President Obama Should Spend $6 Billion in Corn Ethanol Subsidies on Biofuels and Renewable Energy


To most people, it might come as a surprise to learn that technological visionaries, including Henry Ford and Rudolf Diesel, have dreamt of plant fuel-powered internal-combustion engines since the 19th century. However, at the dawn of the automobile era, crude oil was cheap and easily found in much of the world just by drilling shallowly into the ground; it was this, along with its high energy density compared to other liquid fuels, that helped it win out over plant fuels.

Now, rising concerns over prices, geopolitical concerns, and environmental hazards are pushing Americans to reassess their oil dependency. After ethanol’s surge in popularity in the 1980s, the ethanol industry enjoyed what Sen. Dianne Feinstein (D-Calif.) referred to as “a triple crown” of federal support: tax credits, tariffs on imported ethanol, and federal laws requiring a minimum amount of renewable fuels like ethanol to be blended into gasoline. Although fiscal conservatives and liberal environmentalists banded together to kill the tariffs and tax breaks at the end of 2011, the impacts of Washington’s 30-year love affair with corn ethanol have been, and will continue to be, felt in multiple arenas including foreign affairs, land management, food prices, and environmental protection.

In North America, the $6 billion a year that went to corn ethanol subsidies devastated Mexico’s rural economy. When the North American Free Trade Agreement (NAFTA) was passed in 1994, U.S. corn sold at rock-bottom prices inundated the Mexican market, undercutting domestically-grown corn and eliminating over two million Mexican farm jobs. This prompted young men to leave their homes in search of employment across the border in an exodus that has unraveled rural communities, separated families, and made it near-impossible for communities to sustain themselves.

Domestically, the demand for more land to plant corn has caused a dramatic appreciation in land values. Iowa, the state with the highest gains in the Midwest, saw the price of farmland grow by 32.5% to $6,700 an acre in 2011. While high land prices have benefitted sellers, the scramble for acreage has led many farmers to pull their land out of the federal Conservation Reserve Program (CRP), which pays $53 per acre to farmers who leave their land fallow for at least a decade. In 2009, only 9% of CRP enrollments in Iowa were renewed for the following year. To date, over seven million acres have been pulled from the CRP, raising concerns that the program’s gains in the areas of water quality and wildlife habitat preservation could soon disappear. The financial rewards of increased corn production are spurring farmers on to inadvisable land stewardship practices such as removing windbreaks and buffer areas, putting both land and water at risk.

Since President George W. Bush set off a global fervor for renewable fuels in 2007, corn has become caught in a tug-of-war between use for ethanol and food. This contest has pushed food prices up across the globe, causing riots, runaway inflation, higher poverty rates, increased incidences of diseases of poverty, and political instability as angry citizens react to price hikes on staple foods. Domestically, both the meat and dairy industries vilify the push towards corn ethanol. When ethanol producers began buying more corn for fuel, these industries saw dramatic increases in feed prices, with corn prices jumping from $2.25 a bushel in 2001-02 to more than $6 a bushel in 2011.

The enormous volume of fertilizers that goes into corn production has wreaked havoc on the Gulf of Mexico, where fertilizer runoff flowing down the Mississippi River from the Midwest has created an ever-expanding “dead zone” of oxygen-less, and therefore uninhabitable, water. Over the past two decades, the Gulf dead zone has averaged about 5,200 square miles; and research conducted by the Louisiana Universities Marine Consortium (LUMCON) indicates that the problem is becoming increasingly irreversible. Even more worryingly, the Gulf dead zone is not unique: There were 400 known dead zones worldwide in 2008, compared to 305 in the 1990s.

However, second-generation biofuels show real promise. Algae in particular have drawn significant attention as a potential feedstock for biofuels because of its high yields, high productivity, and scalability. Now that its commitment to subsidizing corn ethanol is over, it is time for the federal government to begin funding research in second-generation biofuels. Given that the renewable portfolio standard (RPS) requiring the increased production of energy from renewable resources was not rolled back when the corn ethanol subsidies and ethanol tariffs were abolished, it is not unreasonable to hope that Congress or the Obama administration could reallocate some of the $6 billion corn ethanol subsidy money into other renewable fuel and energy research.

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