Wednesday, April 23, 2008

Ethanol, an example of political meddling in markets

The crisis caused by incentivizing of Ethanol is plain to see. Not only is ethanol inherently less efficient than gasoline it also has almost just as many harmful environmental effects. But because of the efforts of the corn farmers and environmentalists politicians have gottn behind ethanol whole heartedly. This has resulted in tax breaks and subsidies for corn based ethanol production in the US while perversely also raising tariffs on Brazillian sugar cane based production. This has resulted in a food crisis on a global level. As farmers switch crops to enjoy the benefit of the subsidies and tax breaks, not only does corn become more scarce but also other staple crops because it is more profitable to produce corn. If we must switch to Ethanol based fuel shouldn't we do it based on solid economics? Brazillian sugar cane ethanol produces a higher yield than corn and has less effect on the food markets yet it is kept out (I feel I also should note that even Brazillian sugar cane has a pretty harmful effect on the environment due to the fact that rainforests are cleared to produce it). This new Green movement seems more about show than results.

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