4/13/2007

 

The Dark Side of the Yellow Revolution

Two posts in one day, not bad. Not bad at all.

With the yellow revolution (ethanol) underway in the West, it's appropriate every now and then to consider the incontrovertable fact that every choice implies a trade-off. In public policy, these trade-offs mean that oftentimes, the actions taken to solve one problem cause different problems down the road.

Take the goal of energy independence. By decreasing our reliance on foreign oil, we can decrease our reliance on foreign countries who produce oil, many of whom are unstable and prone to fomenting hatred of the United States and its allies.

Many, especially in this state, promote corn-based ethanol as the solution to our imported oil crisis. However, the increasing use of ethanol is not without its problems: increased demand for corn increases the price of other products that use corn as an input, such as meat. The effect of increased demand for corn may hurt the food budget of the world's poor also.

While I've seen the first effect in action at home (cattle and pork producers are paying higher prices for feed corn), the second may be overblown. Higher input prices could spur greater innovation in agricultural sectors, leading to higher yields for all crops (soybeans included). It could also cause cattle and pork producers to find new ways of feeding cows and pigs. Even better, high corn prices could also cause Washington to open US markets to sugar-based ethanol from Brazil, which is currently the world's most efficient way to produce ethanol.

In energy policy, as in all things, discretion is the best course of action.

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