Schrag: Corn Ethanol Subsidy a California Presidential Primary Issue?

[courtesy of California Progress Report]

By Peter Schrag

House Speaker Nancy Pelosi must welcome the heat she's getting for wobbling on the farm and energy bills. Having caved in to Detroit on fuel economy standards and compromised with Midwest agro-plutocrats on crop subsidies for millionaires, she's shown that she's more a pragmatic Baltimore pol like her father than a knee-jerk San Francisco liberal. That'll serve her well.

Both the farm and the energy bills won approval in the House in the past couple of weeks. Both are monuments to waste, stupidity and policy distortions going back generations -- longer in the case of the ag subsidies.

Pelosi says she hopes the Senate energy bill, which contains a sharp increase in fuel economy requirements -- from roughly 25 miles per gallon to 35 -- for cars and trucks, will prevail over the House version when the two are reconciled. She said it almost the same day that we learned that for the first time ever foreign models were outselling Detroit.

More significant, maybe, is the fact that the farm law -- and agricultural policy generally -- is morphing into an energy program. The bill, HR 2419, which calls itself the "Farm, Nutrition and Bioenergy Act of 2007," has oodles of incentives for the development and transportation of renewable fuels.

The link is corn -- already subsidized to the tune of billions -- since corn is the source of ethanol, which refiners are now required by federal law to mix into almost everybody's gasoline. The theory is that gas blended with ethanol doesn't emit greenhouse gases in the same concentrations as regular gas, and that it reduces dependence on imported oil. In fact, it does little of either.

Nor does the theory calculate the impact on food prices or the environmental impact of growing the corn and producing the ethanol, not only in greenhouse gas emissions from farm equipment, but from the trucks, ships and trains that haul the ethanol (nearly all of which comes from Midwest corn) for delivery to refineries.

Because of its corrosive qualities, it can't be shipped through pipelines. The farm bill passed the other day contains a string of programs aimed at developing pipelines for ethanol transport. But that may never be economically feasible.