Politics Gives Me Gas

by Don Boudreaux on November 24, 2006

in Energy, Politics, Trade

In the hot-off-the-press New Yorker (Nov. 27th issue), James Surowiecki nicely explains how politics prevents the use of economically and environmentally sound approaches to supplying fuel for Americans’ automobiles.  Here’s a free link.

To make a long story short, the political power of U.S. sugar farmers — power that greedily burdens American consumers with policies that restrict the importation of sugar — keeps the price of sugar in the U.S. so high that making ethanol from sugar is prohibitively expensive.  And this result, according to Surowiecki, is unfortunate: "ethanol distilled from sugarcane is much cheaper to produce and
generates far more energy per unit of input—eight times more, by most
estimates—than corn does."  But Uncle Sam’s protection of sugar growers from foreign competition (along with some nefarious doings of the corn-growers’ lobby) artificially makes producing ethanol from corn more attractive than producing ethanol from sugar cane.

Here’s Surowiecki:

The favors granted to the sugar industry keep the price of domestic
sugar so high that it’s not cost-effective to use it for ethanol. And
the tariffs and quotas for imported sugar mean that no one can afford
to import foreign sugar and turn it into ethanol, the way that oil
refiners import crude from the Middle East to make gasoline. Americans
now import eighty per cent less sugar than they did thirty years ago.
So the prospects for a domestic-sugar ethanol industry are dim at best.

could, of course, simply import sugar ethanol. But here, too, politics
has intervened: Congress has imposed a tariff of fifty-four cents per
gallon on sugar-based ethanol in order to protect corn producers from
competition. A recent study by Amani Elobeid and Simla Tokgoz,
scientists at Iowa State University, projected that if the tariffs were
removed prices would fall by fourteen per cent and Americans would use
almost three hundred million gallons more of ethanol.

that isn’t likely to happen anytime soon: the Bush Administration
proposed eliminating the ethanol tariff this past spring, but Congress
quickly quashed the idea—Barack Obama was among several Midwestern
senators who campaigned in support of the tariff—and the sugar quotas
appear to be as sacrosanct as ever. Tariffs and quotas are extremely
hard to get rid of, once established, because they create a vicious
circle of back-scratching—government largesse means that sugar
producers get wealthy, giving them lots of cash to toss at members of
Congress, who then have an incentive to insure that the largesse
continues to flow. More important, protectionist rules flourish because
the benefits are concentrated among a small number of easy-to-identify
winners, while the costs are spread out across the entire population.
It may be annoying to pay a few more cents for sugar or ethanol, but
most of us are unlikely to lobby Congress about it.

Note that the newly sainted Barack Obama is no less a scoundrelly politician than is anyone else who succeeds in that profession of predators.


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