Fuels Rush In

This Eugene Register-Guard editorial--cautioning Oregon's politicians to take a sober, hype-free look at biofuels before launching a program to subsidize them--is definitely worth reading.  But it makes one point that, while not clearly out-and-out wrong, at least deserves a closer look. 

According to the editorial, legislative action to promote biofuels in Oregon would be unnecessary...

...if biofuels could compete with other forms of energy in the marketplace. The fact that ethanol and biodiesel need the Legislature's encouragement is evidence that these fuels suffer an economic disadvantage, have environmental costs or both.

Hold on, there, buckeroo.  Petroleum gets huge subsidies of its own, ranging from special tax benefits for oil companies, to the mammoth military costs for defending access to overseas oil supplies, to the environmental and social costs of air & water pollution, greenhouse gases, etc.  So just because ethanol needs subsidies to compete with petroleum, doesn't necessarily mean that ethanol is inherently uncompetitive; it could just be that petroleum's massive subsidies outweigh those to ethanol.

Then again, corn--which is used to make most ethanol today--gets massive federal subsidies too.  As they're currently structured, federal corn subsidies encourage overproduction, which reduces the price of corn, which artificially lowers the price that ethanol distillers have to pay for raw materials.  Plus growing corn carries significant environmental costs:  habitat loss, soil erosion, water quality problems, and greenhouse gas emissions from fertilizer production and use, to name a few.

It's only in an unsubsidized world--where subsidies for both corn and petroleum are eliminated, and all environmental and social costs are accounted with taxes or some other mechanism--that you could even tell whether petroleum and ethanol are playing on a level playing field, or even in the same league. 

But in this world, it's nigh-on-impossible to tell whether ethanol subsidies give an unfair boost to an economically uncompetitive technology, or simply let ethanol compete on even footing with petroleum.

Now, as I've said before (see my comment on this post) I'm very skeptical about the benefits of using food crops to power cars.  And I completely agree with the editorial that Oregon has to take a hard and careful look at any program to subsidize biofuels. But skepticism is only useful to the extent that it keeps you honest--which means that a skeptical look at biofuels should be sure to include an equally skeptical look at why, exactly, petroleum seems so cost-competitive.