It's what happens when economics is tossed out the window

Rice University analysis questions U.S. ethanol subsidies
By Scott Learn, The Oregonian
January 10, 2010, 7:00AMFederal taxpayers forked over $1.95 a gallon in ethanol subsidies in 2008 on top of the retail gasoline price, a new white paper from Rice University's Baker Institute for Public Policy found. The 118-page analysis from the Houston-based institute says the United States needs to rethink its policy of promoting ethanol. Amy Myers Jaffe, associate director of the Rice Energy Program and one of the report's authors, said in a news release that the federal government's aggressive goals for ethanol production could mean "throwing taxpayer money out the window." Oregon has invested heavily in ethanol, including granting tax credits for two corn ethanol refineries that filed for bankruptcy after the economy soured. Critics note that biofuels take up a lot of land and often use petroleum-based fertilizers in abundance. Oregon officials and ethanol backers say the next generation of biofuels will be more efficient, rely on non-food crops and use less land, helping wean the nation off oil. Petroleum supporters are emphasizing the defects of biofuels to take the heat off oil, they say.In 2008, the U.S. government spent $4 billion on biofuels subsidies, replacing about 2 percent of the U.S. gasoline supply, according to the Baker Institute report, "Fundamentals of a Sustainable U.S. Biofuels Policy." The average cost to the taxpayer was about $82 a barrel, or $1.95 a gallon.In 2007, Congress mandated that biofuels production increase from 9 billion gallons in 2008 to 36 billion gallons by 2022. Corn ethanol is capped at 15 billion gallons a year, but the study says even that level will be difficult to reach.The report also questions the tariff imposed on ethanol imported from Latin America and the Caribbean, mainly made from sugar cane. Because sustainable production of U.S. domestic corn-based ethanol faces limitations, the report finds "tariff policies that block cheaper imports are probably misguided." -- Scott Learn