More Consequences of Ethanol Subsidies

This article, in Newsweek, talks about the pressure being placed on water supplies in the midwest due to increased corn growing, for use in the production of ethanol. While this is indeed a boon for corn growers, it can't last forever, and not just because the money runs out. The water is running out as well.

By now we all know that using ethanol as a replacement or additive for gasoline is a losing proposition. Ethanol requires more energy to produce than you get back when you burn it, which means it costs more money to produce than it can be sold for. In a free market, such a product would have limited uses, but thanks to the environmentalist lobby, along with a great deal of misinformation about the benefits of ethanol versus its cost, the public is stuck with it. The only way to make such a product feasible is to use taxpayer dollars to subsidize its production, which the federal government does with glee, and which grants to corn farmers a windfall of potential profit.

The unintended consequences of the subsidy are many. First, the price for corn has skyrocketed, as mentioned in the article. This applies primarily to feed corns, which aren't consumed by humans directly, but which are used to feed cattle and other livestock. With more of the feed corn going toward the production of ethanol, there is less left for feed, meaning that food prices will increase as well. Also, since feed corn is suddenly more profitable than other types of corn, farmland that was previously used to grow human-consumable corn has been re-allocated to the growth of feed corn, so the prices of corn products directly consumed by humans will increase. In fact, the effects have been so far-reaching that in Mexico the price of corn tortillas, formerly an affordable staple food item, has more than doubled. The tequila industry has suffered as well, as former tequila producers torch hundreds of acres of yucca fields in preparation for planting ethanol corn.

Now, we throw in the fact that the additional growing in the midwest is threatening the region's water supplies. In a free market, an increase in the demand for water would be countered by an increase in its price, which would in turn act to discourage its profligate use. In areas where water is a public utility, however, its price is usually fixed, regulated, or subsidized, effectively preventing the natural equalization between supply and demand. Likewise, if the water is obtained by some other means, such as diversion of streams or rivers, or by pumping directly from a lake or reservoir, any or all of which may be "public property", there is little incentive for farmers to curb their water use, as there is no additional cost for using ever more water. Instead, other users of the streams, rivers, and lakes bear the costs of overuse of the water supplies...a classic example of the tragedy of the commons.

Ethanol is all hype and no substance. It has its uses, but that of a general gasoline replacement is not one of them. The continued subsidization of its production will continue to have far-reaching consequences, and the majority of the costs will be born by taxpayers, and by those in society who can least afford it in the form of increased food prices. How does the environmentalist conscience square with foisting the costs of its preferences upon those with the least ability to pay, and how long will we continue to perpetuate the ethanol scam?