitting, there is absolutely no way utilities could finance, permit, and construct 15% of the US electricity capacity by 2020 even if they started today.  No.  Way.   By the way, as a sense of scale, after 35 years of subsidies and mandates, renewables (other than hydro) make up ... about .27% of US generation.
2. The Congress is demanding 36 billion gallons of ethanol.  Presumably, this is all from domestic sources because Congress has refused to drop the enormous tariffs on ethanol imports.  But the entire corn harvest in 2004 of 11.8 billion bushels would make only 30 billion gallons of ethanol.  So Congress wants us to put ALL of our food supply into our cars?  Maybe we can tear down the Amazon rain forest to grow more.
3. By the way, I am all for cutting all subsidies to any industry for any reason, but when they say "industry subsidies and tax breaks" for the oil industry, what they mostly mean is this:

These were leases for drilling rights in the Gulf of
Mexico signed between oil companies and the Clinton Administration's
Interior Department in 1998-99. At that time the world oil price had
fallen to as low as $10 a barrel and the contracts were signed without
a requirement of royalty payments if the price of oil rose above $35 a
barrel.

Interior's Inspector General investigated and found
that this standard royalty clause was omitted not because of any
conspiracy by big oil, but rather because of bureaucratic bungling in
the Clinton Administration. The same report found that a year after
these contracts were signed Chevron and other oil companies alerted
Interior to the absence of royalty fees, and that Interior replied that
the contracts should go forward nonetheless.

The companies have since invested billions of dollars
in the Gulf on the basis of those lease agreements, and only when the
price of oil surged to $70 a barrel did anyone start expressing outrage
that Big Oil was "cheating" taxpayers out of royalties. Some oil
companies have voluntarily offered to renegotiate these contracts. The
Democrats are now demanding that all these firms do so -- even though
the government signed binding contracts.

Update:  More thoughts here.  My climate skeptic video is here.

It is good to know that Al Gore is proud of supporting, even "saving," corn-based ethanol (from a pro-ethanol site):

Vice-President Al Gore
Third Annual Farm Journal Conference, December 1, 1998
http://clinton3.nara.gov/WH/EOP/OVP/speeches/farmj.html

"I
was also proud to stand up for the ethanol tax exemption when it was
under attack in the Congress -- at one point, supplying a tie-breaking
vote in the Senate to save it. The more we can make this home-grown
fuel a successful, widely-used product, the better-off our farmers and
our environment will be."

It is good to know that when the economic and environmental toll from our disastrous subsidization of corn ethanol is finally tallied, we will know where to send the bill.

HT: Tom Nelson

Update: More Here on Ethanol Craziness

Let's forget all the other issues surrounding ethanol for a moment  (we'll mention a really bad one below), and just consider one fact that is beyond dispute.  Ethanol has an energy content per gallon that is only about 65% of that of gasoline.  So, another way to put it is that it takes a bit over 1.5 gallons of ethanol to replace 1 gallon of gasoline.  There is nothing suspicious or sinister about this (ethanol is flawed for other reasons) or at all controversial. 

Therefore, when your paper prints something like this:

"The number of plants under construction is truly frightening,"
said Ralph Groschen, a senior marketing specialist with the Minnesota
Department of Agriculture who closely watches the state's ethanol
development. The country could go from 7 billion gallons of capacity
now to 12 billion gallons, or about roughly 10 percent of U.S. gasoline
capacity, in a few years, according to Groschen.

You need to understand that you and everyone else are failing at simple math.  In 2004 the US consumed just over 140 billion gallons of gasoline.  So, already, our media has failed the math test.  12 billion gallons would be 8.6%, but we will give them a pass on rounding that to "roughly 10 percent."  But this 8.6% only holds true if gasoline is replaced by ethanol 1:1.  Using the actual figures cited above, 12 billion gallons of ethanol is about 7.8billion gallons an a gasoline equivalent, which would make it  5.6% of US gasoline usage in 2004, and probably an even smaller percentage if we were to take the worlds "gasoline capacity" at face value, since surely capacity is higher than production.

I know it seems petty to pick on one paper, and probably would not be worth my time to bother if it was just this one article.  But this mistake is made by every MSM article I have ever seen on ethanol.  I can't remember any writer or editor ever getting it right.

By the way, if you want more on what is wrong with ethanol, check my past posts. 

Finally, the other day I pointed out how much of our food crop is getting diverted to fueling our cars, with negligible effect on CO2 or oil imports.  If you really want to be worried about ethanol, note this:

Biofuels need land, which means traditional food crops are being
elbowed off of the field for fuel crops. Biofuel production is
literally taking the food out of people's mouths and putting into our
gas tanks. Already, increased food costs sparked by increased demand
are leaving populations hungry. The price of wheat has stretched to a
10-year high, while the price of maize has doubled.

Need more
land? Clear cut some forest. Is there a word beyond irony to describe a
plan to mitigate climate change that relies on cutting down the very
trees that naturally remove carbon from the atmosphere? Stupidity,
perhaps? The logic is like harvesting a sick patient's lungs to save
her heart. Huge tracks of Amazon
rainforest are being raised to the biofuels alter like a sacrificial
lamb, and the UN suggests that 98 percent of Indonesia's rainforest
will disappear by 2022, where heavy biofuel production is underway.

Still
need land? Just take it. The human rights group Madre, which is backing
the five-year moratorium, says agrofuel plantations in Brazil and
Southeast Asia are displacing indigenous people. In an editorial
published on CommonDreams last week, Madre Communication Director Yifat
Susskind wrote, "People are being forced to give up their land, way of
life, and food self-sufficiency to grow fuel crops for export."

It is good that doom mongers like Paul Ehrlich have been so thoroughly discredited.  But could anyone have imagined that not only are we not facing "Population Bomb" style famines, but we are in fact spending billions of dollars of taxpayer money to promote burning food in cars?

I am not sure how anyone thought this was a good idea, since

1. Every scientific study in the world not conducted by an institution in Iowa have shown that corn-based ethanol uses more energy than it produces, does not reduce CO2, and creates new environmental problems in terms of land and water use.
2. Sixty seconds of math would have shown that even diverting ALL of US corn production to ethanol would only replace a fraction of our transportation fuel use.

Apparently, Nebraska has reached a milestone of sorts: (HT Tom Nelson)

With three new plants
added in November, annual corn demand for ethanol production in
Nebraska passed the 500-million-bushel mark for the first time, using
37% of Nebraska's corn.

How much fuel has this produced?

"Today, that ambitious
directive has become a reality." Sneller says "At current rates,
Nebraska plants will use 514 million bushels of corn annually to
produce 1.4 billion gallons of ethanol. By the end of 2008, Nebraska
plants will process 860 million bushels into 2.3 billion gallons of
ethanol. Distillers grain, a co-product of ethanol production, is
widely accepted and marketed as a superior livestock feed."

This is enough ethanol to replace about a billion gallons of gasoline (since ethanol has less energy content than gasoline).  This represents about  0.7% of US gasoline usage.  The cost?  Well, I don't know how many billions of subsidy dollars have flowed to Nebraska, but there is also this:

Corn prices have
remained virtually unchanged since World War II. Increased demand from
ethanol production has raised average corn prices by 70% and is driving
an economic resurgence in rural Nebraska, according to Todd Sneller,
administrator of the Nebraska Ethanol Board.

So we have spent billions of taxpayer dollars, have diverted about 40% of Nebraska's corn output, and we've raised prices on corn 70% all to replace less than a percent of US gasoline usage.  If we could really do the fuel balance on the whole system, we would likely find that total fossil fuel usage actually went up rather than down through these actions.

Never have I seen an issue where so many thoughtful people on both sides of the political aisle united in agreement that a program makes no sense since... well, since farm subsidies.  Which, illustratively, have not gone away despite 80 years of trying.  As I wrote here:

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.

Via Tyler Cowen:

The Asian
Development Bank presented official survey results indicating China's
economy is smaller and poorer than established estimates say. The
announcement cited the first authoritative measure of China's size
using purchasing power parity methods. The results tell us that when
the World Bank announces its expected PPP data revisions later this
year, China's economy will turn out to be 40 per cent smaller than
previously stated......The number of people in China living below the
World Bank's dollar-a-day poverty line is 300m - three times larger
than currently estimated.

Well, this is a bit sad, as I would hope everyone likes seeing people emerge from poverty**.  But it is really not surprising.  Strongly state-run economies are notoriously hard to measure from the outside, and westerners systematically overestimated the size of the economy of the old Soviet Union.

**  I make this statement because I am an optimistic guy full of confidence in the generally good intentions of mankind.  Because if I were not such a person, and actually judged people by their actions, I would come to the conclusion that a lot of people DO NOT want people in countries like China to emerge form poverty.  Trade protectionism, apologias for looting dictators like Castro or Chavez, anti-globalization riots, anti-growth initiatives, and calls for rollbacks in fossil fuel consumption all share in common a shocking disregard for people trying to emerge from poverty -- often from folks on the left who purport to be the great defenders of the poor.  I tried to explain the phenomenon before, at least among self-styled "progressives':

Progressives do not like American factories appearing in third world
countries, paying locals wages progressives feel are too low, and
disrupting agrarian economies with which progressives were more
comfortable.  But these changes are all the sum of actions by
individuals, so it is illustrative to think about what is going on in
these countries at the individual level. 

One morning, a rice farmer in southeast Asia might faces a choice.
He can continue a life of brutal, back-breaking labor from dawn to dusk
for what is essentially subsistence earnings.  He can continue to see a
large number of his children die young from malnutrition and disease.
He can continue a lifestyle so static, so devoid of opportunity for
advancement, that it is nearly identical to the life led by his
ancestors in the same spot a thousand years ago.

Or, he can go to the local Nike factory, work long hours (but
certainly no longer than he worked in the field) for low pay (but
certainly more than he was making subsistence farming) and take a shot
at changing his life.  And you know what, many men (and women) in his
position choose the Nike factory.  And progressives hate this.  They
distrust this choice.  They distrust the change.  And, at its heart,
that is what the opposition to globalization is all about - a deep
seated conservatism that distrusts the decision-making of individuals
and fears change, change that ironically might finally pull people out
of untold generations of utter poverty.

The AZ Republic, long-time cheerleader for our current light rail project, writes another ode to commuter rail.  Today's love note is on the Albuquerque commuter rails system.

Sharon Hedrich heads out a little before 7 each morning for the 20-mile
trip to the law office where she works in downtown Albuquerque. She
used to leave home earlier for the dreaded crawl down the city's
congested freeway.

Driving to work could take 40 minutes or
more, depending on the number of emergencies stalling traffic. Now, she
boards a commuter train, settles into a plush red seat and spends the
half-hour ride reading a novel.

She says the train saves her aggravation - and money.

"I put 7 miles a day on my car instead of 50," Hedrich said recently as
the train zipped toward Albuquerque, New Mexico's largest city. "It's
50 bucks a month for me to ride this. I couldn't even get two tanks of
gas for that."

I am just all aglow for Sharon.  But does the project make sense for the taxpayers of the city and the state (and probably nation) that funded it?  Well, we don't know.  Because the AZ Republic writes 56 paragraphs lauding the system without once telling us anything about the system performance.  Does it cover its costs?  Are city roads visibly less congested?  Is there a net energy savings?  Is there measurably less pollution?  We don't know.  All we know is that three people, Geronimo Trujillo, Briana Duran, and Sharon, like it. 

Well, let's see if we can do the analysis that the Republic couldn't manage.  We are told it has 3000 presumably round-trip riders a day, and the fare for these riders is $50 per month.  That's $150,000 of revenue a month or $1.8 million a year.  How much does it take to operate?  Well, we are not told by the Republic and the Albuquerque authority ties itself in pretzels avoiding the question in this FAQ (question 1) comparing apples to oranges and lemons and bananas and any other fruit that might divert our attention.  But I can absolutely guarantee that it costs a hell of a lot more than $1.8 million.  I am not sure that covers the fuel bill, but it certainly does not cover wages, fuel, maintenance and whatever the state is paying the private owner of the rails for trackage rights. 

Let's see if we can find an analog that does disclose its costs to the public.  The commuter rail system in Northern Virginia called the VRE is about twice as long and carries about twice the passengers as the Albuquerque system.  Its costs are $55.4 million per year, so we can conservatively assume that the Albuquerque system is costing perhaps $20 million a year, a figure that exceeds its revenues by a factor of 11x.  That equates to a taxpayer subsidy of $6,000 per rider per year, which is not atypical for these systems.

And this ignores the capital cost.  Unbelievably, the article does actually mention the capital cost in the 36th paragraph, which is $135 million.  That is $45,000 per rider, or enough to buy two Prius's for each rider.

So Sharon Hedrich is happy?  Of course she is freaking happy.  The taxpayers paid $45,000 up front costs and $6,000 per year so she can save 43 miles of driving a day.  Assuming she has a 20 mpg car, pays $3 a gallon for gas, and rides the train to work 250 days a year, taxpayers are paying $6,000 a year to save Sharon $1,612.50 a year in gas.  If we want to consider gas plus wear and tear on her car at 45 cents per mile, taxpayers are paying $6,000 a year to save Sharon $4,837.50 per year.   The taxpayers would have been better off -- by a LOT -- buying her a Prius and paying her expenses to drive than buying and operating a train for her.  This is consistent with my past number crunching on other urban rail systems here and here.

Does the Republic mention these problems?  Sort of:

The system endured the typical raps against a big public-works project:
It fell behind schedule, an anti-tax foundation called it a bad idea
and there were some startup problems.

Dang those tax foundation guys - always getting in the way of progress!  Thank god such a great idea as subsidizing Sharon "endured" these Luddites.

By the way, I am a long-time train watcher and model railroader.  I love trains.  And, all things being equal and if everything was free in the world, I would love to have more commuter rail trains. Unfortunately, all things are not free.  And in most cases, particularly low-density cities outside the northeast, rail tends to be the most expensive possible option.  As a libertarian, I would rather the government just not appropriate this money in the first place.  But given that they are insisting on spending $135 million plus $20 million a year on transportation, nearly any other conceiveable project would have gotten more bang for the buck.

Update:  Below is a picture of Brianna Duran riding in an empty rail car.  It's good Albuquerque is keeping all those empty seats off the highway.

Update 2: Here is the predictable response to the empty seat snark:  Well, it's the people's fault for not choosing such an obviously superior mode of transport.  Wrong.  Its the government's fault for not taking people's preferences into account when spending all that taxpayer money.  A government that adjusts itself to the citizens is a Democracy.  A government that demands citizens adjust themselves to the government is fascism.

Update #3:  I am getting email about the government subsidy of highways.  In theory, this is not supposed to be a subsidy.  The large gasoline prices we pay at the pump are supposed to be for highway funds.  This is actually a pretty intelligent way to pay for roads, because it does a decent job at matching use to fees, with a bit of a penalty thrown in for low mpg cars.  To the extent that gas taxes do not match road costs, I am all for eliminating any subsidy and making them match with the right gas tax.  But I know whatever subsidy there is is not as high as for this rail.  Using the numbers for this example, applied to 100 million US commuters, would imply a capital cost of $4.5 trillion and a yearly operating subsidy of $600 billion.  And this would only cover commuting.  Remember, the people in the story can't give up their cars - rail lines only run a few places.  These costs would be to allow commuters to give up their cars part of the time -- about the same number of roads and cars would still be necessary.

Cars made by GM and fuel produce by Exxon may be responsible for a lot of CO2, but no one is creating as much global warming as James Hansen and NASA do just sitting at their computers.  An example, showing a cooling trend in New Zealand before their adjustments, but a strong warming trend after NASA is through with the data, is posted at Climate Skeptic.

Henry Payne has an interesting tidbit:  The government is now concerning itself with what cars its employees purchase.

Your tax dollars at work. The U.S. Department of Health and Human Services last week sent an email urging its 67,000 employees not to buy SUVs, lecturing that fuel efficiency should be their "top priority" when buying a car.

 

"Every
new sport utility vehicle on the road produces 60 percent more climate
threatening CO2 emissions than a smaller vehicle," said Energy News,
a quarterly newsletter from a department that has nothing to do with
energy, but everything to do with energy morality apparently.

 

"The
toll that vehicles take on the environment includes air pollution, oil
spills, pollution of our water supplies, and damage to natural
habitats," continues the HHS sermon. "In order to really cut CO2
emissions, higher fuel efficiency in all vehicles will be essential."

American auto makers were not amused by the recommendation to buy Toyotas or Hondas. 

This surprises me not at all.  A few weeks ago, I had an EPA audit of a marina and store I operate in Colorado (the report in all its glory is here).  In that audit, the Environmental Protection Agency recommended that we begin selling fair trade coffee in our store.  What that has to do with emissions into the lake, I have no idea.  They also recommended that I put an environmental message on our shopping bags, replacing the current boating safety message.  The audit did say that they could not require these two things.  Well, give them some time, they will probably make it a requirement soon.

My wife and I had our familiar recycling argument this weekend (Wife:  You need to put that stuff in the recycling;  Me:  Recycling makes zero sense for anything except scrap steel and aluminum, all the rest is just a liturgy of belief we perform for the church of the environment, where labor costs are assumed to be zero).

Anyway, thinking about it more, I have had a revelation.  If we define our biggest environmental problem as CO2 production,shouldn't we stop recycling of plastic and paper?  In the first case, we are burying hydrocarbons unburned, putting the carbon back underground.  Each bottle not recycled represent a few more hydrocarbon molecules that must be dedicated to plastics rather than fuel.  In the case of paper, if we don't recycle then we are using trees to sequester CO2 and bury it back in the ground as paper and cardboard.  Once trees hit their maturity, their growth slows and therefore the rate they sequester CO2 slows.  At this point, we need to be cutting more down, not less, and burying them in the ground, either as logs or paper or whatever.  Just growing forests is not enough, because old trees fall over and rot and give up their carbon as CO2.  We have to bury them.   Right?

Yeah, I know it's silly, but is it any more silly than this:

In the last few months, bottled water "” generally
considered a benign, even beneficial, product "” has been increasingly
portrayed as an environmental villain by city leaders, activist groups
and the media. The argument centers not on water, but oil. It takes 1.5
million barrels a year just to make the plastic water bottles Americans
use, according to the Earth Policy Institute in Washington, plus
countless barrels to transport it from as far as Fiji and refrigerate
it. ...

Dave Byers, 65, from Silver Spring,
Md., discussed the issue with his wife, Pat, on the steps of the
Metropolitan Museum of Art on a 90-degree Saturday. "I think it should
be banned, actually," he said of bottled water.

If you care about the environment, I say buy more bottled water, and throw the bottle away.  You too can sequester some carbon.

Via the New York Times:

THE term "food miles" "” how far food has traveled before you buy it "” has entered the enlightened lexicon.

Which should tell you all you need to know about the "enlightened."

There are many good reasons for eating local "” freshness, purity,
taste, community cohesion and preserving open space "” but none of these
benefits compares to the much-touted claim that eating local reduces
fossil fuel consumption. In this respect eating local joins recycling,
biking to work and driving a hybrid as a realistic way that we can, as individuals, shrink our carbon footprint and be good stewards of the environment.

Actually, most recycling, with the exception of aluminum which takes tons of electricity to manufacture in the first place, does nothing to reduce our carbon footprint.  And I must say that I often enjoy buying from farmers markets and such.  But does "food miles" mean anything?  And should we really care?  Well, here is an early hint:  The ultimate reduction in food miles, the big winner on this enlightened metric, is subsistence farming.  Anyone ready to go there yet?  These are the economics Ghandi promoted in India, and it set that country back generations.

Well, lets go back to economics 101.  The reason we do not all grow our own food, make our own clothes, etc. is because the global division of labor allows food and clothing and everything else to be produced more efficiently by people who specialize and invest in those activities than by all of us alone in our homes.  So instead of each of us growing our own corn, in whatever quality soil we happen to have around our house, some guy in Iowa grows it for thousands of us, and because he specialized and grows a lot, he invests in equipment and knowledge to do it better every year.  The cost of fuel to move the corn or corn products to Phoenix from Iowa are trivial compared to the difference in efficiency that guy in Iowa has over me trying to grow corn in my back yard.  Back to the New York Times:

On its face, the connection between lowering food miles and decreasing greenhouse gas emissions is a no-brainer.

Sure, if you look at complex systems as single-variable linear equations.  Those of us who don't immediately treated the food mile concept as suspect.  It turns out, for good reason:

It all depends on how you wield the carbon calculator. Instead of
measuring a product's carbon footprint through food miles alone, the
Lincoln University scientists expanded their equations to include other
energy-consuming aspects of production "” what economists call "factor
inputs and externalities" "” like water use, harvesting techniques,
fertilizer outlays, renewable energy applications, means of
transportation (and the kind of fuel used), the amount of carbon
dioxide absorbed during photosynthesis, disposal of packaging, storage
procedures and dozens of other cultivation inputs.

Incorporating
these measurements into their assessments, scientists reached
surprising conclusions. Most notably, they found that lamb raised on
New Zealand's clover-choked pastures and shipped 11,000 miles by boat
to Britain produced 1,520 pounds of carbon dioxide emissions per ton
while British lamb produced 6,280 pounds of carbon dioxide per ton, in
part because poorer British pastures force farmers to use feed. In
other words, it is four times more energy-efficient for Londoners to
buy lamb imported from the other side of the world than to buy it from
a producer in their backyard. Similar figures were found for dairy
products and fruit.

All I can say is just how frightening it is that the paper of record could find this result "surprising."  The price mechanism does a pretty good job of sorting this stuff out.  If fuel prices rise a lot, then agriculture might move more local, but probably not by much.  The economies to scale and location just dwarf the price of fuel. 

By the way, one reason this food-mile thing is not going away, no matter how stupid it is, has to do with the history of the global warming movement.  Remember all those anti-globalization folks who rampaged in Seattle?  Where did they all go?  Well, they did not get sensible all of a sudden.  They joined the environmental movement.  One reason a core group of folks in the catastrophic man-made global warming camp react so poorly to any criticism of the science is that they need and want it to be true that man is causing catastrophic warming -- anti-corporate and anti-globalization activists jumped into the global warming environmental movement, seeing in it a vehicle to achieve their aims of rolling back economic growth, global trade, and capitalism in general.  Food miles appeals to their disdain for world trade, and global warming and carbon footprints are just a convenient excuse for trying to sell the concept to other people.

A little while back, I posted a similar finding in regards to packaging, that is worth repeating here for comparison.

Contrary to current wisdom, packaging can reduce total rubbish
produced. The average household in the United States generates one
third
less trash each year than does the average household in Mexico,
partly because packaging reduces breakage and food waste. Turning a
live chicken into a meal creates food waste. When chickens are
processed commercially, the waste goes into marketable products
(such as pet food), instead of into a landfill. Commercial processing
of 1,000 chickens requires about 17 pounds of packaging, but it also
recycles at least 2,000 pounds of by-products.

More victories for the worldwide division of labor.  So has the NY Times seen the light and accepted the benefits of capitalism?  Of course not.  With the New Zealand example in hand, the writer ... suggests we need more state action to compel similar situations.

Given these problems, wouldn't it make more sense to stop obsessing
over food miles and work to strengthen comparative geographical
advantages? And what if we did this while streamlining transportation
services according to fuel-efficient standards? Shouldn't we create
development incentives for regional nodes of food production that can
provide sustainable produce for the less sustainable parts of the
nation and the world as a whole? Might it be more logical to
conceptualize a hub-and-spoke system of food production and
distribution, with the hubs in a food system's naturally fertile hot
spots and the spokes, which travel through the arid zones, connecting
them while using hybrid engines and alternative sources of energy?

Does anyone even know what this crap means?  You gotta love technocratic statists -- they just never give up.  Every one of them thinks they are smarter than the the sum of billions of individual minds working together of their own free will to create our current world production patterns.

Postscript: There is one thing the government could do tomorrow to promote even more worldwide agricultural efficiency:  Drop subsidies and protections on agriculture.   You would immediately get more of this kind of activity, for example with Latin America and the Caribbean supplying more/all of the US's sugar and other parts of Asia providing more/all of Japan's rice.

I drive into my local Shell station to fill up, and stick my card in the pump, but the pump refuses to dispense.  I walk into the office and ask the store manager why I can't get gasoline.  She checks my account, and says "Mr. Meyer, your Volvo fuel prescription has expired."  I say, "Oh, well its OK, I am sure I am using the right gas."  She replies, "I'm sorry, but the law requires that you have to have a valid prescription from your dealership to refill your gas.  You can't make that determination yourself, and most car dealerships have their prescriptions expire each year to make sure you bring the car in for a checkup.  Regular checkups are important to the health of your car.  You will need to pay for a service visit to your dealership before we can sell you gas."  I reply, "RRRRRRR."

OK, so if this really happened we would all scream SCAM!  While we all recognize that it may be important to get our car checked out every once in a while, most of us would see this for what it was:  A government regulation intended mainly to increase the business of my Volvo dealership's service department by forcing me to pay for regular visits.

So why don't we cry foul when the exact same situation occurs every day with glasses and contact lenses?  The parable above is nearly exactly the conversation I had the other day with the operator at 1-800-CONTACTS, except with "gas" substituted for "contacts".  I know that my contact lens prescription is a bit out of date, but I really needed them for a trip, and in terms of safety, a slightly out-of-date contact lens in my eye is much better than none (My contacts are about -6.5, which means I am pretty blind without them).  No joy, though.  I did not have time to get to the doctor, so I wore -5.0 contacts I found in a drawer just to have something.  The operator told me that doctors have the prescriptions expire each year so that I am forced to come see them.  Why with eye doctors do we consider this "for my own good" when in any other profession it would be called a scam? 

In fact, each year I know my eyes get about 0.25 worse on each lens.  I would really like to just self-medicate and order myself the next level up, but of course that is way out of bounds.  Can't trust people to figure out their own lens correction (though we do allow this for reading glasses, go figure).

Though it is nominally called an "energy" bill, the Senate just passed the largest farm-subsidy bill in history:

The legislation would require ethanol production for motor fuels to
grow to at least 36 billion gallons a year by 2022, a sevenfold
increase over the amount of ethanol processed last year. It also calls
for boosting auto fuel economy to a fleet average of 35 miles per
gallon by 2020, a 40 percent increase over current requirements for
cars, SUVs, vans and pickup trucks.

The evidence is absolutely unequivocal that corn-based ethanol doesn't reduce net energy use, since it takes at least as much energy to grow and produce as it provides.  It is even worse as environmental policy, since it almost certainly increases total pollution and CO2 production, particularly as ethanol is produced with Midwestern coal-powered electricity.   In addition, it is going to cause marginal lands and open space to be brought into corn production, reversing a 70-year trend in the US towards increases in wilderness and forested land.  It is going to increase fuel costs to no real purpose.  This is dumb, dumb, dumb.  So stupid that I can't even get the energy to criticize the new CAFE standards.  If they really wanted to meet their goals, a carbon tax would have been cheaper and more effective, but that would have taken political guts.

I understand the environmental logic to tax petroleum -- I don't particularly agree with it, but some sort of carbon-based tax is probably the least-bad way to achieve various environmental goals (I will leave for other posts whether these goals make any sense).

However, the Senate's proposal to tax oil companies directly, rather than the oil or petroleum products themselves, is a gutless chickenshit maneuver that is just so typical of politicians.  A tax on oil companies is less efficient than a direct carbon tax on the fuel (because it is operating less directly on price signals), but it makes sense to our political masters for several reasons:

• Populist Congressman can argue to their constituencies that "we didn't tax you consumers, we taxed those evil bloated oil companies."  Of course, in the end, the money comes from consumers anyway.  That's just basic economics.
• Oil companies, not politicians, get blamed for collecting the tax from consumers.  This is an tried-and-true approach, that has worked well with gasoline taxes embedded in pump prices.
• When oil prices inevitably rise due to the tax, the Congress will use this oil price rise as a rallying cry to...increase taxes more.  It is the classic government win-win of proposing increased regulations to solve problems caused by government regulations.

This part is even worse:

Another measure, pushed by Sen. Jeff Bingaman, D-N.M., was aimed at
collected $10.7 billion in royalties the government has been unable to
collect because of flawed oil leasing contracts issued by the Interior
Department in 1998-99. The government would collect an excise tax on
any oil taken from the Gulf of Mexico, subject to royalties not being
paid.

Here is what happened:  The government wrote offshore lease/royalty contracts in a certain way.  Oil companies read the contract language, and entered into the contract as written, and subsequently invested billions of dollars to develop the leases.  More recently, as oil prices rose, the government thinks it made a bad deal, and should have written the contracts differently.  The solution for private companies who make a bad deal: live with it.  The solution for the government, though, it apparently to use the coercive power of the government to extract the royalties you failed to put in the contract 18 years ago via special excise taxes.

And don't even get me started on this farm subsidy program masquerading as energy policy:

The bill would funnel about $11 billion over 10 years into the
development of renewable fuels such as ethanol, biodiesel and power
from wind turbines in a combination of extensions of existing tax
breaks and new tax benefits. An additional $18 billion in tax breaks "”
from tax credits to clean and renewable energy bonds "” also were
approved.

We are making a mistake of epic proportions pouring money and regulatory breaks into ethanol.  Ethanol, in the form we ar investing in it in this country, does NOTHING to reduce our oil use or improve the environment or reduce CO2 emissions.  Nada.  All it does is increase taxes, increase fuel prices, increase food prices, and, soon, cause environmental problems as marginal lands are brought into corn production.  I made a plea to stop this before it is too late, ie before the industry becomes so entrenched it will be politically impossible to cut it off.  I fear we are rapidly approaching this point of no return.

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.