I Hate Ethanol Subsidies

by Will on October 14, 2010

It seems that the EPA has approved motor fuel with more ethanol in it. Kevin Drum brings the frustration:

Just what we need. More land-use destroying, corn price increasing, environmentally idiotic ethanol. All taxpayer-subsidized, of course. I guess the Iowa caucuses must be coming up any year now.

This is maddening. Ethanol is not gas, but burning it is causes worse air quality and more carbon dioxide emissions than burning gas. Mandating that it be put in fuel forces drivers to subsidize corn growers in the big rectangular states. The people subsidized are usually already doing quite well, and usually are already mooching off the taxpayer by taking agricultural subsidies. Since ethanol is made from corn, the subsidy makes it more profitable to grow corn than it should be, so people who would be growing grain and hops and other things start growing corn instead (increased demand leads to increased supply). That decreases the supply of grain and hops and other things, and since the demand for these things does not also go down the price goes up until it approximates the price of corn. As best I can tell — and I await refutation from wiser quarters! — this is why the price of beer has bounced up so dramatically in the last few years, in the face of stagnant or falling prices in most sectors. Ten years ago, people who brewed their own beer told me it was a fun hobby but it ended up costing as much as if they bought beer at the store — an indication that beer was priced correctly. Now people are telling me that brewing your own beer is a great way to save money. It so happens that all of the states between the coastal ones are systematically overrepresented in our government. It also happens that we have certain policies that benefit people in these states, but other than that do nothing but cause harm. Strange, that.

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