RUTHFULLY YOURS

Back in 1994, vice-president of the United States Al Gore cast the tie-breaking vote that started us on the long road of taking American farms out of food production and converting them to fuel production. While conservatives and libertarians argued at the time that subsidizing ethanol production made no economic or environmental sense, Gore and his green allies were certain that bio-fuels would solve all the nation’s woes. Sixteen years later, Mr. Gore has apparently seen the light, admitting that America’s rush to embrace corn ethanol has been something of a mistake.

Here is what Vice President Al Gore had to say ^[1] about his role in subsidizing ethanol, while speaking at the Farm Journal conference back in 1998:

I was also proud to stand up for the ethanol tax exemption when it was under attack in the Congress — at one point, supplying a tie-breaking vote in the Senate to save it. The more we can make this home-grown fuel a successful, widely-used product, the better-off our farmers and our environment will be.

Contrast that with what the vice-president is quoted as saying in this report from Fox ^[2], statements he made while he was attending a recent green energy conference held in Athens, Greece:

It is not a good policy to have these massive subsidies for first-generation ethanol. First-generation ethanol I think was a mistake. The energy conversion ratios are at best very small. One of the reasons I made that mistake is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in the state of Iowa because I was about to run for president. The size, the percentage of corn particularly, which is now being (used for) first-generation ethanol definitely has an impact on food prices. The competition with food prices is real.

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While it’s nice to hear that the hero of the environmental movement has embraced reality, Gore’s conversion has come far too late. When Gore cast his critical vote in 1994, the bio-fuels industry produced about 1.4 billion gallons of ethanol each year from less than fifty plants. Sixteen years later ^[3], as a direct result of government subsidies and tax breaks, over a hundred new corn ethanol plants have been built and the amount of ethanol produced in the United States has increased by almost an order of magnitude, topping 10.5 billion gallons ^[3] in 2009. Private investors have invested tens of billions of dollars to build today’s massive corn ethanol infrastructure and the government has invested tens of billions more to ensure that it remains in place. Had Gore faced facts in 1994, the public and private sectors could have used those funds more wisely and more profitably elsewhere. But now? Having made this huge investment, the pain of admitting defeat, suffering our losses and walking away from corn ethanol may be too much to bear.

Congress has to decide whether or not to renew the current $7.7 billion corn-ethanol subsidy by the end of the year. On the one hand, it seems madness to prolong a fuel industry that – at best – can only generate a bit more energy than it consumes (and more often less), that takes cropland out of food and feed production and, as result, raises the prices and lowers the availability of food. A 2007 Department of Agriculture report ^[4] clearly outlined the effects of subsidizing corn ethanol: a steady decrease in food production, concurrent decreases in agricultural exports and rising costs of food products.

As distasteful as it may be to bite the bullet and end corn-ethanol subsidies, the alternative may be even more unpalatable to Congress. Demanding that the corn-ethanol industry stand on its own two feet would result in the closure of dozens of plants, the loss of thousands of jobs, writing off billions of dollars of losses and finding new sources of petroleum to replace the billions of gallons of ethanol that Americans put in their gas tanks each year. Both options are painful, and while a free market advocate like me would advocate cutting our losses, learning a painful lesson and moving beyond ethanol, Congress may not be so inclined. The benefits of ending the ethanol subsidy are long-term and market-driven. Few politicians are motivated to action by that big a picture, particularly when the short-term damage can be so devastating to their careers. How can even the most staunchly conservative farm-belt congressman face his constituents after voting to end ethanol subsidies? If and when subsidies end, farm income will drop, the property value of farms will plummet and thousands of workers employed in the ethanol industry will find themselves on the streets, looking for work in the worst economic climate since the Great Depression.

The fact that Al Gore has finally come to grips with corn-ethanol reality is a remarkable development, but his conversion has probably come far too late to be of any real value. The policies that he promoted throughout much of his political career have come home to roost and the economic damage that those policies have done is undeniable. Gore – more than anyone else – helped to create the renewable energy monster that saps our nation’s resources and undermines our prosperity today. Having profited handsomely from those efforts, the ex-vice president’s belated mea culpa has fallen incredibly flat.