ENVIRONMENTAL PHANTASM
POLITICAL FORCES KEEP DREAMS OF ETHANOL ALIVE

By Gary D. Libecap

Ethanol is a politician's dream. It is supposed to reduce automobile emissions of carbon monoxide and other gases, promote energy independence, and assist midwestern corn farmers (not to mention large ethanol producers such as Archer Daniels Midland and Cargill). In April, the Senate Environment and Public Works Committee approved a plan that, if enacted, would double ethanol production.

But ethanol fails to perform as promised. Its use appears to have no net positive air quality benefits; its production may entail other environmental costs such as soil and water degradation; and it probably does not contribute to energy independence. Only in helping corn growers and ethanol producers does ethanol pull through as advertised.

Ethanol's political history goes back to the Arab oil embargo of 1973 and the related oil price shocks, which made America's growing dependence on foreign oil a political issue. Ethanol, which is alcohol produced from renewable sources of biomass such as corn, looked like a way to stretch gasoline supplies.

Although the cost of producing ethanol was nearly twice that of gasoline in 1980, forecasts of gasoline prices issued by the U.S. National Alcohol Fuels Commission-as high as $4 per gallon by 1990-1991-made ethanol seem a reasonable supplement. The nineteen congressional members of the commission came mostly from agricultural states.