Sunday, February 24, 2008



U.S. plans to replace 15 percent of gasoline consumption with crop-based fuels including ethanol are already leading to some unintended consequences as food prices and fertilizer costs increase.

About 33 percent of U.S. corn will be used for fuel during the next decade, up from 11 percent in 2002, the Agriculture Department estimates. Corn rose 20 percent to a record on the Chicago Board of Trade since Dec. 19, the day President George W. Bush signed a law requiring a fivefold jump in renewable fuels by 2022.

[..]The energy bill requires the U.S. to use 36 billion gallons of renewable fuels by 2022, of which about 15 billion gallons may come from corn-based ethanol. The nation's current production capacity is about 8.06 billion gallons.

[..]Researchers led by Timothy Searchinger at Princeton University said their study showed greenhouse-gas emissions will rise with ethanol demand. U.S. farmers will use more land for fuel, forcing poorer countries to cut down rainforests and use other undeveloped land for farms, the study said. [link]
Ok ok, so it's called Agflation - the increase in price of food due as a result of agricultural products used for alternative energy resource. No, I'm not trying to blame all this on Al Gore, but as I've said before on this blog, I think the most adverse and immediate effects of climate change will be from bad policy rather than actual climate effects.

This is what happens when you meddle in the market (subsidies, mandates, etc.), you end up with something that nobody really wants at the tax payer's expense. Ethanol is bad for the planet, bad for the U.S. economy and bad for the rest of us. (Hell, even Krugman agrees)

I'd hold Gore somewhat responsible - after all he won a Nobel Price for talking about climate change - it's him and his alarmist faithfuls who demanded that something is done about climate change immediately, pushing the political climate in that direction. Unfortunately, what's to be done about climate change is not so clear, so you end up meddling in the market and do stuff like this.

Let's get this clear - the market is more likely to create an efficient, viable alternative energy source than any government bureaucrat. What's required is some trust in human ingenuity and markets, without jumping the gun and doing something stupid with unintended consequences.

No comments: