Empire of Corn
Today's Wall Street Journal has a front-page story (subscription required) on the drive to expand ethanol capacity in the US Midwest. The article, which has a strong human-interest theme, reveals that the impetus for additional fuel ethanol production derives mostly from the economics of small farming communities and only incidentally from the nation's energy needs. In effect, ethanol is driven by values, not value.
Blending ethanol into gasoline has been controversial since it was first subsidized as part of the nation's response to the oil crisis of the 1970s. As I discussed at length last year, its production consumes more energy of other types (including oil and gas) than the ethanol returns when burned.
Turning food crops into fuel yields one of the poorest energy returns of the various biofuels alternatives, though this balance can be improved dramatically by using crop waste and advanced enzymes to make "lignocellulosic ethanol".
The Journal article paints a stark picture of declining Midwestern towns grasping for any means of preserving a way of life that goes back more than a century, investing in ethanol plants to try to eke more value out of their crops. The risks these small investors are taking on could bankrupt them if overexpansion creates an ethanol "bubble." While it's hard not to sympathize with family farmers, the reader is left wondering whether the billions of dollars in federal and state subsidies propping up the ethanol value chain might be better spent elsewhere, on programs with a bigger impact on clean air, energy security, or farm modernization.