Thursday, 17 March 2011

Lomborg on the ethanol catastrophe

In Slate Bjørn Lomborg writes more, if you really needed it, on The Ethanol Catastrophe: Biofuels aggravate global warming and cause hunger. Why won't the U.S. stop subsidizing them? The question in the subtitle is a good one. Lomborg writes,
Spectators at February's Daytona 500 in Florida were handed green flags to wave in celebration of the news that the race's stock cars now use gasoline with 15 percent corn-based ethanol. It was the start of a seasonlong television marketing campaign to sell the merits of biofuel to Americans.

On the surface, the self-proclaimed "greening of NASCAR" is merely a transparent (and, one suspects, ill-fated) exercise in "greenwashing" for the sport. But the partnership between a beloved American pastime and the biofuel lobby also marks the latest attempt to sway public opinion in favor of a truly irresponsible policy.
and continues,
The United States spends about $6 billion a year on federal support for ethanol production through tax credits, tariffs, and other programs. Thanks to this financial assistance, one-sixth of the world's corn supply is burned in American cars. That is enough corn to feed 350 million people for an entire year.

Government support of rapid growth in biofuel production has contributed to disarray in food production. Indeed, as a result of official policy in the United States and Europe, including aggressive production targets, biofuel consumed more than 6.5 percent of global grain output and 8 percent of the world's vegetable oil in 2010, up from 2 percent of grain supplies and virtually no vegetable oil in 2004.
The results of all of this?
This year, after a particularly bad growing season, we see the results. Global food prices are the highest they have been since the United Nations started tracking them in 1990, pushed up largely by increases in the cost of corn. Despite the strides made recently against malnutrition, millions more people will be undernourished than would have been the case in the absence of official support for biofuels.
Why would anyone back such a policy?
Biofuels were initially championed by environmental campaigners as a silver bullet against global warming. They started to change their minds as a stream of research showed that biofuels from most food crops did not significantly reduce greenhouse gas emissions – and in many cases, caused forests to be destroyed to grow more food, creating more net carbon-dioxide emissions than fossil fuels.

Some green activists supported mandates for biofuel, hoping they would pave the way for next-generation ethanol, which would use non-food plants. That has not happened.

Today, it is difficult to find a single environmentalist who still backs the policy. Even former U.S. Vice President and Nobel laureate Al Gore—who once boasted of casting the deciding vote for ethanol support—calls the policy "a mistake." He now admits that he supported it because he "had a certain fondness for the [corn] farmers in the state of Iowa"—who, not coincidentally, were crucial to his 2000 presidential bid.

It is refreshing that Gore has now changed his view in line with the evidence. But there is a wider lesson. A chorus of voices from the left and right argue against continued government support for biofuel. The problem, as Gore has put it, is that "it's hard once such a program is put in place to deal with the lobbies that keep it going."
So rent seeking is the reason for the continuation of a very bad policy. Again politics trumps economics and millions of people-all of them suffering needlessly-pay the price.

1 comment:

matt said...

There is another general lesson here, the law of unintended consequences that we should expect to produce these sorts of perverse results again and again wherever production is decided from the top down. Most will see ethanol as bad luck, I suspect, but actually this result will be the norm so long as decisions continue to be made in this way. Arguably the main appeal of a carbon tax is that its compatible with bottom up decision making which might help avoid these unintended consequences.