Corn ethanol: setting straight a misguided attempt to free the United States from foreign oil.

 
  I. INTRODUCTION TO AMERICA'S OBSESSION WITH CORN 
 
 II. THE SCIENCE OF ETHANOL 
 
III. HISTORY AND OVERVIEW OF ETHANOL PROGRAMS IN 
     THE UNITED STATES AND BRAZIL 
     A. U.S. Ethanol Program 
     B. Brazilian Ethanol Program 
        1. History 
        2. Lessons Learned from the Brazilian Experience. 
 IV. UNDERSTANDING THE FEDERAL SUBSIDIES IN THEIR 
     VARIOUS FORMS--THE KEY TO MEANINGFUL REFORM 
     A. Federal Support--No Subsidy Left Behind 
        1. Price Support By Way of the VEETC 
        2. Feedstock Subsidies--Corn Growers and the 
           Right to Farm 
        3.Tariffs--The Indirect Subsidy 
     B. The Unintended Consequences of Ethanol 
        1. Not as "Green" As It Looks: The Environmental 
           Effects of Ethanol 
        2. Increases in Food Prices: Tolerable in the 
           United States but Potentially Catastrophic for 
           Poor Nations 
 
  V. ECONOMIC QUAGMIRE: A WAY OUT 
 
   If they saw dry grains of maize scattered on the ground, 
   they quickly gathered them up, saying "Our Sustenance 
   suffereth, it lieth weeping. If we should not gather it up, 
   it would accuse us before our Lord. It would say, 'O, Our 
   Lord, this vassal picked me up not when I lay scattered 
   upon the ground. Punish him!' Or perhaps we should 
   starve." (1) 

I. INTRODUCTION TO AMERICA'S OBSESSION WITH CORN

The sixteenth century Aztecs worshipped corn as a source of life. (2) Similarly, America's reverence for corn in the twenty-first century has reached idolatrous levels. In various forms, corn finds its way into nearly everything Americans eat. (3) Moreover, corn, in the form of ethanol, is filling the tanks of more and more American vehicles due to burgeoning American policy regarding the production of renewable fuels aimed at reducing American dependence on foreign oil, thereby increasing energy security. (4)

While the full-blown ethanol program is in its fledgling stages, ethanol is hardly new--it has been used as a gasoline additive since the 1970s. (5) Furthermore, the United States is not the first to implement such a program. Brazil has been producing ethanol since the 1970s, driven by a national program known as "Proalcool." (6) Today, Brazil is the leading producer and consumer of ethanol made from sugarcane. (7) It is nearly self-sufficient with regard to energy because of its oil and gas reserves, nuclear energy program, and alternative energy program. (8)

While there is much to be learned from the Brazilian example, what works in Brazil is not necessarily what will work in America. (9) U.S. policymakers must provide clear guidance on an integrated program. First, policymakers must reexamine the articulated goals of the ethanol program. Second, policymakers must seriously consider whether the current scheme of subsidies that includes direct income tax credits to farmers and ethanol producers and production mandates is the most efficient way to achieve those goals. Policymakers must also consider the substantial negative effects that massive federal spending has had on the federal treasury, the environment, and the world economy to determine whether the purported benefits outweigh the costs of proceeding on course. Substantial subsidy reform is necessary to curb wasteful spending and achieve the purported goals of the ethanol program, namely, energy independence and reduced carbon emissions.

This Comment will explore the U.S. ethanol program in detail. First, it will explore the science of ethanol. Understanding how ethanol is produced (albeit on an elementary level) is necessary to comprehending how the government funds the program. After introducing the process of ethanol distillation, Part III of the Comment will address the history of the ethanol program both in the United States and in Brazil, including a synopsis of the current ethanol legislation in the United States. Part III will also examine whether the success of the Brazilian ethanol program could be translated to the United States. Part IV of the Comment will address the problems riddling the ethanol program in some detail regarding the current system of subsidies in their various forms. These subsidies cost the public billions of dollars every year and are set to increase dramatically in the coming years. (10) It is not unreasonable to ask if there might be a more cost-efficient method of achieving the goals articulated by Congress in recent legislation. Part IV of the paper will also explore the unintended consequences of federal funding of the ethanol program, both in the United States and abroad. The ethanol program is purportedly committed to liberating the United States from foreign oil, stimulating the agricultural market, and improving the environment. (11) Appropriate guidance is crucial to developing successful alternative sources of fuel. The U.S. government should set appropriate goals such as diversifying the energy supply and establishing a level playing field on which players can compete for the best alternative fuel sources by removing market distortions.

II. THE SCIENCE OF ETHANOL