In the last three days, I have heard three different agricultural ethanol sources lauded as “the next corn.” Poplar, sugar, and switchgrass. I don’t think Congress is subsidizing turning any of these products into ethanol yet, but the sugar lobby, at least, is pushing for sugar-ethanol subsidies (never mind that there is a $.50/gal tariff on Brazilian ethanol, which is made from sugar).
Micromanaging technology subsidies and mandates is not a good way to combat CO2 emissions or the national security problems with heavy reliance on imported oil for energy. The clearest reason is that the federal government (or state governments for that matter) is not in a good position to figure out what technologies are going to lead to the most cost effective reductions in CO2 emissions or petrol imports; no one organization is. The information about what energy use reductions or fuel source changes might be cost effective is totally decentralized. Every industry has its own unique places where cost effective energy savings and emissions reductions are possible; factories can use more efficient machinery and reuse waste heat; offices know how they can save energy by using more efficient appliances and doing business by phone and video instead of by plane. Everyone has information about their own little world, and no single person or organization has even close to all that information. No centralized government program will ever be able to aggregate that information effectively.
And as we can see in the case of ethanol, attempts to micromanage these sorts of technologies are really prone to rent-seeking; various farm lobbies try to get their specific crop added to the subsidy list; factories try to get exempted from specific mandates or to get subsidized themselves. Congress is only too willing to listen to rent seekers.
Luckly there is a simple and effective solution to the problems of CO2 emissions and foreign oil dependence: climate pricing. Let’s ditch the ethanol subsidies.