Ethanol subsidies by the US Congress shows another devastating side-effect: unintended consequences as reported in the Wall Street Journal (sub. required) this morning.
The 2005 highway bill allows companies to power their fleets with alternative fuels such as ethanol. Businesses could receive a 50-cent/gallon tax credit for every gallon of gas if they use a blend of ethanol and petroleum. The paper industry latches onto the idea to mix ethanol with ‘black liquor’ a carbon-rich substance that the industry has been burning to power their giant paper mills and, according to the article – “VOILA” – billions of dollars of federal aid
Now, Canadian paper producers used this argument to get the Canadian government to match the subsidy.
What should Congress do?
1. Stop the nonsense. When you are driving along a road and then suddenly you notice the road has disappeared into a forest – stop.
2. Tell the corn-producing states that the days of subsidy are over. Ethanol must make its way on its own. This will reduce the prices of corn, but then will reduce the price of beef too.
