Said Rep. Earl Pomeroy (Democrat, N.D.): “At a time when our economy is struggling, we cannot afford to let these tax incentives expire and stymie the growth we have seen in our ethanol industry.”

Said Bob Dineen, President of the Renewable Fuels Association (RFA): “Allowing the tax incentives for ethanol to expire is simply not an option.”

Said Tom Buis, chief executive of Growth Energy: “Without the tariff, American taxpayers will be allowing foreign-subsidized ethanol to subvert American companies and American workers.”

I think I’m going to barf.

That some major environmental groups (some in the Sierra Club, but by no means all) bought into the hype is unfortunate, and in the 1990s and through about 2006 they certainly were chearleaders for biofuels — often for cynical reasons (e.g., because they thought it would enjoin the powerful farmers’ lobby in their fight against climate change).

But reality, as it often does, hit the environmenta movement in the face. With mounting evidence of the environmental downsides of biofuels, their extremely poor cos-effectiveness in reducing greenhouse-gas emissions, and their link to higher food prices, environmental groups have, for the most part, dropped biofuels like a hot potato. Environmentalists should at least be given credit for changing course in light of new information, though I would agree that many of the so-called unintended consequences of biofuel policies could have been predicted from the start.

“There are two methods, or means, and only two, whereby man’s needs and desires can be satisfied. One is the production and exchange of wealth; this is the economic means. The other is the uncompensated appropriation of wealth produced by others; this is the political means.” – Albert Jay Nock, “Our Enemy, the State”, 1935.

I’m quite sure that Nock was well acquainted with Frederic Bastiat’s “The Law” (1850), as well. One of the key themes of this work is the subverting of the economic means by the political, which we are reaping the results of today, in spades.

None of this is new. Alas, we have such a dumbed-down, government-schooled (not a disparagement of any one in particular, just an observation – I was, myself, a public school attendee), electorate that they cannot see that this perversion of justice stands against their own self-interests. No side in today’s politicized debate seeks to restore true justice to its preeminent place in the social order, but each seeks to bend law to serve it’s own political interests. It’s become Institutionalized Plunder, no matter who sits in the seats in Washington, District of Criminals – as Bastiat so eloquently stated it 160 years ago.

If it cannot be stopped, there is only one outcome …. collapse.

Thanks for your thoughts. As always, it’s great to hear from you.

The distinction made by Folsom between market and political entrepreneurs is an insightful and important one. It’s always interesting to me when people talk about ‘demand for ethanol,’ when, really, there would be almost no demand for ethanol without government mandates, both in the U.S. and here in Brazil. I’ve also often wondered about the validity of purported benefits of ethanol production, both in terms of their environmental merits and their benefits to rural economic development.

My approach, however, is not to question the wisdom of Bush’s 2007 Energy Independence and Security Act, the law that establishes the Renewable Fuel Standards and biofuel use mandates you discuss in your post, but to focus on the question, if we’re going to meet these mandates, if and how Brazilian cane ethanol might fit into this picture in ways that are beneficial to Brazil?

The report by the Baker Institute and Rice U. also provides great food for thought. A source not cited there is the article by Eaves and Eaves (Renewable corn-ethanol and energy security,” 2007) which points out that, with the immense fossil fuel demands of corn production, corn ethanol will do little or nothing to reduce our dependence on fossil fuels or imported sources of energy.

As for your question about if or when the tariff on imported ethanol might be reduced, that’s anybody’s guess. Many Brazilians in the industry here point to the entrance of major petroleum companies BP and Shell into the Brazilian ethanol market as an indication that this tariff may indeed soon be lowered. These companies, they claim, have at least as much power as the influential corn growers’ lobbies, and so may be able to weigh in, especially in light of the EPA’s recent RFS2 announcements approving Brazilian cane ethanol as an “advanced biofuel.”

Keep in touch, and keep me posted on your work!

Cheers,
Jason