Ethanol—There’s nothing to like

12 Nov Ethanol—There’s nothing to like

Posted Nov. 12, 2015 from Seattle, WA

Ed is expecting that the above ad will run in the A-section of the Seattle Times on Sunday, November 14, 2015.

The painful, awful thing about politics is taking a stand that you know will annoy wonderful &  good people who happen to disagree with you.  I know there are people like that who feel that Ethanol is a good thing and I find it deeply painful to disappoint them.

But Ethanol is a bad idea  that has done a terrible harm to the natural world.  Here’s the URL of a blog post from the Environmental Working Group that describes some of the damage it has done:

 http://www.ewg.org/agmag/2015/04/nail-corn-ethanol-s-coffin

Had Ethanol ever been subjected to the rigors of the market, the vast amount of expensive land, water, chemical fertilizers, hauling and production costs would have sunk it immediately, but the mandate hid all those problems and costs.

The ad grew out of a fundraising party I attended in Seattle for the Rainforest Trust, a spectacularly effective organization that is low key in many ways.  I buttonholed Dr. Paul Salaman and asked him about Ethanol.  Hence the quote.  Rainforest Trust gets sky-high marks from Charity Navigator and works with local organizations to save imperiled rainforest land in the tropics.  Here is a URL:

https://www.rainforesttrust.org/

What’s so wrong with the RFS (Required Fuel Standards) that mandate Ethanol in gasoline is precisely that they are a mandate.  A subsidy for a product is usually a bad idea, but it is softly bad, ie. It doesn’t tend to wreak new havoc with the economy or environment the way a mandate can.

Here is an RFS for Newbold prints. If you are going to do a serious redecorating project in your house this year and plan to buy over 8 pieces of art, one has to be a Newbold.

Think of the difference between a subsidy and a mandate in a hypothetical example involving my product.

Let’s government wants to increase the sales of Ed Newbold Art prints as a percentage of the market.  A ridiculous example can illustrate the issue best.

First let’s say the government uses as a plain old subsidy.  There are different ways to implement a subsidy that but let’s say it’s done this way:  If a customer buys a $20 Newbold print and then reports it on their 1040 tax form at the end of the year they get $5 off on their taxes.

Make no mistake, this would be good for me.  Depending on how much I promoted and marketed the subsidy, I could probably generate quite a few more sales than I otherwise would get.  But if I received this subsidy, the first thing I would do might not be calling a Yacht broker.  I still have to have an appealing product and just as prior to the subsidy, people have to actually want it.

However, if I get a mandate that’s a total game-changer and then I can call that yacht broker.  Consider this mandate:  Anyone who does a significant redecorating project in their house during the course of the year must purchase an Ed Newbold art print as part of the project.

People wonder why there is this hatred out there for Ethanol, and the mandate is the answer.   If you hate Ed Newbold art prints, the subsidy still might not drive you into a rage.  But the mandate forces you to consume and pay for a product you have no desire for or interest in, and you’d be quite right to be upset.  The government is not allowing you to be a conscientious objector status against a particular product being sold on the market, the way you can conscientiously object to other products, such as sugar or cocaine.  You may even like Newbold art prints but feel that you should not be forced to buy them.

At a time when many people are choosing to support organic agriculture, notice there is no option for “Organic Ethanol.”  Not that I want that.  I want nothing to do with ethanol or any ag-biofuel or biodiesel or even cellulosic ethanol.   But here is perhaps our single largest ag product and it doesn’t even have a small component of the market in organic production.

The Environmental movement has been partly disgraceful in its early support of ethanol.  I was shocked back in the 90s when Washington Environmental Coalition came out for ethanol during the time when the “Go Green Think Yellow” ad campaign sponsored by Archer Daniels Midlands and others was all over the airwaves.  We need a mea culpa from some of the organizations and we need the ones who have seen the light to become more aggressive about it.

Here is corn on both sides of the road in Chester County, PA, but it could be any county, US. Our country is now nothing but a big corn field.

The interest in cellulosic ethanol is unfortunate insofar as people aren’t first disassociating the two ideas: cellulosic ethanol and the mandate, which cellulosic ethanol, being in the royal line, would inherit from corn ethanol.  Scientific American wrote an article on ethanol a while back and basically said, if they ever get cellulosic figured out, watch out, that will be the final end of all nature as we know it.  Think about it:  If there is a tree or a plant growing, cut it down, process it into ethanol and put it in your gas tank.  It doesn’t have to be on arable land, it could be growing on the side of a mountain:  Let’s let it rip!  Why leave plants standing in the world anywhere?

The mandate is the cousin of other flawed approaches, the renewable standards, low-carbon standards, and cap and trade, which all set government up as the arbiter of what the solution to climate change will be.  It may have an ugly name, but the Carbon tax is actually the market-based approach.  For those who have studied economics, it’s a simple Pigovian tax–that is the government sets up a straightforward tax on an undesired pollutant and let’s the market simply react to that tax.  A. C. Pigou, an economist who worked with market externalities such as pollution, is the derivation of the adjective.  An example of a good Pigovian tax would be Inititiative 732 which is currently defying the experts and gaining enough signatures to go on the ballot in 2016.