Subsidizing Big Oil to Get Ethanol?

Former Senate Minority Leader Tom Daschle and three ethanol boosters made a convincing case this morning at the Center for American Progress. In the words of David Morris, vice president of the Institute for Local Self-Reliance, "ethanol is the perfect Trifecta." It cuts our reliance on unstable Middle Eastern oil, it reduces carbon emissions, and it provides the Democrats (I'd say any politician but we can't expect much for our oilman president) with a wedge issue in farmbelt red states.

I was especially pleased to hear Morris knock down the $4 gasoline tax proposal, whose chief proponent (at least in the media) is Tom Friedman of the New York Times. "I'm all in favor of it in theory and opposed in practice," he said. Why? First, it's a political loser that mobilizes the right-wing anti-tax crowd. Second, it's unfair because people who have to drive will just pay the tax and not reduce their driving. That's what happened in Europe (although it also made them opt for smaller cars). Finally, most of the money in the U.S. would just go to build more roads, which is mandated in many state constitutions and the federal gas tax formula.

Of course, it is possible to realign the formulas, but how likely is that in an environment where the proponents have already stirred up a hornet's nest of opposition to the imposition of the tax?

I was a little disappointed in the small bore proposals for reform from the group. Instead of mandatory fuel mileage standards (I proposed a 60 miles per gallon standard within six years in my article in The American Prospect), Morris proposed a carbon cap-and-trade system. Could work. But it would undoubtedly open up loopholes for big polluters to buy their way out of trouble.

As for ethanol, Rep. Stephanie Herseth (D-SD) pushed for higher renewable fuel mandates (where big refiners have to buy a set number of gallons of ethanol to mix into their blends) and shifting the producer tax credits so they benefit smaller, local ethanol refiners set up by farm co-ops instead of the huge ethanol refineries being set up by agri-giants like Archer Daniels Midland. Morris asked for Congress to mandate that automakers install flex-fuel gizmos in all vehicles rolling off assembly lines, which adds a mere $100 to $150 to the price of a new vehicle.

This is Clintonism at its worst. We need a major national commitment to wean the country from oil, which on the domestic front will be the number one national priority of the next administration. We must do it for national security reasons and we must do it for environmental reasons and, for both those reasons, we must do it fast.

Do we create "incentives" for Homeland Security? No. It's mandates and government contracts all the way. So why the double standard? Weaning ourselves from oil is an issue of national and global security. There is simply no way that business can be incentivized to achieve this goal through market mechanisms. Business will respond to mandates, and they will make a lot of money in the process, too. But they're going to have to be dragged kicking and screaming into the future.