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Undoing America’s Ethanol Mistake
By Senator Kay Bailey Hutchison
Published in Texas Insider: 04-30-08
The Nobel Prize-winning economist Milton Friedman once said, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.”
When Congress passed legislation to greatly expand America’s commitment to biofuels, it intended to create energy independence and protect the environment.
But the results have been quite different. America remains equally dependent on foreign sources of energy, and new evidence suggests that ethanol is causing great harm to the environment.
In recent weeks, the correlation between government biofuel mandates and rapidly rising food prices has become undeniable. At a time when the U.S. economy is facing recession, Congress needs to reform its “food-to-fuel” policies and look at alternatives to strengthen energy security.
On Dec. 19, 2007, President Bush signed into law the Energy Independence and Security Act. This legislation had several positive features, including higher fuel standards for cars and greater investment in renewable energies such as solar power.
However, the bill required a huge spike in the biofuel production requirement, from 7.5 billion gallons in 2012 to 36 billion in 2022.
This was a well-intentioned measure, but it was also impractical. Nearly all our domestic corn and grain supply is needed to meet this mandate, robbing the world of one of its most important sources of food.
We are already seeing the ill effects of this measure. Last year, 25% of America’s corn crop was diverted to produce ethanol. In 2008, that number will grow to 30%-35%, and it will soar even higher in the years to come.
Furthermore, the trend of farmers supplanting other grains with corn is decreasing the supply of numerous agricultural products. When the supply of those products goes down, the price inevitably goes up.
Subsequently, the cost of feeding farm and ranch animals increases and the cost is passed to consumers of beef, poultry and pork products.
Since February 2006, the price of corn, wheat and soybeans has increased by more than 240%. Rising food prices are hitting the pockets of lower-income Americans and people who live on fixed incomes.
While the blame for higher costs shouldn’t rest exclusively with biofuels — drought and rising oil costs are contributing factors — the expansion of biofuels has been a major source of the problem.
The International Food Policy Research Institute estimates that biofuel production accounts for between one-quarter and one-third of the recent spike in global commodity prices.
For the first time in 30 years, food riots are breaking out in many parts of the globe, including major countries such as Mexico, Pakistan and Indonesia.
The fact that America’s energy policies are creating global instability should concern the leaders of both political parties.
Restraining the dangerous effects of artificially inflated demand for ethanol should be an issue that unites both conservatives and progressives.
As a recent Time cover story pointed out, biofuel mandates increase greenhouse gasses and create incentives for global deforestation.
In the Amazon basin, huge swaths of forest are being cleared to meet the growing hunger for biofuels.
In addition, relief organizations are facing gaping shortfalls as the cost of food outpaces their ability to provide aid for the 800 million people who lack food security.
The recent food crisis does not mean we should entirely abandon biofuels.
The best way to lower energy prices, and reduce our dependence on foreign oil, is to accelerate production of all forms of domestic energy.
Expanding biofuels while refusing to take other measures, such as lifting the ban on oil and natural gas production in Alaska and the Outer Continental Shelf, is counterproductive. We should be tapping into a broad portfolio of energy options, including clean coal, nuclear power and wave energy.
The key is increasing energy supply. By taking these measures, we can enable biofuels to be part of the energy solution, instead of contributing to the energy problem.
Congress must take action. I am introducing legislation that will freeze the biofuel mandate at current levels, instead of steadily increasing it through 2022.
This is a common-sense measure that will reduce pressure on global food prices and restore balance to America’s energy policy.
As the Senate debates this issue, we must remain focused on the facts.
At one point, expanding biofuels made sense for America’s energy security. But the recent surge in food prices has forced us to adapt. The global demand for energy and food is expected to rise about 50% in the next 20 years, and the U.S. is well-positioned to be a leader in both areas.
That will require a careful, finely tuned approach to America’s farm products.
By freezing the biofuel mandate at current levels, we will go a long way to achieving that goal.
Senator Hutchison chairs the Senate Republican Policy Committee and is representing Texas in her third full term in the Senate.