A large part of the political support for ethanol--for mixing requirements, CAFE credits, and outright subsidies--is old fashioned "special interest" pandering, nest feathering, corporate welfare.
One aspect of this farmer protection program is the import tariff on ethanol. Currently, ethanol imports are taxed at a whopping $0.54/gal (per gallon!). The effect of this is to protect the domestic ethanol producers, and to keep ethanol expensive. But it isn't the "family farm" that is being protected--the big winners are the huge producers of ethanol, corn, and seed--companies like Monsanto and Archer Daniels Midland.
This doesn't make much sense for the bigger picture. Ethanol derived from corn and soybeans is much less energy efficient than ethanol derived from sugarcane, according to a Wall Street Journal article I just read. Corn has an ethanol energy factor of 1.3 (1.3 BTU's out for every BTU it took to produce), while sugarcane has an efficiency of a whopping 8....
Reuters:Underestimated US ethanol craze may hurt poor-EPI
Poor people in countries that depend on grain imports could soon be hit with rising food prices driven by explosive growth in the number of U.S. distilleries producing the alternative motor fuel ethanol, an environmental expert said on Thursday.
"Soaring food prices could lead to urban food riots in scores of lower-income countries that rely on grain imports," Lester Brown, president of Washington, D.C.-based Earth Policy Institute, a environmental research organization, told reporters on a conference call. Consumers in Egypt, Nigeria, Mexico and Indonesia, where many spend more than half their income on food, would be hardest hit, he said.
U.S. ethanol demand for corn will rise to 139 million tonnes by the 2008 harvest, half of the U.S. corn crop and more than double the U.S. Department of Agriculture's forecast of nearly a year ago, said Brown.
Ethanol producers have been struggling to keep up with demand amid high petroleum prices and as oil companies use it as a replacement for the gasoline additive MTBE, a suspected carcinogen banned in several states. The Bush administration has offered producers millions of dollars in incentives in an attempt to reduce imports on foreign oil.
Demand has already pushed grain prices higher. U.S. corn prices rose to more than $3 a bushel late last year, a dollar above prices of a year before and near the record price set 10 years ago. on the rising demand for the grain from ethanol plants.