It seems that congress is finally trying to do something to get E85 into the mainstream. “A Senate energy bill would increase the amount of ethanol and other biofuels that refiners are required to use to 15 billion gallons by 2015 and 36 billion gallons by 2022….Sen. Tom Harkin, D-Ia., and others have proposed requiring carmakers to make nearly all vehicles capable of using E85 within 10 years. Oil companies also would be required to install E85 pumps. To get motorists to buy E85, the lawmakers want a special subsidy that starts at 35 cents a gallon and then decreases.”
One potential problem is that they are trying to mandate that Oil Companies install E85 which will compete directly with the product that the oil companies are trying to sell. Since the Oil Companies are trying to sell their own product, wouldn’t they mark up the price of E85 so that their own product is competitive still? The problem is the Oligopoly aspect of the oil industry, there are too few players in the market to have it work competitively. One potential solution to this would be to tie the maximum allowed cost of gasoline to the cost of production of the oil and then to tie the maximum allowed cost of E85 to its own production proportionally.
The goal would not be to keep the price of gas down which would obviously lead to shortages, it would simply be to decrease the potential manipulation by the industry which would keep E85 uncompetitive with gasoline. Another possible solution would be to have the oil industry control the ethanol industry which would lead to them having an incentive for E85 to do well. Either of these solutions will inevitably have many unintended consequences, before anything is implemented these consequences really need to be examined.
Personally I would love to see E85 stations everywhere, I think that would be true progress. It needs to be well thought out and examined before anything goes into law because something like this if implemented poorly has a lot of potential to screw things up.
July 16, 2007 at 2:13 am |
You’re concerned about oligopolies, then why only in oil? What about concentration of the industry on the ethanol side as well? ADM and Poet together account for 1/3 of capacity. And, guess what? The CEO of ADM, Patricia Woertz, is a former top executive from Chevron Corp.
As for the alleged environmental benefits of E85, those have been brought into question by a peer-reviewed study by Stanford University’s Marc Jacobson.
And, at least currently, the subsidies to ethanol that fuel the typical E85 vehicles currently on the road (75% of which are SUVs or pick-up trucks), are highly regressive, costing taxpayers around $500 per vehicle per year.
For more on this calculation, see our study, “Biofuels–At What Cost?: Government Support for Ethanol and Biodiesel in the United States.”
July 16, 2007 at 9:20 am |
For the most part I agree with you. A government sponsored (see tariff on Brazilian ethanol) oligopoly of our ethanol industry will be uncompetitive and in the end bad for the country. The industry will never attract enough investment to become mainstream however if the government is overly harsh during it’s infancy.
There is a difference between the ethanol industry and the oil industry as well. The oil industry controls the supply and the consumer distribution method (gas stations), whereas the ethanol industry only controls the supply. The oil industry would have an easy time manipulating both the price of ethanol and the price of gasoline at the pump since they would be the ones setting the price for E85.
In a few years after we have made some progress into making ethanol competitive or even cheaper than gasoline, the subsidies can be simply phased out and free market forces can once again commence as the subsidies will have served their purpose of jumpstarting the ethanol industry. I do not see this happening until cellulosic ethanol starts to attract the kind of investment that corn ethanol is currently experiencing however.
This is ridiculously debatable and completely a matter of opinion, but I feel as though $500 per E85 vehicle per year for the next few years is a bargain for the energy independence and reduced CO2 emissions which we will have gained by switching our primary fuel source to ethanol. The fact that we will no longer be throwing our money at governments who may or may not be funding terrorism is also a bonus (this way the money stays in our economy as well).
As for alleged environmental benefits, I agree with your statement completely. Other than reduced CO2 emissions from a lifecycle analysis perspective, ethanol is only marginally cleaner than gasoline at best.
July 16, 2007 at 11:03 am |
Joel,
Thank you for the considered response. As for ethanol being an “infant industry”, on what basis do you make that claim? The Energy Information Administration (EIA) calls it a “mature technology”. People have been producing ethanol from grain since Moses. The main new technologies involved in the process are those, like molecular sieves, that enable ethanol to reach 99.7% purity. And that technology has been available for decades.
Certainly in terms of subsidies, corn ethanol has been living off them since the late 1970s. And the industry does not want them to stop — because it knows that it cannot avoid competing with other uses of its feedstock, and feedstock prices account more more than half its production costs. So, when is this big baby going to grow up?
I have heard the argument before that supporting ethanol helps to undermine the oligopoly over transport-fuel distribution. Direct sales to fleets (more important for biodiesel than ethanol) might chip away at it marginally, but if all you are doing in the end is forcing the oil majors (and small, independent gas stations to boot) to sell ethanol, how have you changed the market fundamentals? The oil companies will still be distributing most of the nation’s transport fuel.
Indeed, if I were an oil company, I’d LOVE biofuels, since the commitment the government has made to them basically ensures many decades more of the dominance of the internal combustion engine as the main technology for personal transport (as opposed to, for example, electric vehicles). And the blending of biofuels with gasoline and diesel ensures continued demand for those products for even longer. So, sorry, I don’t buy that argument.
Obviously, I disagree with your view that $500 per vehicle per year (equivalent to the per-capita income of a typical person living in low-income developing country) is a “good deal”. Once you factor in the energy that went into making that ethanol, and the fact that most U.S.-made SUVs get terrible gas mileage, the “energy security” contribution is minuscule. There are many other ways to improve energy security — e.g., by improving traffic controls in cities, by spending more money to enforce speed limits, by building bicycle infrastructure in cities where commuting by bicycle would be a realistic option — that would probably yield more gallons saved per dollar.
July 16, 2007 at 3:25 pm |
Ron,
As for the claim that the ethanol industry is in its infancy, I was referring to the potential of cellulosic ethanol. I agree that technology won’t get us much farther for corn ethanol. Cellulosic ethanol however promises us much more. Taken from the DOE report under “the doctrine”: “Current yield for nonenergy-crop biomass resources is about 5 dry tons/acre and roughly 65 gal/ton. The goal for energy crops is 10 tons/acre at 80 to 100 gal/ton during implementation. Second, perennial biomass crops will take far less energy to plant and cultivate and will require less nutrient, herbicide, and fertilizer. Third, biomass contains lignin and other recalcitrant residues that can be burned to produce heat or electricity consumed by the ethanol-production process.”
Basically we will be tripling the ethanol per acre while reducing the effort (therefore cost) required to grow the crops. We will also be providing energy savings via burning of lignin and hemicelluloses. The paper industry is mostly energy self supplied by burning only some (amounts vary from mill to mill) of the lignin. It is possible that these cellulosic ethanol plants will not only produce ethanol, but also provide extra power for the grid. Basically once we actually see cellulosic ethanol plants popping up, farmers growing miscanthus, and regularly see E85 pumps/capable engines is when the cellulosic ethanol industry will be mature.
I agree that we will inevitably need to do something about subsidies, and that the corn ethanol industry is going to fight tooth and nail to keep what they have. This will need to be overcome by intelligent legislation. I would argue however that the subsidies are essential for the time being in order for the market to develop the infrastructure that is required to change from one energy source to another. Once corn ethanol is phased out, the subsidies will no longer be needed (the ultimate goal).
“I have heard the argument before that supporting ethanol helps to undermine the oligopoly over transport-fuel distribution. Direct sales to fleets (more important for biodiesel than ethanol) might chip away at it marginally, but if all you are doing in the end is forcing the oil majors (and small, independent gas stations to boot) to sell ethanol, how have you changed the market fundamentals? The oil companies will still be distributing most of the nation’s transport fuel.”
This is true, my point was that there is a potential for the oil industry to manipulate the price of ethanol even if they do not control the supply since their infrastructure is the preferred distribution method and that a system will need to be developed to discourage anticompetitive behavior.
“And the blending of biofuels with gasoline and diesel ensures continued demand for those products for even longer. So, sorry, I don’t buy that argument.”
Cellulosic ethanol is an attempt to gradually phase out gasoline. Eventually removing 85% (E85) of gasoline usage is of course not perfect, but it will get us to the point where we no longer rely on foreign oil. By the time we are using mostly E85, electric vehicle technology will very likely be economically available and inevitably we will combine the technologies. While the Volt is a really cool concept, it will still require fuel for longer trips. Not to mention Lithium Ion batteries are ridiculously expensive.
Your developing country argument is sensationalist since we are talking about the US where average per capita income is closer to $42,000/year.
I completely agree with you that there are other ways of improving energy security. Improving bike paths, encouraging people to live near their work, improving city planning, increasing MPG requirements, enforcing speed limits. These should also be emphasized (perhaps a gradual increase in national fuel tax to eventually bring us more in line with Europe). I would argue that these things will be more difficult to change since they require a lifestyle change rather than a technological change. People unfortunately would rather pay a little more than change the way they live. All of these things though should definitely contribute to fixing our energy “crisis”.
July 16, 2007 at 8:06 pm |
Joel,
Thank you again for the well-reasoned answer.
The title of your blog shows that you have your eye on cellulosic ethanol, so I understand that. But I would point out a few things in response to your argument that current subsidies are facilitating the transition to a bright, cellulosic future: (a) they involve the government heavily in the game of picking winners; (b) it is a hugely expensive endeavour; (c) the history of subsidizing one form of energy in the hope that a related but better one comes along to replace it, has a poor track record; (d) we are far from reducing the cost of producing cellulosic ethanol below that of corn-based ethanol, much less gasoline, and even the industry gets there, it needs to be asked what is the potential supply of feedstocks at the kinds of prices assumed.
I presume we can agree on (a), and that therefore it is a matter of personal taste whether one feels that in this case, heavy-handed government intervention is needed. Why do economists so dislike governments picking winners? Because they can err, big-time. And they often do not pull the plug until more money has been wasted than would have been the case had investment in the technology been driven only by private risk and reward. A more technology-neutral policy would be a carbon tax. Had the U.S. government chosen that route instead of a volumetric subsidy and mandate, it is doubtful that coal-fired ethanol plants would have ever been built.
Regarding (b), I would point out the cumulative cost to the U.S. Treasury of the 51 cents per gallon volumetric ethanol excise tax (VEETC) alone — i.e., not counting the myriad other federal, state and even local subsidies — of ramping up to the proposed mandate to 36 billion gallons a year (or whatever level) by 2022, is not trivial. Assuming 7 billion gallons produced this year, and straight-line growth, that is:
(([36-7]/2) + 7) x 16 x 0.51 = $175 billion.
And by then, ethanol would be contributing (on an energy-equivalent basis) — what, 15% of total transport demand?
If one is going to mandate something, one could make an equally plausible argument that the Government should mandate a shift to (clean) diesel engines with manual transmissions (not something I would advocate!), which would save at least 15% of petroleum fuel consumption through fuel-economy gains — at a much smaller cost (indeed, a lower sticker price for a manual transmission car compared with one with an automatic transmission) to consumers.
But no, ethanol advocates want to push the country down the spark-ignition route, rather than the compression-ignition route. See what I’m getting at regarding “picking winners”?
Regarding (c), corn ethanol has already been heavily subsidized in the USA for almost 30 years. I think the burden is on the advocates to paint a politically realistic scenario of how those are going to end. Otherwise, history points to numerous examples — especially for anything involving agriculture — of industries, once grown dependent on subsidies (and a mandate is just another way to provide a subsidy), continuing to be subsidized for decades and decades. Indeed, despite occasional boasting by industry representatives that it can survive without subsidies, the reality is that it keeps pushing for more and more. As reported a couple days ago in the Des Moines Register, “The biofuel industry wants an additional subsidy of 75 cents a gallon to cover the higher cost of producing cellulosic ethanol. Energy tax bills proposed by congressional Democrats would provide an extra 50 cents per gallon.” Such a deal!
“Once the corn ethanol is phased out” is looking more and more like a challengable assumption. Many of the past studies that have look at the future costs of cellulosic ethanol from plants like switchgrass have concentrated on costs of production, not the opportunity cost of producing something like switchgrass instead of a more lucrative crop (higher input costs but higher revenues as well), like corn. To sum up a recent study from Iowa State University, one of the leading researchers on biofuel economics:
“Cellulosic ethanol from switchgrass and biodiesel from soybeans do not become economically viable in the Corn Belt under any of [our] scenarios. This is so because high energy costs that increase the prices of biodiesel and switchgrass ethanol also increase the price of corn-based ethanol. So long as producers can choose between soybeans for biodiesel, switchgrass for ethanol, and corn for ethanol, they will choose to grow corn. Cellulosic ethanol from corn stover does not enter into any scenario because of the high cost of collecting and transporting corn stover over the large distances required to supply a commercial-sized ethanol facility.”
So, one might see cellulosic ethanol as an adjunct to starch-derived ethanol, but we’re still talking, in the Midwest, at least, of corn, corn, corn.
Speaking of infrastructure, while we’re waiting for switchgrass-ethanol nirvana to arrive, massive investments are being made in equipment and infrastructure to plant, spray and harvest corn. Do you honestly think that investment will be abandoned easily and willingly?
So, how about cellulosic ethanol from wood chips? Unfortunately (for the ethanol industry), they are not the only ones with designs on that feedstock. Power companies were also counting on it, too. Already, one company, has taken out options on buying up a huge amount of diseased and storm-damaged wood along the east cost. For cellulosic ethanol? No, to supply the 25-30 new, wood-fired power plants planned for New England by 2010. The company, Green Energy Resources, predicts $50 per ton biomass woodchip prices within the next twelve months. The current US price level is between $25 and $32 per ton.
July 17, 2007 at 9:39 am |
Ron,
From the University of Illinois Researchers:
“An acre of Miscanthus yields 15 tons, which could translate to 1,500 gallons of ethanol,” Dohleman said.
By comparison, switchgrass yields about 700 gallons per acre.
Corn, on the other hand, yields about 450 to 500 gallons per acre.
“From the Iowa State summary that you posted:
“Ethanol from Cellulose: This study only assesses the relative profitability of producing
ethanol from corn, corn stover, and switchgrass grown in the Corn Belt. Because ethanol
from corn is the only one of these three sources to generate positive returns, it is the only
one that we include in our baseline and scenarios. Other sources of ethanol from cellulose
may prove more feasible”
And they are proving more feasible. Miscanthus produces twice the biomass per acre with roughly the same costs of production per acre as switchgrass. Miscanthus and switchgrass can be grown on land that is not available to corn due to their “hardiness”.
“Farmers will not be willing to plant switchgrass unless it offers a net return comparable to that of corn. Babcock et al. (2007) calculated the price at which farmers would consider changing to switchgrass as $110 per ton of switchgrass from land with a yield of four tons per acre and $82 per ton for land with a yield of six tons per acre. The maximum that ethanol plants can bid for these same tons is about $37 per ton in years when ethanol is selling for $1.75 per gallon. Under these conditions, switchgrass simply cannot offer farmers a market incentive that offsets the advantages of growing corn.”
The problem with this reasoning is that Miscanthus growth is closer to 15 tons per acre. If a linear relationship is assumed, this will bring the price down to $32.8 per ton. The linear relationship is probably too simplistic however and probably undercuts the actual cost since transportation costs will be proportional to the mass of the feedstock. They will be less than the model in the study (about corn stovers) projects however since the density of cellulosic mills will be potentially much greater in areas of miscanthus growth since feedstock mass per area is greater in those areas, therefore average travel distance (and with it, cost) will be greatly reduced. This also does not take into account that breeding programs and genetic engineering have a lot of potential to relatively easily (at least at first) increase yields even further. The study also does not seem to take into account the decreasing processing costs of cellulosic material that will be the result of mass production of conversion of cellulose to ethanol.
A company making cellulosic ethanol economical already using the toted less efficient acid hydrolysis method:
“But production costs have now fallen with improvements in processing technologies to below €20/US$ 27 cents a liter (US$ 1.02 per gallon). This means the fuel is cost-competitive with oil at US$42 a barrel,”
If they can do this by acid hydrolysis, once researchers at places like Mascoma and Iogen have their way and figure out how to bring down the cost of enzymes, the process will just keep getting less expensive. The eventual goal is to develop enzymes which convert cellulosic and hemicellulosic material directly into ethanol. This is still a ways off however in the next few years they should be making some progress into speeding up hydrolysis times and bringing down production costs.
I am not saying Miscanthus will be the only cellulosic ethanol solution; there is a lot of potential for cellulosic ethanol production from agricultural waste as well.
Another point is that although not our original (at least given) reason for going in, would we continue to spend ($450 billion) in Iraq if we did not have a vested interest in the stability of the area? Yeah Saddam was bad, but places like Darfur have far worse genocide than Iraq ever had yet we do not seem to be bothering with them. We keep pouring money into the region to fund these heavy handed tyrants. By creating ethanol out of biomass, rather than paying tyrants, we will instead be supporting industry in the U.S. which carries the added bonus of increasing income for farmers and providing jobs to a lackluster Midwest USA economy. Also relative to our middle-eastern military spending for asset/interest protection, your $173 billion per year is not THAT expensive.
It is not as if the technology used for corn ethanol cannot be adapted to use in cellulosic ethanol from the UT article:
“Experts say the crop doesn’t take a big investment for farmers either. They can harvest it with the same equipment used for hay, but at a different time of year. When used for ethanol, switchgrass should be harvested after it’s turned brown, usually in the fall or early winter. ”
From the perspective of a chemical engineering student I see that the process for conversion of corn to ethanol is similar enough to the process for conversion of cellulose to ethanol that a lot of the capital investment can be adapted to the changing technology.
As for subsidies, I agree with you that there are probably better ways of implementation (such as a broad carbon tax). With this congress and administration however ill take what I can get. Adding spending seems to be a far more reachable goal for them than adding a tax.
I completely agree that there are many other ways that we can cut down on fuel usage and I fully endorse them. As you said “If one is going to mandate something, one could make an equally plausible argument that the Government should mandate a shift to (clean) diesel engines with manual transmissions (not something I would advocate!), which would save at least 15% of petroleum fuel consumption through fuel-economy gains — at a much smaller cost (indeed, a lower sticker price for a manual transmission car compared with one with an automatic transmission) to consumers.” This goes back to the matter that it is easier to change the technology than to change people’s preferences (for automatic transmissions). You are right, I could be advocating for diesel engines with manual transmissions. I made this site however because cellulosic ethanol as a technology interests me. I don’t think that cellulosic ethanol is the entire solution, but it definitely has potential to be part of the solutio
July 17, 2007 at 1:44 pm |
Joel,
Thanks for all the interesting information on miscanthus. Perhaps you should write to Bruce Babcock and ask him whether they considered that feedstock in any of their analyses.
If the economics of producing ethanol from miscanthus proves as good as you foresee, I’ll be very happy as well. (Though if farmers plant miscanthus in place of food and feed crops in a big way, and as a consequence drives up food and feed prices, I won’t.) Meanwhile, however, the bulk of subsidies keep going to support corn-based ethanol.
Perhaps you, as an engineering student, are rather relaxed on the question of cost-effectiveness. Me, a public-policy analyst, am not. And I am perhaps (at the comparatively advanced age of 53) more worried than you about the chances of unintended consequences. Already, we are seeing big increases in the cost of food. Some sources are saying that America’s food bill went up $14 billion last year. Not all of that can be blamed on biofuel policies, but some of it can. And that is in addition to the subsidies provided directly to biofuel producers.
Citing the hundreds of billions of dollars that the U.S. is spending on Iraq is the last refuge of the … er, biofuel advocate … in this business. Yes, the U.S. Government has an interest in protecting the oil supplies there — as much for the stability of the world economy as for its own supplies. But it was spending (a lot less) money there before the war. The enormous amounts being spent now are thanks to the invasion and its aftermath. No conceivable amount of domestic ethanol production (as we both agree, Congress is not about to drop the tariff on Brazilian ethanol) over the next decade (by which time I certainly hope the U.S. will have pulled out its troops) will make one jot of difference in how much is spent militarily in the Middle East between now and 2015.
As for the job creation argument, that has no validity in economics. Yes, the Midwest is gaining some jobs — but at the expense of jobs elsewhere in the economy. If self-sufficiency or import-substitution were the answer to economic prosperity, the best policy for every country would be autarky. So, why hasn’t Congress closed all the borders to imports or embarked on a policy of mandating or subsidizing self-sufficiency in everything? Because no politician in his or her right mind wants to turn the USA into North Korea.
Also, proponents of this argument forget that while producing ethanol might reduce some oil imports, it also means the USA has to spend more to import fertilizer, and sacrifices some exports of grain. So less money spent abroad on oil, but more moeny spent on inputs to grain production, and less money earned abroad from grain exports as well.
Finally, your defense of the popularist policy approach is not very appealing or convincing. As I said, I would not mandate that people drive manual transmissions (though I don’t honestly see what the fuss is all about). But there seems to me not much difference between mandating all cars be FFVs or mandating that all cars be diesel-powered. In any case, the problem with the USA’s current biofuel policy is that it both mandates AND subsidizes biofuel production — the only country in the world that does that (all others do one or the other) — thus hiding the true cost of driving from the public. That only delays the day of reckoning, and sends a message to drivers that they need not do anything, because the government is going to solve the problem of high oil prices for them: by providing lots of (artificially) cheap, home-grown ethanol.
July 17, 2007 at 3:59 pm |
Ron,
its interesting that you mention that growing ethanol in the Midwest will simply act to reposition jobs from elsewhere in the country. I was just reading an article which relates to the subject. It seems that at least some of these jobs will be leaving their current location no matter what we do as Saudi Arabia is of late investing in the refining business in a big way. Being from Michigan I will admit to a bias which favors bringing jobs to the Midwest given our state’s suffering economy.
“Today, most of OPEC’s investments are going into value-added refineries and petrochemicals, not increased oil production. Three fourths of the $70 billon Saudi Arabia will invest in the next four years will be in downstream refineries and petrochemical facilities. They intend to export more gasoline, ethylene and plastics, using their advantage in lower oil costs.”
“Perhaps you, as an engineering student, are rather relaxed on the question of cost-effectiveness. Me, a public-policy analyst, am not. And I am perhaps (at the comparatively advanced age of 53) more worried than you about the chances of unintended consequences. Already, we are seeing big increases in the cost of food. Some sources are saying that America’s food bill went up $14 billion last year. Not all of that can be blamed on biofuel policies, but some of it can. And that is in addition to the subsidies provided directly to biofuel producers.”
True though it is mostly due to the rising cost of gasoline:
“New research, conducted recently by economist John Urbanchuk of LECG, LLC, found that rising energy prices have twice the impact on the Consumer Price Index (CPI) for food than does the price of corn. The full report, “The Relative Impact of Corn and Energy Prices in the Grocery Aisle,” is available on the ACE website, http://www.ethanol.org in the Press Room.
The study finds that “a 33 percent increase in crude oil prices results in a 0.6 percent to 0.9 percent increase in the CPI for food, while an equivalent increase in corn prices would cause the CPI for food to increase only 0.3 percent.”"
“Citing the hundreds of billions of dollars that the U.S. is spending on Iraq is the last refuge of the … er, biofuel advocate … in this business. Yes, the U.S. Government has an interest in protecting the oil supplies there — as much for the stability of the world economy as for its own supplies. But it was spending (a lot less) money there before the war. The enormous amounts being spent now are thanks to the invasion and its aftermath. No conceivable amount of domestic ethanol production (as we both agree, Congress is not about to drop the tariff on Brazilian ethanol) over the next decade (by which time I certainly hope the U.S. will have pulled out its troops) will make one jot of difference in how much is spent militarily in the Middle East between now and 2015.”
So far we have spent 3 times your 175 billion calculation in Iraq, what if we end up invading Iran? Sure it wont make an immediate difference, but eventually there is a good chance that satisfying a larger portion of our own energy demand will give the US a strategic advantage when dealing with middle eastern politics. What if 30 years from now we are still completely reliant on oil and there is a need to invade Saudi Arabia and we physically cannot invade because our economy would fall apart without their oil?
“Also, proponents of this argument forget that while producing ethanol might reduce some oil imports, it also means the USA has to spend more to import fertilizer, and sacrifices some exports of grain. So less money spent abroad on oil, but more moeny spent on inputs to grain production, and less money earned abroad from grain exports as well.”
Cellulosic ethanol production combined with considerably smarter energy usage could end up resulting in (the far distant future) the US becoming a net ethanol exporter. Don’t forget that in years past we have been net oil exporters. These things change. One of the greatest assets of America is that we have millions and millions of acres of some of the best top soil on the planet.
“But there seems to me not much difference between mandating all cars be FFVs or mandating that all cars be diesel-powered.”
Enabling an automobile to be a flex fuel vehicle costs the automakers roughly $10/car. Compare this to the cost of a diesel which is something in the neighborhood of two base 10 orders of magnitude greater than enabling a FFV (I can’t seem to find an exact number). While diesel and regular unleaded are roughly the same cost and although you do get slightly better fuel efficiency out of a diesel, from what I can tell for the average car it is still cheaper to go with gasoline when considering the lifetime cost of the car.
“thus hiding the true cost of driving from the public” True, but when has this administration ever shown any semblance of fiscal responsibility?
July 17, 2007 at 5:39 pm |
Joel,
I’m flying off tomorrow to visit my parents, so I won’t be able to respond to your extensive comments in depth. It’s been an interesting and civil exchange. I don’t think we disagree on the need to reduce energy consumption, and dependence on oil from unstable countries. But we probably do disagree on what is the most cost-effective way of doing that. It is not sufficient enough to argue that the end (reducing U.S. dependence on the Middle East) justifies your particular favored means.
Just one more point on FFVs: most have been built to take advantage of the “dual-fuel” loophole, which allows Detroit to get extra credit (essentially, not to count the ethanol consumed by a vehicle, assuming it runs on E85 half the time) towards their CAFE standards, whether or not the owners ever put a drop of ethanol in the tank. They are still predominantly gas guzzlers, with 5.3-litre engines. Indeed, some of the biggest ones consume as much gasoline running solely on E85 as does a Honda Civic hybrid running exclusively on gasoline. So please excuse me for being cynical about enthusiasm for FFVs. I’d be curious to know from where you got your $10 per vehicle estimate. Most articles I see on FFVs say the extra cost is an order of magnitude higher.
July 17, 2007 at 5:51 pm |
Sorry, I will add one other remark. Here we have two reasonably informed people arguing over arcane technical details of different fuels and power systems. I’m sure if I had time I could show why diesel-powered vehicles are still cheaper. And you might come up with good counter-arguments. In the mean time, some new technology may have come along that flips their relative advantages.
But let’s step back and imagine the even less-informed (or at least informed by even more conflicting information) debate that goes on in the corridors of Congress — which is the institution that matters when we are talking about subsidies and mandates, not the administration. Do you honestly think they should be in the business of picking winners in the technological sweepstakes, and skewing the market over decades (if not longer) towards whatever fuel and technology seems to be the flavor of the month?
Funding on R&D is one thing. If it doesn’t work out, you can walk away from it. Setting mandates 15 years in advance, and subsidizing massive amounts of infrastructure for a partiucular fuel is a HUGE gamble. And accepting such approaches because “they are the best we can do” reflects, in my view, the kind of short-term thinking that is bound to create some very large, unanticipated long-term problems.