Editorial: Moving beyond ethanol
The Associated Press made a splash with its investigation into corn-based ethanol in the United States last week, and now it has the whole industry up in arms over the findings.
The AP reported that farmers contaminated local water, eradicated wildlife habitats, and destroyed substantial tracts of conservation land in the rush to raise more corn that could be sold to ethanol plants. Not exactly flattering. And definitely not something the ethanol industry wants everyone to know about, which may explain the Renewable Fuels Association’s Geoff Cooper’s statement to reporters that “We find it to be just flabbergasting. There is probably more truth in this week’s National Enquirer than AP’s story.”
Clearly, the industry is wildly panicked. And it should be. On Nov. 15, the Environmental Protection Agency, noting that biofuel legislation passed in 2007 has not been working as well as hoped, proposed reducing the amount of ethanol in the national fuel supply. By 2014, it would cut 3 billion gallons of biofuels that are blended into gasoline.
This will inevitably mean losses for Iowans. A map from Iowa Workforce Development shows that there are numerous ethanol plants scattered around the state, providing thousands of jobs, many of which are in small towns that have been shriveling up for decades.
Don Hofstrand, the codirector for Ag Marketing Resource Center, explained in a newsletter that Iowa’s corn farmers also benefit from ethanol because it drives demand for corn, raising prices and ultimately increasing profits.
As promising as it may seem at first glance, ethanol is not a reliable path to ensuring Iowa’s future economic success. We say this knowing fully that a move away from ethanol would not bode well for much of rural Iowa in the short term, but if the state economy remains heavily invested in ethanol, we will get hammered the instant something goes wrong. And in volatile industries such as oil and corn, that is only a matter of time.
Already, the ethanol economy is subject to major unpredictability. Gas prices shot up with the wave of unrest across the Middle East, brought about by the 2011 Arab Spring, but in recent months have been falling. When gas prices are high, that’s good for the ethanol industry, but when they fall back down, it hurts demand for biofuels.
Corn prices are similarly hard to predict, because it is a crop that is highly dependent on weather patterns. Iowans know well that extreme weather can adversely affect crop yields. When there’s less corn, prices go up. With ethanol in the mix, that effect is only exacerbated.
Small corn yields also have a ripple effect across the economy more broadly. A report from the Congressional Budget Office explained that a smaller supply of corn can drive up the prices of meat (because livestock consume corn as feed) and many other foods that use corn as an essential ingredient. Diverting a large portion of Iowa’s corn for biofuels makes such shortages worse.
In addition to the instability of an ethanol economy, there are many questions about the long-term viability of the industry.
One major threat to the ethanol industry, Hofstrand noted, is innovation. He wrote that the ethanol industry was heavily dependent on government subsidies and tariffs on Brazilian sugar-cane-based ethanol.
Currently, the main support for U.S. corn-based ethanol is the biofuels mandate. Without artificial government support, the fuel’s production process in the United States is simply too inefficient to survive against foreign competition.
If ethanol is supplanted by a superior fuel, and it almost certainly will be, ethanol plants will shutter, the price of corn will fall, and farmers will suffer.
Although politically popular in Iowa, it’s for the best to distance ourselves from this economic and environmental time bomb called ethanol.
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