Several days ago, I posted about an improved variant of sugarcane, designed for use as a fuel and developed by Barbados. The post also discussed the irrationality of the 54-cent-per-gallon tariff that the US currently imposes on imports of ethanol.
Today’s Wall Street Journal has an editorial “What’s Wrong with Free Trade in Biofuels?” which amplifies the point. Excerpt:
Brazil has already established itself a low-cost producer of cane-based ethanol churned out in large volume at the oil-equivalent price of $25 a barrel without any heroic biogenetics involved. Its example is already inspiring copycat behavior by other Latin, Caribbean, African and South Asian countries, with similar conditions that make them potentially prolific exporters of biofuels.
Unfortunately, against the danger that poor countries might find profitable new niches for themselves as energy producers, rich countries have been busy erecting trade barriers to kill off the incipient competition to their own farmers. The U.S. imposes a 54-cent-a-gallon tariff on Brazilian ethanol, to discourage competition with domestic ethanol, which receives a 54-cent subsidy from taxpayers. The European Union just slapped new duties on Pakistani ethanol.
This should lay bare the fraud that what’s going here has anything to do with energy security. It has only to do with the agricultural lobby masquerading its interests behind foolish and misleading rhetoric about energy security.
Take the pressure for flex-fuel mandates, requiring auto companies to build cars capable of running on 85% ethanol. Unmodified cars can already burn fuel comprised 10% of ethanol. If we were honestly keen on diversifying supply and squeezing out imported oil, we’d throw open our dense coastal markets to ethanol producers in Brazil, India, Pakistan, Nigeria and Thailand, displacing perhaps 10 billion gallons of current gasoline use without any vehicle modification or taxpayer subsidy at all.
I don’t think the $25/bbl number for Brazilian cane-based ethanol is right; at least it’s not consistent with the $.87/gallon number quoted in the Farm Bureau article (linked from my earlier post)…but even with the $.87/gallon number (cost after ocean shipping charges $1.01/gallon) and considering the lesser energy in a gallon of ethanol vs a gallon of gasoline, the cane-based ethanol sounds like a winner. The tariff should go.