The development of grain-based biofuels has provided us with some great illustrations of the Law of Unintended Consequences. The shift to corn-based ethanol to wean us away from our dependence on oil certainly seems like a good idea - after all, what could go wrong? Ethanol is easy on the environment and will allow us to wean ourselves away from our dependence on petroleum and Middle Eastern sources of supply.
Well, it's not that simple. Ethanol and other bio-fuels are made from grain. The increased demand for these commodities drives up their price which is good for farmers, but bad for consumers, and absolutely disastrous for the third world poor who rely on grains like corn for food.
Here's an example I came across recently which shows how tinkering with one part of the economic web produces consequences completely unanticipated and unwanted elsewhere in the system: The increase in corn price due to demand for biofuels recently caused a large poultry operation to lay off hundreds of workers because they could no longer afford to buy feed for their chickens. Evidently chicken food is no longer chicken feed.
Paul Krugman lays out the problem in a bit more detail and spares us the bad puns in the New York Times:
Where the effects of bad policy are clearest, however, is in the rise of demon ethanol and other biofuels. The subsidized conversion of crops into fuel was supposed to promote energy independence and help limit global warming. But this promise was, as Time magazine bluntly put it, a "scam."
This is especially true of corn ethanol: even on optimistic estimates, producing a gallon of ethanol from corn uses most of the energy the gallon contains. But it turns out that even seemingly "good" biofuel policies, like Brazil's use of ethanol from sugar cane, accelerate the pace of climate change by promoting deforestation.
And meanwhile, land used to grow biofuel feedstock is land not available to grow food, so subsidies to biofuels are a major factor in the food crisis. You might put it this way: people are starving in Africa so that American politicians can court votes in farm states.
Oh, and in case you're wondering: all the remaining presidential contenders are terrible on this issue.
There's a lot of other interesting stuff in Krugman's piece. For example, did you know that we are in a world food shortage partly because the Chinese, having moved toward a market economy, are becoming more affluent? This means they're eating more meat which increases the demand for feed grain on the world market which means the price goes up, and poor people in the third world have to go with even less food for themselves and their families than the meager portions they were previously able to scrabble together.
What's the lesson? Exploit the oil reserves we have off-shore and in Alaska that Democrats in Congress have placed off-limits. Increasing the supply of oil would drive down its price which would lower agricultural and transportation costs associated with grain and provide a boon to the poor both at home and abroad. Indeed, reducing their cost of living may be the best way to bring relief to people who exist on the edge of starvation.
So why are Democrats, the self-proclaimed party of compassion, opposed to drilling?
Check out Krugman's column at the link.RLC