Wednesday, December 22, 2010

Ethanol and the Law of Unintended Consequences

Using ethanol as an alternative, renewable fuel has been an intruiging part of the energy debate for quite a few years.  When looking at a lot of pieces of legislation, it is just one side that feels all happy and justified with their decision while agitating the other side.  Ethanol is peculiar because it is one of those rare instances that not only do we have bipartisan efforts, but both sides have that "feel good" attitude towards the legislation.  For the Left, they like ethanol because it's good for the environment.  For the Right, they can better sleep at night because they can tell themselves that ethanol usage will decrease our dependency on foreign oil and help with national security.  Both sides will use the protectionist argument that jobs will stay in America.

Enter the law of unintended consequences.  Like with just about anything else in life, things don't go as planned.  However, if you are to have an unintended consequence, you would rather have it be positive, much like Adam Smith's concept of the Invisible Hand.  Unintended consequences are bound to be a part of government programs, and they are rarely a positive factor.  The case of ethanol legislature is of appeal because it is not just one side that doesn't get the concept of unintended consequences--it is both sides. 

Let's start with the notion that ethanol is good for the environment.  You know something is wrong [with ethanol] when the Far Left environmentalists, such as the Friends of the Earth, agree with a free-market libertarian, albeit for different reasons. As they point out, biofuels, particularly ethanol, cause air pollution and biofuel spillages can do massive damage.  Friends of the Earth even goes as far to claim that "[B]iofuels can also do more to cause global warming than conventional gasoline."

What about energy independence?  At least if the Left wasn't correct, surely the Right would be correct about not supporting Arab oil anymore.  Wrong!  That's wrong.  In spite of increase in ethanol usage, oil imports have not decreased.  Why hasn't oil consumption increased?  Because we just love our oil too much.  I'm not opposed to finding alternative forms of energy.  It would cut back on using more resources, which would be a better allocation of limited resources.  I just don't want Big Government getting involved.  And until we either find alternative energy, or at least start drilling in ANWR, we will still be using foreign oil since most of oil is used for transportation, not to mention that about 40% of our energy comes from oil.  Even if we used all the corn in America to produce ethanol fuel, it would only displace 16% of the current fuel usage. 

I could go on, but at this time, it sufficeth to say that ethanol fuel is hardly the wave of the future.

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