Study calls ethanol mandate a billion-dollar mistake
Sarah Steelman’s about-face on ethanol makes this a good time to look at the costs and benefits of the E-10 mandate that Missouuri enacted in 2006. As it happens, both the Missouri Corn Merchandising Council and the Show-Me Institute have studied the issue recently.
Predictably, the corn folks say the mandate has benefited Missourians — to the tune of $285 million this year and more than $2 billion over a decade. Show-Me’s Justin Hauke and David Stokes, however, say those figures omit some very large negatives. Specifically, they say the corn promoters are leaving out the cost to taxpayers, and they’re ignoring the fact that ethanol has a lower energy content than gasoline. Their bottom line is much different:
We find that accounting for these costs significantly impacts the MCMC savings projections and would result in a net loss to Missouri consumers of almost $1 billion during the next decade. If one were to consider the additional impact of the E-10 mandate on higher food prices and CO2 gas emissions, these costs would be even higher.
The ethanol mandates, they conclude, are merely another form of special-interest legislation:
Missouri should adopt energy policies that benefit all Missorians, not just those who happen to be on the winning end of a corporate subsidy.
(3 votes, average: 4.33 out of 5)
Loading ...
David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
Even better, how about having a national energy policy that recognizes that the revenue losses to government from any sort of subsidies must be made up by higher taxes somewhere else? That should be obvious to anyone who can do simple arithmetic.
What is less obvious is that subsidies cause economic distortions that make most people worse off, for the sake of gains to a politically-favored minority. The ethanol subsidy fiasco is becoming a case history of that effect, considering its contribution to raising the price of grain — and everything made from grain — on markets throughout the world. (The increased price of oil has probably contributed even more to this price surge, but it’s doubtful that the increased ethanol production has done much to alleviate the increase in the price of oil.)