WSJ on Ethanol

[jensend]

hey you forgot a question mark.

[Fransisco]

A liberitarian who wants people to be free to be the best they can be. Not the worst.

There is a difference.

[Fransisco]

This is probably a first on this forum. Someone getting heck for actually trying to raise the level of debate.

[Fransisco]

I find it interesting that I pointed out two things that bother me about Jen; the inability to <b>differentiate between 'slavery' and 'voluntary' employment</b> and the obvious laziness in the grammar department.

Both of which are true. The first one <b>offensively so</b>, the second one is more annoying than anything.

Yet pointing out that someone can't be bothered to pull up their pants seems to bother you more, just_wondering, than someone minimizing the horror of slavery.

Like I said, isn't that interesting.

[cottonpicken]

How about simple democracy then.

Your the only one that is so damn bothered by spelling.Give it up captain annoying.

It's almost as bad as tom's bible thumpin.

[jensend]

i can differentiate between slavery and voluntary employment. i said i didn't think the employers put significantly more value on sweatshop employees in developing countries than slaveowners put on slaves. are you sure not using upper case is a grammatical error? you seem very noble.

[Fransisco]

You kids have the right to be wrong.

But that doesn't mean I don't have the right to point it out.

I'll stop, when you start communicating like adults.

Until then you'll just have to suck it up, crybabies.

[just_wondering]

Fransisco

re: Yet pointing out that someone can't be bothered to pull up their pants seems to bother you more, just_wondering, than someone minimizing the horror of slavery


Your mixing up your posts.
I stayed out of the slavery thread because I know what I don't know.
Biofuels happens to be a interest of mine (I'll admit I have some dollars invested)
So I am working to keep the dollars invested in Canada
Brazilian Sugar might be more efficient but how does that keep jobs in rural Canada?
Is it more efficient because environmental laws are less stringent south of the equator?
What is the number that import tariffs should be to keep imports out, what if those imports were subsidized in the first place?

Should there be a sunset clause on plants getting taxpayer dollars, or a revenue cap ala equalization?
Name me an industry in Canada that receives no favorable govt policy I'll show you an industry in decline.
It seems that the US will no longer export corn after 2012. The result will do more to improve prices for the worlds poor than anything done in modern agriculture!

Fransisco you and I agree on so many things, I believe that you are wrong on this (biofuels) issue. Point your guns outside the wagons

[just_wondering]

to everyone
I am waiting for some responses on biofuels and subsidies I have my own ideas, but would like to raise the level of debate and stick with the original thread.
It is a complex issue with complex responses what are some of the issues?

Do I have backyarditis ( not a real word).

[jensend]

just anecdotal information.

we have company here from germany from a farm. they say biofuels are on the wane over there becaue they are more expensive and their benefit is being debated.

[cottonpicken]

Fundamentally and in a perfect world ethanol and bio-diesel from our grains and oilseeds is a poor idea when you apply simple physics and business models.

But its far from a perfect world.

I'm repeating myself when i say oil is "strategic".The number #1 user of oil is........you guessed it,the us military.

Economies are based on it,with out it were dead,the powers that be are going to make sure of our energy security.

I wouldnt want to take a guess on the margins and profits.

The only area i'll be putting my money into is some cutting edge stuff.I'll see if i can find the link.

[cottonpicken]

Found it:

http://www.liveleak.com/view?i=40d_1190936653

I was talking about this before but somebody pissed me off so i didnt post it.Shouldn't be like that so here it is.

I thought this was EXTREMELY interesting.

[Fransisco]

Okay just_wondering, here are my answers to your questions which I have in bold for reference here.

<b>Brazilian Sugar might be more efficient but how does that keep jobs in rural Canada? </b>

It doesn’t. However, Jobs is not and should not be the primary goal of a nation’s economy. Just as is the case for an individual, the primary goal in a countries economy is to get the greatest result with the least amount of effort. Production is the end, and jobs are the means to the end, not the other way around. And one has to remember in all this that we can’t have the fullest production without full employment but that we can very easily have full employment without full production. Just get rid of all the dirt moving equipment in the country and give everyone a shovel.

The question is not how many jobs there will be in say ten years but how much will we produce, and as a result, what will be our standard of living.

<b>Is it more efficient because environmental laws are less stringent south of the equator? </b>

Possibly, but it has more to do with cheap labor and the fact that you can pretty much get twice the ethanol per acre from sugarcane than you can from corn. Compared to sugarcane American corn is a ‘low yielding’ crop. There is also the fact that they use the bio mass from the sugarcane as an energy source while corn based ethanol needs an outside source such as natural gas. There are some Brazilian distillers today that actually sell off excess power from the generators fuelled by the sugarcane bio mass.

By the way wheat is even worse than corn in the efficiency department because of its average yield.

There is also the issue of how much water is needed but I'll leave that one alone for now.

<b>What is the number that import tariffs should be to keep imports out, what if those imports were subsidized in the first place?</b>

I would argue zero, if another country wants to give us a present from their taxpayers I say let them. Remember the ‘get the greatest result with the least amount of effort strategy’ I just talked about.

There are no subsidies on Brazilian ethanol today other than a 20% mandate at the pumps. More about this later.

<b>Should there be a sunset clause on plants getting taxpayer dollars, or a revenue cap ala equalization?</b>

Sure, at some point these things have to stand on their own 2 feet and the sooner the better. The problem is that most industries built on handouts can’t, that’s why they argue for the handout in the first place. And it becomes even harder to cut them off once they are up and running, the argument then changes to ‘if government created this in the first place then they supposedly have the responsibility to keep it going’.

<b>Name me an industry in Canada that receives no favorable gov’t policy I'll show you an industry in decline.</b>

The most fundamental rule in economics is that there is no such thing as a free lunch. At some point somebody has to pay the difference. And for the government to give anyone a dollar always costs way more than a dollar. The only way this works is by taking the money from successful businesses and transferring it to unsuccessful ones, after the bureaucrats take their cut of course. As long as there are enough successful businesses around and they don’t get bled too much, to the point where they are no longer viable or decide enough is enough and leave, an economy can take a certain amount of this. But at the end of the day it’s simple mathematics really, you can’t spend more than you have. And you can’t build a successful economy by constantly bleeding your most productive activities to subsidize the unproductive ones.

[Fransisco]

Now a few words on the “Brazilian” experience.

<blockquote>
Brazilian ethanol from sugarcane is arguably the first renewable fuel to be cost-competitive with petroleum fuel. The productivity and efficiency of Brazilian sugarcane ethanol production are virtually unmatched by any other country. These efficiency gains were achieved over a three-decade learning curve, which combined with factors unique to the country, allow Brazil to sell ethanol close to or below the market price of gasoline.

However, Brazil’s ethanol infrastructure model did not arise from free market competition: It required huge taxpayer subsidies over decades before it could become viable. An official evaluation of the total amount of investments in both the agricultural and industrial sectors for the production of ethanol for automotive use found that during 1975-1989 the government had spent a total of $12.3 billion in the National Alcohol Program. Even today, during a period of high oil prices, volatile ethanol prices have not freed Brazilians from losing money on the E20 blend mandated by their government.</blockquote>

So if the most efficient bio fuel in existence today, which needed massive support to get going in the first place, and still needs support even at record high oil prices what makes you think that the stuff we make here out of wheat will ever have a chance at being economically viable?

Now remember my concern about what happens when a government created demand suddenly goes away and how you can’t spend more than you earn? Well both of those problems hit Brazil…

<blockquote>During the second half of the 1980s, Brazil’s ethanol program began to experience problems. Huge fiscal deficits and high inflation led Brazil to start economic reforms that included a cutback on ethanol production subsidies. At the same time, world oil prices dropped sharply during 1985-1986, obviating the consumer benefit of replacing oil with ethanol.

The economics became even more unfavorable in 1988 when the world sugar price rose considerably, and, at the same time, the government liberalized the sugar export market. The economics got so bad that in 1989 Brazil had to import ethanol. Drivers stopped buying ethanol-fueled cars, and car manufacturers stopped producing them. By the mid-1990s, only taxis and rental cars were being produced to run on ethanol.

During the late 1990s, the Brazilian economy experienced profound transformation. Economic policy emphasized stabilization, privatization, and liberalization. There was little political support for continued taxpayer-funded subsidies for sugar growers or distillers. The government gradually rescinded incentives and subsidies and freed alcohol prices to fluctuate with the market.

The dramatic increase in the availability of flex-fuel vehicles since then has helped fuel the Brazilian sugarcane industry’s recent expansion.</blockquote>


I think that in the long run we all save ourselves a whole lot of time, grief, and money by just letting the marketplace take care of these things instead of begging the government “central planners” to call the shots. Because the marketplace will actually work towards getting the greatest result with the least amount of effort, with government it’s always the opposite.

[Fransisco]

Then there is this that I just read today.

<blockquote>The biodiesel industry in Germany is near collapse because of the elimination of tax benefits. Production is currently estimated at about 20% of capacity, and another tax takes effect Jan. 1. Tax concessions on biofuels were removed a year ago because of the revenue loss. Biodiesel production had expanded rapidly after 2002 to over 1.4 billion gallons annually. Now some plants are being dismantled for export to other countries. Winter ****seed area in Germany for 2008 harvest is down 8.5%. </blockquote>