The Absurd Report

With the price of corn soaring, it’s clear that the ethanol mandate is bad economic policy and bad energy policy.

You may be justifiably fuming about gasoline prices, but have you checked your grocery bills lately? Last week, corn briefly hit a record high — and given its importance as a livestock feed, sweetener and packaged-food ingredient, that’s putting upward pressure on prices for a wide range of comestibles. As a result, Congress is rethinking one of its more shortsighted energy policies.

Successive energy bills have imposed ever-increasing mandates for blending ethanol (which in the United States is made mostly from corn) with motor fuels. Apparently, no one explained to Congress the basic economic reality that when you dramatically increase the demand for an agricultural product whose supply is limited by the amount of acreage available for farming, prices will rise. Ethanol mandates are far from the only cause of the run-up in corn prices, but there’s little question that they play a role.

Last week, 51 House Republicans sent a letter to the Environmental Protection Agency urging it to relax its requirements on ethanol use. This comes after Congress required that 9 billion gallons of ethanol be blended into U.S. fuel this year; in 2006, the U.S. produced less than 5 billion gallons. The EPA has the power to waive biofuel rules if they would severely harm the economy or environment. The ethanol mandate, which was passed with little study or consideration of its consequences, is hurting both.

High prices for corn and other commodities are prompting landowners to remove fallow but ecologically important farmland from a federal conservation program and plant on it instead. That increases soil erosion and fertilizer use, contaminating U.S. waterways. Meanwhile, high food prices are boosting inflation.

The EPA should waive the ethanol requirement, but if that’s the only outcome of the ethanol brouhaha, the country will still lose. Lawmakers should see this as an important lesson: Tinkering with energy regulation can have disastrous consequences, especially when it’s done on behalf of special interests rather than the national interest. Given the number of phenomenally bad proposals for lowering oil prices floating around the Capitol, this lesson could not come at a more critical time.

Energy policy is complex and little understood by voters, which is why Republicans get away with claiming that more offshore drilling would lower prices even though government experts say it would have no effect for decades, while Democrats get away with proposing windfall profit taxes on oil companies even though economists say that would be self-defeating. With a little more study and a little less populist rhetoric, Congress could pass energy laws that would both lower consumer costs and lessen our use of climate-altering fossil fuels.

Source: LA Times Editorial

Tags: self-defeating ethanol

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