A McCain Policy Worth Stealing
For a lefty like me, it isn’t very often that I can write the above title. Stranger still, the policy to which I refer is a plank of McCain’s energy plan. Don’t worry–I’m not advocating offshore drilling or the $300 million battery prize; those policies are as silly as ever. However, McCain does deserve credit for an intelligent and brave stand on ethanol imports.
At present, the US charges a 54-cent tariff per gallon of imported ethanol and limits total imports to 7% of the US ethanol market, a gift to agribusiness to keep corn prices high. At present, however, the combined demand of a hungry world and our hungry tanks have sent corn prices skyrocketing. The corn industry is making a killing and ethanol (usable as a gas additive or the basis for E85) is pricey even with subsidies worth billions of dollars. McCain’s solution: allow Brazil to export sugarcane ethanol to the U.S. Given the immense power of the corn lobby, this is a courageous stand for a Republican to take, but it’s also a plan that can make a real difference. Even with the tariff, Brazil’s ethanol is cheap enough to export to the United States up to the 7% quota. In Brazil, ethanol makes up 20% of its total fuel consumption and 40% of the gas used by light vehicles. It’s cheaper than oil, it’s cleaner than oil, and the Brazilians are just aching to sell it to us. This is global trade at its most beneficial.
Another crucial thing to bear in mind is that Brazilian ethanol is far cleaner than the corn-based fuel we environmentalists love to loathe. Corn grows well in the American Midwest, but it takes a lot of energy to grow per unit of fuel extracted. For every calorie of fossil fuels put into US ethanol production, we get about 1.5 calories of ethanol in return. It’s better than burning oil, but only barely; corn is much more useful as
food than fuel. Brazil’s ethanol uses sugarcane, which produces more sugar and requires fewer chemical inputs. As a result, Brazilian ethanol produces 8.2 calories of usable energy for every calorie of fossil fuel used in its production. Contrary to popular belief, Brazilian ethanol does not come at the expense of rainforest conservation. Sugarcane is a subtropical crop, meaning that nearly 100% of new sugarcane fields take over old pastures or previously-used fields, not virgin forests. Soybeans (for cattle feed) are the main culprits of Brazilian deforestation.
In this context, Barack Obama’s ethanol plan seems rather unimaginative. To be fair, he favors funding to bring sustainable cellulosic ethanol (switchgrass, rapeseed–much better than sugarcane) on the market sooner. In the short-term, however, he supports the ethanol tariff, favors the quotas, and wants to increase support for America’s corn-based ethanol program. As a Senator from Illinois, this position makes sense. No sense in irritating the rural south of the state. However, a national Democratic candidate has much more to gain by offering short-term gas relief than he has to lose by irritating the corn lobby, particularly as his opponent has already made that leap.
McCain’s ethanol plan is no substitute for a transition to sustainable energy sources; at best, it could fractionally reduce gas prices for a few years. It is, however, the most realistic route for short-term price relief and might even ease our transition from oil. The Democrats should give it a second look.
Whoah. I was expecting you to talk about his plan to have the President appear before congress more regularly.
This is an excellent plan. I’d rather see investment in non food resources, but this is a great step nonetheless.
I can’t agree more! I’d rather give my money to Brazilians for fuel than to insanely rich Emirs and Saudi Princes.
Corn is in almost everything we consume and the rise in corn prices is one of the many reasons behind inflation in food prices. Importing Brazilian ethanol would go a long way in easing our pain at the grocery store.
What would this mean for domestic ethanol production? They’ll mostly get sunk from cheaper, and better, imports so many firms will die out. Those that survive, however, would have stood the time honored free market test of competition and they’ll be better for it.
Obama will never go for it though. Our domestic industry has tried to grow too fast overnight and is dependent on government protection so I wouldn’t be surprised if more than half of domestic production shuts down. This of course translates to American jobs being lost and thus makes the policy-maker that enacts free ethanol trade look bad. No one wants to be labeled and a “job exporter”, even though American corn-based ethanol production was a stupid idea to begin with and that these jobs never should have existed.
Not for nothing and correct me if I’m wrong…Isn’t one of the problems with any of the Ethanols is the transporting aspect. I’ve always heard it is more corrosive therefore damages railway cars,ships and pipelines quicker.
And on a related matter would you embrace free trade agreements with Brazil ? Colombia ?
I don’t speak for Travis but as far as free trade goes, I think its a watery grave for most import/exports right now.
10 years ago when energy prices were cheap it made sense to have our cheap shit made in China, Mexico, Indonesia but as energy prices go up so does the cost of shipping and those cheap goods from China aren’t so cheap anymore.
Meanwhile, our factories have boarded up and we’re stuck with once again shoving the upfront costs of restarting an industry we’d already had.
I’m not sure about the corrosivity of ethanol but I’m sure it can be engineered around. Also as Travis said, the energy cost of sugar ethanol is much higher and from a crop that we can only supply limited amounts ourselves; most of which is sold for food.
However, if shipping really is an issue there is an island country not 90 miles away that could, possibly be, in the future a supplier of huge amounts of sugar ethanol. Until recently they were the worlds largest supplier of sugar.
Just saying
Alfie- in principle, you’re absolutely right–transporting ethanol is tricky, since it’s corrosive than oil and mixes easily with water (like corn syrup). As such, it requires slightly different equipment than oil and is more expensive to move from place to place. However, though I don’t have any figures handy, I’m guessing that it’s not a prohibitive cost. Brazil already supplies 7% of America’s ethanol (as much as it legally can import), and it ships to a lot of other countries as well. Higher maintenance costs of tankers and pipelines could reduce the environmental benefits, though–what do you think?
Yes ethanol is much more difficult to transport than gasoline but we’re already working around that as evidenced by the number of E85 stations cropping up. Those transportation costs are already accounted for in the price.
Another thing to consider is what would the importation of Brazilian ethanol mean for the US infrastructure. Cheaper and more plentiful ethanol from abroad would give the private distributors a good reason to invest in the US infrastructure for a few reasons. First is that it will signal that the US really is trying to get away from fossil fuels meaning that investment in ethanol transportation now will have plenty of time to yield returns later. Second, an increase in the amount of the ethanol being traded gives private distributors to cut cost as best as possible since the current system will likely be overloaded.
On a side note, I encourage folks to check out http://www.e85prices.com as it paints a picture as to what prices are doing right now. A general rule of thumb is that 1 gallon of e85 will go about as far as a seven tenths of a gallon of gas so e85 has to be equal to or less than 70% that of gasoline in order for it to be a good buy.
Currently e85 prices are about 82% that of gas (nationally) so if ethanol is to have any chance of being a good choice then either the price of e85 needs to fall (as would happen with a free trade agreement with Brazil), the price of gas needs to climb (which will likely happen anyways), or both.
Oh yeah, the general idea behind free trade is that the benefit the whole populace of lower prices with free trade outweigh the benefit of employing a few domestics folks to produce something relatively inefficiently. Protectionism creates a net loss to society in two ways; domestic producers are relatively inefficient and consumers on the whole lose out on the benefit of lower prices and higher quantity.
That’s the “academic” reason why most economists support free trade although this boiled down and over simplified model doesn’t account for a lot of things, such as pollution created abroad due to zero environmental concerns for one example. After all, it is much easier to produce something cheaply and efficiently if you don’t have to worry about air emissions.
Rife with typos again…
Well thanks for the interesting read. My little herring of free trade was meant in a good way. I hold out hope that Colombia and Brazil can usher a new era in US/Latin America relations. I hold that Hugo is nuts (although he still trades big time w/US) and Ecuador ,Bolivia,Chile and Argentina have issues ,many understandable w/ us. I feel C and B hold a chance for fair talks,shared concerns and some honest “inter”-national relations.
On the fuel front I’m a driller/hydrogen /urban electrics via clean coal kind of guy. Overfarming and messing w/ food stocks kind of scares me. Also on the corrosive pipes thing I guess BP showed us all that no matter what coarses through the pipes we need to maintain.
@ Marc as for that big time sugar supplier 90 miles away. They’re gonna be an oil supplier 90 miles away some day but that and that island are perhaps best left for another post by you all.@ kevin I’m assuming I’ve matched any and all in typos. Take care all look forward to the next.
Yeahhh, Cuba’s one I don’t generally touch for the sake of family politics (they read the blog). My grandparents had to run from the country with very few of their remaining possessions and so have, of course, their own version of how future politics with Cuba should go.
I have another; not generally the usual alternative to our current policies, just an open-minded perception of how things should go.
I’m also one of those people who shudders at the fallacy of the term “clean coal.” It’s merely cleaner coal.