The People Making Policy Do Not Know Enough

This great read, “Corny Capitalism” by Matt Purple shows very nicely why the government shouldn’t make energy policy, the market should.

There’s just one problem: Ethanol fuel is wildly inefficient. The amount of corn required to soak the fuel supply is massive. To shift America’s car culture entirely from gasoline to gasohol would require 700,000 square miles of land growing corn exclusively for ethanol production. That would mean converting one-fifth of the United States into a sprawling corn farm.

Then again, the government never found a green boondoggle it didn’t love. For five years now, Congress has been mandating that the fuel supply be diluted with ethanol. The Energy Policy Act of 2005 required 7.5 billion gallons of ethanol in the fuel supply by 2012. A Democratic Congress went a step further in 2007, mandating 9 billion gallons by 2008, 15.2 billion by 2012, and 36 billion by 2022.

Unfortunately, that whole Economics 101, supply-and-demand thing got in the way. The maximum amount of ethanol that can be produced to meet demand, called the “blend wall,” is expected to level out at 15 billion. That will make it impossible to meet the government’s mandates.

The agriculture industry, represented primarily by Archer Daniels Midland and Growth Energy, spied an opportunity. Why not increase the legal gasohol concentration from 10% ethanol to 12% or even 15%? That would immediately ignite ethanol production and allow the government to meet its mandate. More importantly, it would make Big Agriculture some serious money.

The EPA looked ready to raise the limit until science finally intervened. A study surfaced by the National Renewable Energy Laboratory from 2008 that found E15 ethanol caused a raft of problems in cars, including a loss of fuel economy and spikes in exhaust temperatures. Meanwhile the higher concentration of ethanol did nothing to reduce tailpipe emissions. The study also found problems when E15 fuel was used in lawn trimmers.

Read the entire thing, it’s enlightening, and highlights the point in yesterday’s post that we really are idiots if we continue to let the government interfere in markets that those who govern can not possibly understand.

Link via Karen De Coster