This is your brain on ethanol

As the other half of the Zeitgeist editorial board, I'd like to take this opportunity to strongly endorse my coauthor's denunciation of corn-based ethanol. By this point, I think it's safe to say that the only ones who are really benefitting from our flirtation with domestic ethanol production are the people of Iowa. The rest of us are really getting the short end of the stick. Some thoughts:

The relatively new and historically-unprecedented demand for corn is putting an enormous strain on American farmers' production capacity. Land that could be used to grow other crops is now devoted to corn, which causes the prices of those agricultural products to rise (this is why historically the grain futures markets track each other very closely, and why soybean prices almost mirror corn prices.) Meat is becoming more expensive, because a good deal of livestock feed is corn-based, and it takes about 700 calories of corn to produced about 100 calories of meat. A USDA economist recently estimated that about 3% of corn's price increase could be attributed to ethanol demand. Compare that with the UN Food and Agricultural Organization, which argued that it was almost 30% (did the USDA forget to move a decimal point?), and the World Bank who've put the number as high as 70%.

What to do about all of this? There are a few sensible steps to take. First, stop subsidizing ethanol production. It's an enormous waste of money and it's never going to be anywhere near efficient enough to justify. Another oft-repeated but damning statistic: you could feed a person for an entire year with the amount of grain it would take to fill an SUV's 25-gallon gas tank once.

Second, encourage investment in other energy projects. I'm skeptical that governments have the know-how to pick winners in these situations, so why not let venture capital markets take the lead? Anyways, they more or less already are. Governments might consider helping spur further research with calculated tax breaks/credits for green investment.

Third, import Brazilian sugar-cane based ethanol. In contrast to our ethanol made with corn, sugar-cane is more efficient (hence cheaper) and there's no worry about anyone starving because you use the cane to make ethanol instead of sugar. Besides, Brazil has plenty of land to grow the stuff on, without destroying the Amazon rain forests. They are investing heavily in the industry and already exporting significant amounts.

I might have lost the "energy independence" crowd with that last point. But here's an uncomfortable truth: energy independence is not going to happen anytime soon, if ever. As a country, we just consume far too much energy to realistically produce it all at home. (But why is that such a bad thing? Have we all forgotten about comparative advantage?) Anyways, if you are concerned with security, doesn't it make sense to start buying more fuel from a friendly, stable democratic state and "transfer less wealth" to backwards, authoritarian nations in the Middle East? Think of what that would do for our image in Latin America! Why, you can almost hear Mr. Chavez gnashing his teeth already!

(Picture from Rolling Stone Magazine.)