Krugman on ethanol

It's a good thing that Paul Krugman isn't teaching at one of those land grant colleges out in the midwest that started out as agricultural colleges. He'd be stripped of tenure and thrown out on his can faster than he could say "Jack Robinson" after today's column in the NY Times [behind subscription wall] on ethanol.

In the United States, ethanol comes overwhelmingly from corn, a much less suitable raw material. In fact, corn is such a poor source of ethanol that researchers at the University of Minnesota estimate that converting the entire U.S. corn crop — the sum of all our ears — into ethanol would replace only 12 percent of our gasoline consumption.

Still, doesn’t every little bit help? Well, this little bit would come at a very high price compared with the obvious alternative — conservation. The Congressional Budget Office estimates that reducing gasoline consumption 10 percent through an increase in fuel economy standards would cost producers and consumers about $3.6 billion a year. Achieving the same result by expanding ethanol production would cost taxpayers at least $10 billion a year, based on the subsidies ethanol already receives — and probably much more, because expanding production would require higher subsidies.

What’s more, ethanol production has hidden costs. Even the Department of Energy, which is relatively optimistic, says that the net energy savings from replacing a gallon of gasoline with ethanol are only the equivalent of about a quarter of a gallon, because of the energy used to grow corn, transport it, run ethanol plants, and so on. And these energy inputs come almost entirely from fossil fuels, so it’s not clear whether promoting ethanol does anything to reduce carbon dioxide emissions.

So why is ethanol, not conservation, the centerpiece of the administration’s energy policy? Actually, it’s not entirely Mr. Bush’s fault.

To be sure, at this point Mr. Bush’s people seem less concerned with devising good policy than with finding something, anything, for the president to talk about that doesn’t end with the letter “q.” And the malign influence of Dick “Sign of Personal Virtue” Cheney, who no doubt still sneers at conservation, continues to hang over everything.

But even after the Bushies are gone, bad energy policy ideas will have powerful constituencies, while good ideas won’t.

Subsidizing ethanol benefits two well-organized groups: corn growers and ethanol producers (especially the corporate giant Archer Daniels Midland). As a result, it’s bad policy with bipartisan support. For example, earlier this month legislation calling for a huge increase in ethanol use was introduced by five senators, of whom four, including presidential aspirants Barack Obama and Joseph Biden, were Democrats. In a recent town meeting in Iowa, Hillary Clinton managed to mention ethanol twice, according to The Politico.

Meanwhile, conservation doesn’t have anything like the same natural political mojo. Where’s the organized, powerful constituency for tougher fuel economy standards, a higher gasoline tax, or a cap-and-trade system on carbon dioxide emissions?

Can anything be done to promote good energy policy? Public education is a necessary first step, which is why Al Gore deserves all the praise he’s getting. It would also help to have a president who gets scientific advice from scientists, not oil company executives and novelists.

But there’s still a huge gap between what obviously should be done and what seems politically possible. And I don’t know how to close that gap.