The End of Ethanol?

Maybe it’s the new mood in Congress.  Maybe the stars are aligned.  Whatever the cause, opposition to ethanol subsidies is cropping up in some unusual places — and just in time, as ethanol tax credits are set to expire in a few weeks.

Back in 2000, then-Vice President Al Gore touted ethanol subsidies as good for farmers and the environment.  This was no surprise, as the Clinton-Gore Administration worked to expand ethanol mandates under the Clean Air Act.  However much ethanol programs helped corn farmers, they were never much good for the environment, something Gore now admits.  Reuters reports:

“It is not a good policy to have these massive subsidies for (U.S.) first generation ethanol,” said Gore, speaking at a green energy business conference in Athens sponsored by Marfin Popular Bank.

“First generation ethanol I think was a mistake. The energy conversion ratios are at best very small.

“It’s hard once such a programme is put in place to deal with the lobbies that keep it going.”

Meanwhile, on the other end of the political spectrum, Senators Tom Coburn (R-OK) and Jim DeMint (R-SC) are taking aim at ethanol subsidies as yet another special-interest energy policy boondoggle that should be opposed by free-marketeers and environmental activists alike.  Greg Sargent reports:

With billions in ethanol subsidies set to expire this year, including a 45-cent-a-gallon tax credit for ethanol blenders that heaped nearly $5 billion on to the deficit last year, it appears senators DeMint and Coburn are dead serious about pressing the point.

DeMint, who bucked the GOP establishment by successfully rounding up enough support for an earmarks ban, said in a statement emailed my way:

“Government mandates and tax subsidies for ethanol have led to decreased gas mileage, adversely effected the environment and increased food prices. Washington must stop picking winners and losers in the market, and instead allow Americans to make choices for themselves.”

“We need to let the ethanol subsidies expire and we need energy developed based on market forces,” Senator Coburn added in an interview with me. He said Senators who are not willing to let them expire are “just protecting a parochial interest ahead of the national interest.”

Coburn added that a failure to let the subsidies expire would show that Republicans were not heeding the message their electoral victory sent about reining in spending — precisely what Tea Partyers argued about earmarks.

As Jonathan Zasloff notes, the ethanol issue also presents Republicans with an opportunity to show how less government intervention can be better for the environment.

Ethanol is a lose-lose proposition any way you slice it: it costs a big chunk of money, it’s horrible for the environment, and it does nothing but enrich special interests.  It’s particularly bad on the climate, because the amount of emissions requiring to produce a liter of ethanol is actually more than just using gasoline.  Kudos to Senators Coburn and DeMint for pushing this.

If Republicans fail to take action on ethanol, it will demonstrate the shallowness of their commitment to limiting government largesse and give credence to arguments that Republicans are only for less government when it’s good for special interests.