Agriculture is drunk on corn-based ethanol

Thomas Dobbs is Professor Emeritus of Economics at South Dakota State University, and a W.K. Kellogg Foundation Food & Society Policy Fellow.

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American agriculture is becoming addicted to corn-based ethanol, and the economic and environmental effects of this addiction call for some intervention!

The explosive growth in U.S. ethanol production from corn is having worldwide ramifications. December 6 articles in The Economist ("Cheap no more" and "The end of cheap food") trace the impacts of ethanol production on prices of other crops and on food. Rising crop prices can benefit farmers not only in the U.S., but also farmers who have marketable surpluses in other countries.

Many consumers, however, are hurt by the rising food prices. This is especially true of urban and landless rural poor in developing countries. According to The Economist's food-price index, food prices have risen in real (inflation-adjusted) terms by 75 percent since 2005. International Food Policy Research Institute data cited by The Economist indicates "the expansion of ethanol and other biofuels could reduce caloric intake by another 4-8 percent in Africa and 2-5 percent in Asia by 2020."

The growth in ethanol production is hardly a market phenomenon. According to The Economist, Federal subsidies for ethanol production already come to over $7 billion a year. Moreover, many previous years of cheap corn that resulted from Federal farm program subsidies helped lay the economic foundation for ethanol plants already built or under construction.

Implications for energy and farm policies?

What are the policy implications of this "food versus fuel" conflict that past and present energy and farm policies have created? As far as the ethanol industry is concerned, its interests trump all other interests, including those of taxpayers and the poor who can least afford higher food prices.

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Politicians and the art of deception

Compare this video (posted by David) of Hillary squirming while she tells a whopper with the video below of McCain being brutally honest (via a comment by greyflcn in same post). Refreshing. We human beings are masters of deception, and of detection of said deception -- the result of an evolutionary arms race:

Update: I didn't realize that this is old footage before his flip flop.

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A second opportunity to make climate pricing fair

Climate policy offers an enormous opportunity not only to undo our fossil-fuel addiction and build a stable energy future, but also to reverse the natural unfairness of climate change itself.

I've said it before: energy prices are going up no matter what, with or without climate policy. But smart policy can turn rising costs into broadly shared benefits. It can shield working families, fund a shift to a clean future of new technologies, compact communities, and a trained, green-collar workforce.

Building economic fairness into climate policy is a no-brainer: there are several viable ways to make it happen. In my last post, I described a means to it called "Cap-and-Dividend," in which most public proceeds from auctioning carbon emissions permits finance a program of payments to each citizen. Another approach that shields working families from high energy prices (PDF) comes from Robert Greenstein, founder and chief of the Center on Budget and Policy Priorities. CBPP is the Washington, DC-based think tank that bird-dogs the federal budget on behalf of poor families. Greenstein wrote the plan with colleagues Sharon Parrott and Arloc Sherman.

In short, in this plan climate dividends go only to families with very low incomes, to buffer them from cost increases. It's Cap and Dividend, but only families who need it most get a dividend. Call it "Cap and Buffer." Greenstein suggests compensating the poorest fifth of families for energy price increases and also providing some assistance to those in the second fifth of the income ladder. These families, according to Greenstein, stand to pay between $750 and $950 extra each year for fuel and other goods, once climate policy boosts energy prices enough to reduce emissions by an initial 15 percent. (Without climate policy in place, the only dividends from rising prices are going to energy companies.)

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Bali conference could end deforestation overnight

This post was co-written with Dorjee Sun, the head of Carbon Conservation, a company that works to protect forests in Indonesia from destruction.

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Bali, Indonesia, is the perfect backdrop for this week's climate summit. No country better embodies the immense peril of inaction -- and the immense opportunity this meeting has to make massive and immediate progress in stemming the climate crisis.

Indonesia is the world's third largest global warming polluter, behind the United States and China, and just ahead of Brazil. But in Indonesia, like Brazil and the rest of the tropical world, pollution isn't coming from factories, power plants, or cars like it is in the industrialized world. Instead, almost all of it is coming from the rapid burning of the world's vast tropical forests to make room for timber, agriculture, and especially palm oil plantations. (Despite its green reputation, palm oil is anything but: a recent study in Science found that palm oil, like other biofuels, produces two to nine times more greenhouse gases than regular old crude oil because of the forests and grasslands destroyed for its production.)

Companies like Starbucks, Procter & Gamble, Cargill and Seattle's Imperium Renewables are paying top dollar to turn palm oil into food, cosmetics and biodiesel. That global demand has driven the value of a hectare of palms above $1000 (PDF) in some cases -- providing a powerful financial incentive to corporations, investors, and farmers to raze the forests, regardless of the consequences to the climate or to the endangered orangutans, tigers, and rhinoceroses - and indigenous people -- who need them to survive.

The Bali conference could immediately eliminate that perverse accounting by making sure forests and other wild lands around the world are financially valued for the carbon they store, and not just their potential as timber or agricultural land. The way to do that is to allow polluters to get credit for protecting forests that they can apply against their pollution reduction obligations, an idea called carbon ranching or avoided deforestation.

Polluters would jump at this opportunity. Protecting forests from destruction can cost as little as 75 cents per ton of carbon dioxide - even at higher costs, it's a fraction of the price (PDF) of cleaning up most industrial pollution. In the past, some environmentalists criticized carbon ranching for this very reason: they were concerned that if polluters focused their greenhouse gas reduction efforts on forest conservation, that would divert money from necessary clean-ups in industrial pollution. That's the wrong way to look at it. Because locking up carbon dioxide by protecting forests is so cheap, it means that the world can achieve bigger reductions in global warming pollution faster and for less money. Carbon ranching should be an argument for bigger immediate pollution reductions, from both forests and industry, not a way for polluters to get around their responsibility to clean up their own pollution.