Congress’ ethanol af­fair cools; sub­si­dies tied to food deficit

The Washington Times Weekly - - National - By Stephen Di­nan

Mem­bers of Congress say they over­reached by push­ing ethanol on con­sumers and will move to roll back fed­eral sup­ports for it — the latest sure sig­nal that Congress’ ap­petite for corn-based ethanol has col­lapsed as food and gas prices have shot up.

House Ma­jor­ity Leader Steny H. Hoyer said Democrats will use the pend­ing farm bill to re­duce the sub­sidy, while Repub­li­cans are look­ing to go fur­ther, rolling back gov­ern­ment rules passed just four months ago that re­quire blend­ing ethanol into gaso­line.

“The view was to look to al­ter­na­tives and try to be­come more de­pen­dent on the Mid­west than the Mid­dle East. I mean, that was the the­ory. Ob­vi­ously, some­times there are un­fore­seen or un­in­tended con­se­quences of ac­tions,” Mr. Hoyer, Mary­land Demo­crat, told re­porters April 30.

Only a year ago, Congress and Pres­i­dent Bush seemed to view ethanol as a near-magic so­lu­tion to the na­tion’s de­pen­dence on oil and counted on it to make a dent in green­house gas emis­sions. Repub­li­cans and Democrats to­gether piled up the in­cen­tives and man­dates that pushed farm­ers into plant­ing corn for ethanol and con­sumers into buy­ing gaso­line blended with it.

But as farm­ers switched crops, they left a dearth in other foods — which, cou­pled with higher world­wide liv­ing stan­dards and higher de­mand — has caused food short­ages. Food ri­ots have erupted in some na­tions, while even in the U.S., some stores have said they will ra­tion sales of sta­ples such as rice.

Now the most com­mon phrase when law­mak­ers talk about ethanol is “un­in­tended con­se­quences.”

“This is a clas­sic case of the law of un­in­tended con­se­quences,” said Rep. Jeff Flake, Ari­zona Repub­li­can, who in­tro­duced a bill last week to end the en­tire slate of fed­eral sup­ports, in­clud­ing the man­dates for blended gaso­line, the tax cred­its for ethanol pro­duc­ers, and tar­iffs that keep out cheaper for­eign ethanol.

“Congress surely did not in­tend to raise food prices by in­cen­tiviz­ing ethanol, but that’s pre­cisely what’s hap­pened. A jump in food prices is the last thing our econ­omy needs right now,” Mr. Flake said.

Mean­while, Sen. Kay Bai­ley Hutchi­son, Texas Repub­li­can, is work­ing on her own plan to freeze the ethanol-re­new­able-fuel-re­place­ment man­date at this year’s lev­els.

“I’ve talked to cat­tle pro­duc­ers, I’ve talked to pig pro­duc­ers. They are all say­ing the same thing: The cost of food and the cost of fuel is just killing their abil­ity to con­tinue to op­er­ate,” Mrs. Hutchi­son told ra­dio talk show host Rush Lim­baugh on April 30, tak­ing her case to the air­waves. “I think it’s go­ing to get worse, and I’d like to try to do some­thing that might mit­i­gate this and not cause the cri­sis.”

Her state’s gov­er­nor, Rick Perry, two weeks ago asked the En­vi­ron­men­tal Pro­tec­tion Agency for a waiver from 50 per­cent of the re­place­ment fuel man­date, call­ing it “a well-in­ten­tioned pol­icy” but one that’s dis­torted the mar­ket and driven up prices.

He said that 25 per­cent of U.S. corn pro­duc­tion went to ethanol last year and that up to 35 per­cent will be de­voted to ethanol this year.

“With ever in­creas­ing man­dates of corn crop diver­sions to ethanol pro­duc­tion through 2015, the im­pact on food prices glob­ally, and to Texas specif­i­cally, will only worsen,” he wrote in a let­ter to the EPA.

Sens­ing the tide turn­ing against them, those who sup­port the gov­ern­ment man­dates say blam­ing ethanol for food prices is mis­placed.

“A com­plex set of fac­tors are at work help­ing to drive food prices higher around the world,” for­mer Sec­re­tary of Agri­cul­ture John Block said. “Sin­gling out bio­fu­els like ethanol for all or even the ma­jor­ity of the blame misses the boat.”

Farm­ers and corn grow­ers, a pow­er­ful lobby in many states, said corn is be­ing scape­goated and urged Congress to go af­ter oil com­pa­nies in­stead, ar­gu­ing that the in­creas­ing price of en­ergy is driv­ing up food prices.

“To put things into per­spec­tive, in 1999 a bar­rel of oil cost $10, com­pared to $120 to­day. Con­sumers lose when the oil in­dus­try plays a cat-and-mouse game with the Amer­i­can peo­ple,” said Na­tional Corn Grow­ers As­so­ci­a­tion Chief Ex­ec­u­tive Of­fi­cer Rick Tol­man. “Truth be told, Amer­i­cans are ac­tu­ally sav­ing $69 bil­lion each year at the pump thanks to bio­fu­els.”

The White House on April 30 could not say whether Mr. Bush would be open to the ef­forts to re­duce sup­ports; al­though on April 29, Mr. Bush seemed en­thu­si­as­tic about in­creas­ing use of ethanol.

“The high price of gaso­line is go­ing to spur more in­vest­ment in ethanol as an al­ter­na­tive to gaso­line. And the truth of the mat­ter is it’s in our na­tional in­ter­ests that our farm­ers grow en­ergy, as op­posed to us pur­chas­ing en­ergy from parts of the world that are un­sta­ble or may not like us,” he said at a press con­fer­ence.

He cited sta­tis­tics that only 15 per­cent of world food price in­creases were be­cause of de­mand for ethanol.

Law­mak­ers ac­knowl­edge those other fac­tors but say there’s still room for ac­tion.

The Democrats’ farm bill plan would re­duce the sub­sidy paid to corn-based ethanol pro­duc­ers and in­crease the sub­sidy paid for cel­lu­losic ethanol made from other sources, such as wood chips or switch­grass.

The fate of Repub­li­can plans is less clear, with sup­port for sub­si­dies and man­dates break­ing along re­gional rather than party lines. For ex­am­ple, it pits the corn-grow­ing re­gions of the Mid­west against cat­tle-rais­ing states such as Texas.

Top con­gres­sional aides said they were wary of pre­dict­ing whether Congress would go be­yond the tin­ker­ing in the Democrats’ farm bill.

Michael Con­nor / The Wash­ing­ton Times

‘Un­in­tended con­se­quences’: House Ma­jor­ity Leader Steny H. Hoyer said ethanol sub­si­dies will be re­duced in the farm bill.

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