Monday, July 24, 2006

If You Thought That

Businessmen were Capitalists, you’d be mistaken. Submitted for your approval: one Vinod Khosla. Mr. Khosla’s scheme is to replace corn based ethanol with ethanol produced from a more efficient plant. So far, so good.

However, you don’t particularly have to read the article very closely to realize that he’s just scheming to get into the taxpayer’s wallet. Not much mention is made of a pilot project, test farm, etc.

There is plenty of mention, however, of getting Uncle Sam to: expand controls over automobile design; force gas stations to distribute Mr. Khosla’s product; and continue to pay heavy subsidies to ethanol producers. I’m sure that there are other items on his shopping list.

Nor is there much mention of reducing barriers to importation of cheaper ethanol from other countries.

Perhaps more troubling (after all, businessmen conspiring to get into the taxpayer’s wallet to subsidize their projects isn’t exactly a new phenomena) is Mr. Mallaby’s assumption that conversion of a big chunk of the economy to ethanol is almost free. For instance, forcing “big” oil distributors to install 20,000 ethanol pumps is claimed to cost around $1 billion. Mr. Mallaby notes that this represents a “flyspeck on a $12 trillion economy”. Sort of true, in a misleading way. $1 billion isn’t a flyspeck if it is coming out of your pocket.

Given the intensely politicized nature of the global warming debate, I’m not sure that one should sign off on the ‘almost free’ type of studies ginned up by the Energy Information Administration or the Intergovernmental Panel on Climate Change. Always beware of government agencies claiming that a major, mandatory, top-down re-write of society will be nearly costless.

Also – and this may purely be due to my ignorance – but the drive for ethanol always seemed to be about “energy independence”, or reducing the costs of foreign purchased fuel, etc. Ethanol may well burn cleaner than petrol, but I’m assuming that the output of combustion will still be some greenhouse gas. And ethanol production is not likely to be environmentally costless.