Europeans didn't know that corn existed before Columbus "discovered" America. It had been cultivated by indigenous North Americans for thousands of years before the Italian brought home what was to become a favorite food for many. The more adventuresome even figured out how to distill corn into something more to their liking.
Fast-forward five hundred years, and those yellow kernels are embroiled in a political food fight. Ethanol, or ethyl alcohol, is being served up as a way to slake our thirst for foreign oil. Ethanol is even on the menu of the Iowa Caucus, the first major primary of the 2008 election year. It also is featured prominently in the latest energy bill passed this June by the Senate. One economist at Iowa State University predicts that enough new distilleries will be built in the state to make it a net corn importer. "We'll be the Arabs of the Midwest," says a manager of an Iowa farm cooperative.
Supply-side economics
Although major questions about ethanol's government support, delivery, cost-competitiveness, and environmental impact remain unanswered, I doubt any presidential hopeful will stand in the way of the ethanol juggernaut—especially in Iowa. Still, embracing ethanol without vetting all the issues associated with its production and use would be a big mistake. Don't get me wrong; I believe ethanol will be a piece of our energy puzzle. But it may not be as big a piece as advertised.
The Renewable Fuels Corp. reports that there are 111 ethanol refineries nationwide with an annual capacity of 5.4 billion gallons. Another 78 refineries and eight expansion projects in various stages of development will add another 6 billion gallons, easily meeting the 2005 Energy Policy Act's goal of 7.5 billion gallons by the year 2012. To put those numbers in perspective, the Earth Policy Institute notes that refineries will consume half of U.S. corn production by 2008. Farmers have planted 90.5 million acres of corn this year—the most since 1945, according to the U.S. Department of Agriculture (USDA).
Because the U.S. accounts for 40% of the global corn harvest, our increased domestic consumption and reduced exports are driving up worldwide prices. For example, in Mexico, where corn is a dietary staple, President Felipe Calderón had to impose voluntary price caps on the crop because tortilla prices quadrupled since last summer. Sugar-derived ethanol from Brazil could help meet domestic demand and free up some U.S. supply, softening prices, but Washington insists on protecting U.S. sugar producers with a 54-cents/gallon tariff on ethanol imports. Might ethanol policy impale us on the horns of a moral dilemma: having to choose between lowering the cost of driving and keeping poor Mexicans from starving?
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