The Ethanol Quandary

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The New York Times had an article yesterday on the economic growth that ethanol is spurring across rural America, even in places like Grinnell. However, the article only grazed on the hidden costs and unintended consequences of this boom.

The rise in the use of ethanol has raised corn prices considerably. As this article from Bloomberg News mentions, corn “surpassed $4.20 a bushel Jan. 17, almost double its September price.” This has big consequences for American consumers. Hogs, chickens and cows rely on corn for their feed. This has led to higher prices for pork and beef but also for soybeans, which serve as an alternate feed for livestock, not to mention all sorts of other foods ranging from bread to pop.

However, the consequences have been far graver internationally. In Mexico, the rise of corn prices has led to a giant surge in the price of tortillas, which is the basic staple for most poor and working class Mexicans. The result has led to most poor Mexicans being forced choose between spending “up to a third of their income on tortillas — or eating less or switching to cheaper [and much less healthy] alternatives.” It is beginning to ripple into a political crisis with over 75,000 Mexicans holding a protest against the rising prices 10 days ago.

Ethanol isn’t even that good for the environment either. The Bloomberg article points to a June 2006 study by researchers at the University of Minnesota in Minneapolis that found that there may be a net increase in greenhouse gas emissions as a result of growing more corn for ethanol. The article goes on to explain that this happens because “crops have to be irrigated, plowed with tractors, doused with nitrogen fertilizers and transported to ethanol distilleries, which power their machinery with natural gas or coal. Croplands are less effective than forests or grasslands in absorbing carbon dioxide, the heat-trapping gas blamed for global warming.”

The final issue is that the ethanol boom creates an unsustainable boom in corn prices. If a Democratic Congress raises CAFE standards as expected, Americans will be consuming less gasoline, not to mention gasoline alternatives such as ethanol. However, this is only small potatoes compared to the long term issue. The President announced an initiative several years ago to make hydrogen fuel cells a viable option by 2020. Even if that estimate is off by ten years, that will create a real long term issue. If, by then, growth in alternative fuels has continued at the current pace, much of our nation’s agricultural sector will be geared towards producing ethanol, biodiesel and other substitutes for gasoline. However, there is no need for a substitute for gasoline when you’ve found a substitute for the internal combustion engine. This creates the inherent potential for a farm crisis that would dwarf the one in the 1980s.

As the use of alternative fuels increases, these issues will become more pressing. The question is how to deal with the difficult balance between spurring economic growth in rural America and decreasing our dependence on Middle Eastern oil on one hand and keeping food prices low for consumers and protecting our economy and environment in the long term on the other. There is no easy answer but it is a question that should be and needs to be asked.

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Entry Filed under: Miscellaneous, Agriculture

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