Biofuel Subsidies Are a Waste of Taxpayer Money

In hearings for the 2012 Farm Bill, lawmakers entertain the prospect of continuing the wasteful alternative energy.

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Tom Pyle is the president of the Institute for Energy Research

In the hope of coming to an agreement on a 2012 Farm Bill this spring, the Senate Agriculture Committee held the first of four hearings on Wednesday to discuss the future of our country's agricultural policy. This week's inaugural hearing, titled "Energy and Economic Growth for America," focused specifically on the prospect of continuing the wasteful alternative energy subsidies of the previous Farm Bill.

Initial indications of the direction of the upcoming Farm Bill are ominous. In his testimony at Wednesday's hearing, Secretary of Agriculture Tom Vilsack lauded the heavily-subsidized biofuel industry, stating,

There's an extraordinary potential for a bio-based economy… The reality is that as we move towards the 36 billion gallons of renewable fuel under the Renewable Fuel Standard, and as we fully integrate and coordinate our efforts in the bio-based economy, we're talking about millions of jobs.

[ Daniel Kish: Ethanol Subsidies Are Gone, But Not Forgotten]

Perhaps Secretary Vilsack missed the memo on recent reports that the Renewable Fuel Standard (RFS2) trading program has been fraught with fraud and abuse, with biofuels producers having pocketed over $70 million—and counting—from trading fraudulent credits associated with each gallon of fuel. Perhaps he also missed the memo that, under the RFS mandate that a certain amount of biofuel be used every year, refiners are charged $1.13 per gallon for failing to use non-corn biofuel that doesn't exist, because the industry responsible for producing it hasn't been able to get off the ground. For this reason, the Environmental Protection Agency recently cut its target of producing 500 million gallons of cellulosic ethanol by 2012 to a mere 8.62 million gallons this year. This is a far cry from creating a million jobs.

Moreover, the biofuel incentive programs of the previous Farm Bill have been demonstrably wasteful and have produced unintended results. The original Farm Bill energy spending estimate from the Congressional Budget Office for Fiscal Years 2008-12 was $647 million. Unsurprisingly, the actual spending for energy programs alone during this period is projected to total $1.9 billion. That's right, the energy programs encoded in the current Farm Bill are $1.3 billion over budget.

[ See a collection of political cartoons on energy policy.]

To understand how outsized this spending is, compare it to other programs in the Farm Bill during the same period: spending projections show that commodity programs are $9.4 billion under budget; conservation is $1.7 billion under budget; and export programs are $300 million under budget. Compared with other agricultural programs in the Farm Bill, the energy program is deficient and wasteful.

Deficiencies and waste might be marginally acceptable if the biofuel program actually produced beneficial results. The reality, however, is very different. It has been estimated that diversion of our cropland into fuel production means that almost 200,000 more people worldwide die each year from starvation or malnutrition. The environmental community has noted for years that production of biofuels can result in higher greenhouse gas emissions and higher particulate emissions (which have been implicated in strokes and various respiratory ailments). Engine manufacturers make a compelling case that biofuels damage seals and gaskets and other engine components. Additionally, biofuels like ethanol provide about 30 percent less power than gasoline, gallon for gallon.

[ See a collection of political cartoons on gas prices.]

Simply put, because of biofuel's numerous deficiencies, consumers would almost certainly not buy billions of gallons of biofuels in a free, transparent market. Biofuels are not government supported and mandated because they produce superior energy. Instead, they represent a transfer of wealth from the great number of taxpayers to the fewer number of recipients of government, and specifically, agricultural subsidies.

Viewed through the lens of redistribution, however, the subsidies embedded in the energy programs of the Farm Bill are very successful. So successful, in fact, that the chairmen of the congressional agriculture committees have no intention of letting the gravy train stop or even slow. The Stabenow-Lucas agreement that was put forth last October would have shaved $23 billion from farm programs over the next 10 years—which actually cuts less than what the president and others in Congress had suggested to the "super committee" in deficit reduction talks. The agreement fell through, but the push for generous subsidies to the biofuels industry won't end there.

As we watch and listen to the debate over the Farm Bill this spring, keep all of this in mind: The "energy" programs in the Farm Bill aren't really energy programs—they are simply another way of taking your tax dollars and sending them to beholden government cronies.