The unintended consequences of the ethanol quick fix

The push to increase ethanol production and ease dependence on oil has created a price runup in fuel and food prices.

By Ray Nothstine

from the July 27, 2007 edition

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Grand Rapids, Mich. - Ronald Reagan once said that the most terrifying words in the English language are, "I'm from the government and I'm here to help." His one-liner immediately comes to mind when looking at the problems behind the federal government's campaign to boost production of corn-based ethanol with a massive 51-cent-per-gallon subsidy.

Ethanol and other biofuels are advertised as one of the main cures for our oil-thirsty economy. But it's clear that the ethanol boom, with a major assist from Washington, is succeeding in simultaneously raising both fuel and food prices.

With more than 20 percent of corn now dedicated to ethanol production, the US Department of Agriculture is projecting a record US corn crop in 2007 – along with record prices.

Outside the United States, the unintended consequences of ill-considered policies promoting ethanol and other biofuel crops are already in full view. The poor, of course, are hit hardest.

In Mexico, where corn is a staple, rapidly rising prices for tortillas have sparked open revolt. Tortilla prices skyrocketed more than threefold last year. Protesters took to the streets in Mexico City, compelling the normally free market-minded President Felipe Calderón to cap prices at 78 cents per kilogram.

Religious leaders are speaking out. In March, Roman Catholic bishops in Brazil warned that a rapid increase in ethanol production based on sugar cane could lead to widespread deforestation, massive relocation of workers and their communities, and harsh working conditions for cane cutters.

Analysts predict that Brazil, the world's largest exporter of ethanol, may increase ethanol production as much as 40 percent in the next four years. "We are going to turn the country into a huge cane [plantation]," said Cardinal Geraldo Majella Agnelo.

In Colombia, Christian aid organizations say armed groups are driving peasants off their lands to make way for plantations of palm oil, another biofuel. Acreage dedicated to production of the palm oil tree has more than doubled in the past four years.

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