Ethanol

Further evidence that corn-based ethanol production in the US is economically irrational:

Gasohol has received considerable governmentalfinancial support because it is alleged to have important ecological and economic advantages. It is, for instance, supposed to reduce our extraction of nonrenewable energy, to have a cost advantage over gasoline, and to reduce pollution. This essay presents evidence that the amount of nonrenewable energy used in producing the corn ethanol is less than the amount of energy it provides as a fuel, that its price competitiveness with gasoline is doubtful, and that its environmental benefits are far from proven. In brief, current U.S. policies encouraging ethanol production to produce gasohol do not seem economically rational.

In Table 2, he shows that the energy in a gallon of ethanol is about 70% of the gross energy inputs required to produce the gallon of ethanol. Of course, if the gross energy inputs are in a less usable state than the resulting product, a less than 100% ratio isn't necessarily a bad thing. But in this case, it's a bad thing.

Pryor concludes:

Although current U.S. policies subsidies of corn-based gasohol are economically irrational, changing them raises some obvious difficulties, given the present system of governmental supports. Although it is simple to eliminate subsidies for building new ethanol plants, they would probably have to be phased out slowly to be politically palatable so that current producers who made their investment decisions on the basis of the current subsidy system have time to adapt. The current system of subsidies for ethanol should also be restructured on a sliding scale so that if any subsidies are given, they would fall as corn prices rose. Striking a fair balancing between the interests of taxpayers of agricultural and ethanol subsidies and of farm producers and ethanol producers must be left for others to discuss. The most difficult task is, of course, gaining political support for any policy shift, and, in the near future, the probability of seeing a reduction in governmental support for ethanol production seems dim. The only ray of optimism is that the current impasse will focus more attention on ethanol production based on other raw materials, which, it is hoped, might prove more economically sound.