I‘ve been writing about the folly of ethanol subsidies for a while — my 2006 book, The Big Ripoff, dedicated an entire chapter to ethanol (“Corporate Moonshiners on the Dole” was the chapter title).
On cellulosic ethanol, in particular (that is, ethanol made from woodier material or grass, as opposed to corn or cane sugar), I’ve written about plants getting boatloads in taxpayer subsidies, benefitting from being mandatory, and then failing to ever produce ethanol before going under.
But cellulosic ethanol policy is even worse than I knew. A great Wall Street Journal editorial today shoots daggers at the mandates and subsidies forcing us all to pay for this flop of a fuel. Here’s the most infuriating part of the op-ed:
In 2009 a jury in a civil fraud case ruled that Cello had lied about how much cellulosic fuel it could produce. Some of the fuel that Cello showed to investors was derived from petroleum, not plants. The firm produced little biofuel and in October 2010 it declared bankruptcy.
It gets worse. Because there was no cellulosic fuel available, oil companies have had to purchase “waiver credits”—for failing to comply with a mandate to buy a product that doesn’t exist. In 2010 and this year, the EPA has forced oil companies to pay about $10 million for these credits. Since these costs are eventually passed on to consumers, the biofuels mandate is an invisible tax paid at the gas pump.
As you read this, recall that Tim Geithner’s chief of staff at Treasury, Mark Patterson, was a lobbyist for Goldman Sachs where his job included lobbying for federal subsidies for cellulosic ethanol in which Goldman was investing.
You pay more, Goldman and Geithner’s buddies get paid. Nobody gets any fuel.
