Stimulus spending on environmentalist policy is a green albatross around the neck of President Barack Obama. Inspectors General are having a field day auditing stimulus-funded programs for so-called “green jobs,” and the media LOVES stories about wasted taxpayer money. What started as a sop to his environmentalist base, now threatens to become a slow-drip nightmare of negative press. The timing couldn’t be worse for the President. It takes time to disburse scores of billions of dollars, so we are only now starting to scrutinize stimulus spending. By November 2012, we’ll be able to account for most of the money, and unless the current trend changes radically, the Executive in Chief is going to look conspicuously incompetent.

Here’s the back-story: In early 2009, the Executive and Legislative branches of government had a popular mandate to defibrillate America’s moribund economy with a huge injection of taxpayer dollars. Instead of limiting this “stimulus” to state bailouts and infrastructure spending, the Obama administration (led by climate “czar” and former EPA administrator Carol Browner) and the Congressional majority (led by House Energy and Commerce Chair Henry Waxman (D-Beverly Hills)) also sought to advance environmentalist policy.  As a result, the American Recovery and Reinvestment Act, a.k.a. the stimulus, included almost $70 billion in spending for green jobs and renewable energy infrastructure.

Every single link along the green energy supply chain was showered with subsidies. There was funding for green jobs training, funding for factories to make green products, and funding to incentivize demand for green goods and services. It was as like a green Gosplan!

Most of the money went to the Energy and Labor Departments. Budgets ballooned. To cite a typical example, in 2008, the Department of Energy’s weatherization program budget went from $450 million to $5 billion. Making matters worse, federal bureaucrats were told to spend the stimulus as fast as possible, in order to jumpstart job-creation. Exploding budgets and a mandate to rush money out the door—that’s a recipe for poor stewardship of taxpayer dollars. This is borne out by an increasing number of watchdog reports concluding that stimulus spending for green goals was wasteful. Here’s a laundry list of what they’ve found so far:

• On November 2, Eliot P. Lewis, the Department of Labor’s IG, testified before the House Oversight and Government Reform Committee that the Labor Department received $435 million to train 96,000 people in the renewable energy trade. The goal was to create 80,000 green jobs. Through June 30, according to Mr. Lewis’s testimony, the Labor Department had spent $130 million, which is 30% of the program budget, and created a scant 1,336 jobs, which is 2% of the program target.

• During the same Congressional hearing, the Department of Energy IG Gregory Friedman said that he had launched more than 100 criminal investigations into green energy spending. Each one is a potential scandal.

• GreenWire’s (subscription required) Annie Snider has reported on a series of IG investigations by the Department of Defense faulting the military for wasteful stimulus spending on green energy projects. The report titles say it all: “American Revoery and Reinvestment Act Wind Turbine Projects at Long-Range Radar Site in Alaska Were Not Adequately Planned”; “The Departmnet of the Navy Spent Recovery Act Funds on Photovoltaic Projects That Were Not Cost-Effective”; “U.S. Air Force Academy Could Have Significantly Improved Planning Funding, and Initial Execution of the American Recovery and Reinvestment Act Solar Array Project”; and “Geothermal Energy Development Project at Naval Air Force Station Fallon, Nevada, Did Not Meet Recovery Act Requirements.”

• On November 7, the Department of Energy Office of the Inspector General issued a “management alert” regarding the Western Area Power Administration’s $3 billion, stimulus-created loan program to facilitate the transmission of electricity from renewable energy projects in the west. According to the IG alert, “Western had not implemented the necessary safeguards to ensure its commitment of funding was optimally protected.”

• In October, Resources for the Future released a report suggesting that the $3 billion, stimulus funded “cash for clunkers” program, whereby the government subsidized the purchase of fuel efficient cars for consumers that agreed to junk their less fuel efficient cars, was an economic and environmental failure.

• Since February, the Energy and Commerce Committee has been investigating Solyndra, the California solar panel manufacturer that declared bankruptcy in September, leaving the taxpayer on the hook for a $535 million stimulus-funded loan guarantee from the Department of Energy.

Why is the green stimulus failing? As I note above, ballooning budgets and a mandate to spend fast are conducive to waste.

More fundamentally, central planning of the economy is a loser. Invariably, politics corrupts the process. Members of Congress are less concerned about the economic viability of the industries into which they invest taxpayer money, and much more concerned with getting pork to their districts. Civil servants, no matter how disinterested, know that their political overlords are watching their decisions carefully, so as to ensure that taxpayers give-aways reach their constituents. (For an archetypical example of a Member of Congress browbeating a civil servant, see this post about Sen. Al Franken shaking down Energy Secretary Steven Chu).

When parochial politics isn’t interfering, crony capitalism is. According to “Throw Them All Out,” a new book by Peter Shweizer, $16.4 billion of the $20.5 billion in loans granted by the stimulus-created loan guarantee program (whence the Solyndra debacle) “went to companies either run by or primarily owned by Obama financial backers.” Of course, political payback is a poor substitute for sound financial analysis.

Gross fiscal mismanagement by government attracts media like flies to dung. So far, most coverage is by local papers reporting on local failures. (See “Seattle’s Green Jobs Program a Bust,” by the Seattle Post Intelligencer and “Stimulus Funds Provide Training, But Openings Few in State,” by the Detroit News.) However, even the New York Times, whose editorial board supports green energy subsidies, published a story titled, “Number of Green Jobs Fails to Live up to Promises.” Expect many more of these types of articles as the watchdogs continue to do their work.

As the negative press mounts, the President will become ever-more burdened by his foolish bet on green energy.

The ethanol compromise did not make it into any debt ceiling negotiations and its future is now looking bleaker than ever before. The Congressional ‘super-committee’ established by the debt ceiling negotiations will have to decide by November 23rd some manner to reduce the deficit by $1.5 trillion or face potentially unpopular automatic spending cuts to defense and discretionary spending (though USA Today writes that these “threats” have failed in the past). None of the rumored super-committee members seem to be from regions that would require their support of the ethanol industry

The ‘ethanol compromise’ had legs because it funneled money into the domestic ethanol industry while still maintaining a facade of deficit reduction. It would have collected $2 billion in revenue from the ending of the domestic tax credit as of July 21 and used a small amount less than that to spend on items near and dear to the ethanol industry (mainly ongoing support for cellulosic ethanol and money for the installation of blender pumps at fueling stations), hence their support.

The deficit reduction from the ethanol tax credit is no longer possible because the ethanol tax credit is again set to expire at the end of the year (as it was extended for one year at the end of 2010). This means that any potential deficit reduction is slowly being eroded as the tax credit continues on towards the end of the year, and renewal of support for the industry will add to the deficit rather than reduce it, making it much more difficult for conservative politicians to support it (though, obviously, they have been willing to forget their supposed free-market ideology when it suits them).

So it seems likely that the tax credit and tariff will expire at the end of 2011. It is possible (though it is harder to get subsidies back once they’ve been gone) that future support for the industry will get stuck into a larger energy bill, especially support for ‘next generation’ biofuels which remains popular among those who have given up on corn based ethanol. The Renewable Fuels Association has high hopes:

Bob Dinneen, president and CEO of the Renewable Fuels Association said that because the debt deal includes a call for a future budget framework, the opportunity to discuss comprehensive energy tax policy still exists. This could include infrastructure support, tax incentives for second-generation ethanol technologies and feedstocks and the repeal of petroleum subsidies. “With the debt ceiling crisis looking as though it has been averted for now, we hope Congress and the administration are now prepared to address the nation’s worsening energy crisis, as oil and gasoline prices continue to rise and the nation’s investment in homegrown renewable fuels languishes,” he stated.

The much bigger problem with ethanol is still the renewable fuel standard. This fight will manifest itself in future years as virtually every related industry outside of those who produce ethanol revolt against higher blends of ethanol entering the fuel supply (this assumes that ethanol does not become cost competitive with petroleum, if it does, the government would do best to get out of the way).

As was widely reported, the Senate voted last week on a bill that would terminate the ethanol tax credit and corresponding tariff. While many were excited by the prospect of finally moving towards better energy policy, it seems likely that things will still get worse before they get better. The ethanol industry does not seem worried.

Consider the following: John McCain (R-AZ) offered additional legislation, while the Senate was voting down the tax credit, that would have ended federal subsidies for ethanol fuel pumps at gas stations. This was voted down 41-59:

“It lost because of the influence of the ethanol lobby,” McCain said on Fox News Thursday, alleging ethanol “is probably the greatest rip-off that I’ve seen since P.T. Barnum.

“It is one of the most outrageous examples of the influence of special interests,” McCain said.

He said that the rejection of his amendment thwarts the will of voters who handed Republicans major gains in last year’s midterm elections.

McCain said:

“The American people as of last November expected us to act. If we don’t, I think they will try to find somebody else that will. This example, the failure to address ethanol, at last to phase out these incredible subsidies to ethanol is really, I’m sorry to say, a signal to the American people we are not serious. And the special interests still govern here in Washington.”

He is right — though some Democrat’s have turned against ethanol, most haven’t, including the Obama Administration. And it seems, as some predicted all along, that though the tax credit might sunset, it will be replaced by some form of corporate welfare. The ethanol industry has suggested a number of different types:

• Require that all automobiles sold in the U.S. be flex-fuel vehicles — as many as 120 million — at no additional cost to the taxpayer.
• Eliminate artificial barriers to the transportation fuel market by building out the distribution infrastructure for ethanol, including 200,000 blender pumps and federal loan guarantees for ethanol pipelines. This infrastructure will provide consumers the access to choose ethanol in an open and free market.

Ignoring their abuse of language (free markets don’t involve federal subsidies and mandates), these subsidies will be much worse than the tax credit, as they will stick around forever and potentially be much more expensive. As more infrastructure and capital is invested into projects that cannot survive without federal support, the more money and fear mongering will be employed by the industry every time their federal support begins to dry up. Perhaps the relatively inexpensive $6 billion per year was a blessing in disguise compared to what they might get stuffed into a larger energy bill.

With gas prices hovering near $4/gallon, Democrats are trotting out fanciful “solutions” to temper the price of oil.

On Saturday, President rolled out a three-part plan to relieve Americans’ pain at the pump. The third part was the elimination of Big Oil “subsidies” (in fact, they are tax breaks, not subsidies). This doesn’t make any sense. The point of the tax breaks to Big Oil is to decrease the cost of production. That is, they make oil cheaper to extract. Removing these “subsidies” will in no way decrease the price of gas.

Meanwhile, Senate Democrats are blaming evil “speculators” for bidding up the price of oil. This is utter malarkey. The price of oil is dictated by a global market.  Ill-defined “speculators” are a straw man.

Removing Big Oil’s “subsidies” and prosecuting “speculators” are empty political gimmicks of the sort that the 2008 version of Obama campaigned against. (So much for “Change,” right?) I suspect that the President and Senate Democrats are relying on these bogus non-solutions because, otherwise, they’d have to acknowledge that the price of oil is a function of supply and demand. And if they concede that the market, and not “subsidies” or “speculators,” is to blame for high oil prices, then they’d also have to acknowledge that increasing supply would decrease the price. That is, they’d have to admit that “drill, baby, drill” works. Of course, they don’t want to do that, because doing so would upset their environmentalist base.

This is why I’m suspicious of the President’s apparent pro-drilling posture during his Saturday address. In addition to prosecuting “speculators” and removing Big Oil “subsidies,” President Obama promised to expand domestic production. Here’s what he said,

Second, we should increase safe and responsible oil production here at home.  Last year, America’s oil production reached its highest level since 2003*.  But I believe that we should expand oil production in America – even as we increase safety and environmental standards.

To do this, I am directing the Department of Interior to conduct annual lease sales in Alaska’s National Petroleum Reserve, while respecting sensitive areas, and to speed up the evaluation of oil and gas resources in the mid and south Atlantic.  We plan to lease new areas in the Gulf of Mexico as well, and work to create new incentives for industry to develop their unused leases both on and offshore.

*[The President is being disingenuous. Expanded oil production in America has been driven primarily by production from the huge Bakken Formation in North Dakota.  And this was made possible by the fact that the oil is underneath private land. Were the Bakken Formation on federal land, it would have been locked up by the Obama Administration.]

The absence of specifics in the President’s pro-production plan gives me pause. I’m not the only one who harbors this concern. The pro-drilling editorial board at the New Orleans Times Picayune is also waiting to see real action before it believes the President.

Between the time this is written and the time you read it, gas prices will have undoubtedly risen again.  They have been on an upward spiral for months and not likely to drop long term without some bold, decisive action as was taken on July 14, 2008. Instead of encouraging the development of our own natural resources, politicians of both parties  are once again betting that we will not notice if they play the antibusiness card—but 2011 is not a year for politics as usual and the rules have changed. This is no longer a back-room game. It is the poker channel. People are watching.

With their cards close to the vest, Max Baucus (D-Mont.) and Harry Reid (D-Nev.) are bluffing. They want America’s citizens to believe their hand is filled with spending cuts—cut subsidies from big oil companies. Somehow we are supposed to think this will lower gas prices?

Part of their bluff is to use the term “subsidy”—which in the house-of-cards economy/debt crisis they’ve built translates to spending. Concerned Americans do not want more spending, they want cuts. We’ve anted up all we can. Politicians are betting we’ll fall for the deception.

But for those of us who are watching, the tell is there. The so-called “big oil companies” don’t get subsidies. They do get the same type of tax deductions on their expenses and some of their up-front costs that every industry gets. Their dramatic wins are in the headlines now. Loses are huge too—though usually not front page news. Last month, it was announced that Shell Oil had to scrap their Alaska drilling plans (which would have provided more domestic energy) due to an EPA decision to withhold permits. Shell had spent five years and $4 billion on plans to explore. Will the EPA reimburse them for their loss? No. But they will receive some tax benefits, the loss is held against their wins—just like every other business. They know they win some, they lose some. It is all factored into the game plan.

But who is the real loser? The American citizen who wants lower gas prices. If the cost of doing business is lower, and the resource development is encouraged, the savings is passed on at the pump. When costs continue to escalate and business is forced to fold their hand—even when it could be a full house, we lose.

The way the energy game is being played now is that the house always wins—with the house being government, not business. A company can, as Shell did, make big investments based on their hand as they see it (geology and seismic data indicates the gamble is worth it) and then the dealer calls the shots. Sorry.

Because we are playing dealer’s choice, other more expensive, less competent players get the advantage. Renewables do get subsidies—like $6 billion for the corn ethanol industry. Electric cars are subsidized to the tune of $7,500 for each vehicle sold—and this is just on the retail end. American taxpayers are forced to buy in even though we know we are drawing dead.

Next week, Harry Reid is dealing once again. He is expected to hold a vote on the Baucus plan which they claim will “end billions of dollars in wasteful tax breaks for large, multinational oil and gas companies while investing in cleaner and cheaper domestic energy sources.” The dealers are picking the winners and losers. If the above quote from Baucus’ website was honest, it would say that they are singling out one industry because it is currently making money (who will be next?) and giving money to more expensive energy sources.

If the game was fair, and we eliminated tax deductions and subsidies altogether—great! Then everyone would need to stand on their own merits in every industry. But that is not going to happen with this hand. We’ll need a different dealer.

But we, the American taxpayers, do not have to sit idly by and watch. We can let them know we are watching. We can participate. We can force politicians to play for us. It is our money they are playing with.

Call their bluff. The hand they are holding will increase the cost of doing business for America’s domestic energy providers and that will result in higher gas prices not lower. Who do they think they are fooling?

Politicians, like poker players, are known to have a few cards up their sleeve.

Known as the voice for energy, Marita Noon is the Executive Director at Energy Makes America Great Inc. the advocacy arm of the Citizens’ Alliance for Responsible Energy—working to educate the public and influence policy makers regarding energy, its role in freedom and the American way of life. She is a popular speaker, a frequent guest on television and radio, her commentaries have been published in newspapers, blogs and websites nationwide, and she has just completed her twentieth book: Take Away Energy, Take Away Freedom. Find out more at www.EnergyMakesAmericaGreat.org.

Republicans in the House of Representatives are flocking to support a bill to extend and create a number of taxpayer-funded subsidies for manufacturers and buyers of vehicles powered by natural gas.   Nearly eighty House Republicans (and a hundred Democrats) have signed up as sponsors of H. R. 1380, the New Alternative Transportation to Give Americans Solutions Act (or NAT GAS Act).  Just call it the T. Boone Pickens Earmark Bill.

Many conservative Republicans in the House, particularly a number of new Members with Tea Party connections, have sworn that the fiscal and economic crisis confronting America requires a radical change in federal policies.  Out-of-control spending must be stopped; spending earmarks must be abolished; crony capitalists on the prowl for corporate welfare must be sent packing; subsidies for special interests must be abolished; government must stop interfering in the economy and let free markets work.

That big talk doesn’t seem to apply when the spending is being earmarked for a crony capitalist who is one of the biggest contributors to Republican candidates in history–billionaire T. Boone Pickens.  Apparently, some subsidies are good if they benefit the right special interests.  And government interference in the economy is wonderful if it is done in the name of reducing oil imports.

H. R. 1380 would extend the tax credit of 50 cents per gallon of liquid natural gas (or its equivalent of compressed natural gas) when used for fueling vehicles and provide purchasers of natural gas vehicles with credits ranging from $7,500 to $64,000.  The lower end is for passenger cars and the upper end for big trucks.  There are also credits for natural gas vehicle manufacturers and for installing natural gas fueling stations.

Why are billions of dollars of taxpayer-funded subsidies needed?  According to T. Boone Pickens’s web site, it’s because natural gas vehicles are cheaper to operate than gasoline or diesel vehicles:  “Even with higher initial costs (which will disappear as manufacturing ramps up) the life-cycle costs of NGVs [natural gas vehicles] are significantly lower.  Fuel costs are at least 15 percent less using natural gas rather than gasoline or diesel.”

So people need to be paid in order to make them want to buy vehicles that will save them money.  Yes, that makes sense: I always prefer the more expensive product unless there is a government rebate for the cheaper one.  Call it the Boonedoggle bill.

As for getting us off foreign oil, this claim is trotted out to support every payoff to special interests in the energy sector.  It’s a claim for which little evidence is ever produced.  What will reduce our dependence on foreign oil is producing more of it in this country.  What the bill will do is increase demand for natural gas, which will tend to increase prices for natural gas, which means a big payoff for T. Boone Pickens, who has invested heavily in–you’ll never guess–natural gas.

It’s sad to look at the list of conservatives who claim to be principled who have signed up to support the Boonedoggle.  Here’s the complete list of Republican sponsors as of today.  The chief sponsor is Rep. John Sullivan of Oklahoma.  Most surprising and perhaps most disappointing is Rep. Ron Paul of Texas, who claims that he votes against everything that isn’t in the Constitution.  I seemed to have missed the section of the Constitution that allows taking billions of dollars from taxpayers to give to fatcat billionaires and corporate welfare queens.  Call it the Pickens-Your-Pocket bill.

This stampede by conservatives, including several freshmen who identify with the Tea Party, to support the T. Boone Pickens Earmark Bill makes a mockery of their claims to want to cut federal spending, eliminate subsidies to special interests, and get government out of people’s lives.  We’re very close to returning to business as usual in Washington.

Here is an excellent overview (by Robert Rapier) of taxes and the oil industry. The basic takeaways are that a simpler tax code is much preferable to what we have now, that ending these deductions without reforming the tax code will be damaging, and the oil industry’s profit margins are actually lower than many other industries. The whole thing is worth reading, but below are a few excerpts.

The biggest ‘oil company subsidy’ — amounting to $1.7 billion per year for the oil industry — is a manufacturer’s tax deduction that is explained in Section 199 of the IRS code. This is a tax credit designed to keep manufacturing in the U.S., but it isn’t limited to oil companies. It is a tax credit enjoyed by ethanol companies (have you ever heard anyone call it an ethanol subsidy?), computer companies (we are subsidizing Microsoft and Google!) and foreign companies who operate factories in the U.S.

One never hears of proposals to entirely do away with Section 199. Apparently, since this tax credit was designed as an incentive to keep manufacturing in the U.S., many would feel that eliminating it for all companies would provide less incentive for them to keep their factories in the U.S. Some of the same people apparently don’t believe this reasoning will apply with the oil industry.

…

Another category of subsidies is a percentage depletion allowance. It is worth about $1 billion a year for U.S. oil companies. Again, it isn’t limited to oil companies; other extractive industries are able to take the percentage depletion allowance. It is similar to a depreciation allowance in other businesses.

Another category is the foreign tax credit. Again, you may be surprised to find out that this ‘oil subsidy’ isn’t limited to the oil industry. But it is worth $850 million to the oil industry, and is designed to make sure that profits that have been taxed by foreign countries aren’t taxed again when they are returned to the U.S. Eliminating the foreign tax credit will provide an incentive for oil companies to keep the profits out of the U.S. and reinvest them abroad, helping to accomplish the goal of shrinking the U.S. oil industry.

…

In a nutshell, a large chunk of Big Oil’s ’subsidies’ are the same as those of Big Ethanol (which also has direct per gallon subsidies), Big Computer (Microsoft, Google, etc.), Big Auto, Big Pharmaceutical, and all the other industries large and small. They are not like their subsidies, they are in most cases the exact same tax deductions from the same tax code. The oil industry already pays an estimated $36 billion per year in U.S. taxes, and they have a higher tax rate than that of Microsoft or Google — both companies with higher profit margins than those of the oil industry. But those who argue that we preferentially eliminate, for instance, Section 199 and the foreign tax credit for the oil companies are in effect saying they have no problems subsidizing industries that are more profitable than the oil industry.

From part of the conclusion:

I get that it doesn’t seem fair that ExxonMobil’s record profits are coming out of our pockets. But the current proposals won’t do anything to combat what is coming out of our pockets. It will ensure that more of that profit — and the jobs that those profits support — are shifted to foreign suppliers. As much as people hate ExxonMobil, would they rather those profits were being reaped by Saudi Aramco? That is the alternative.

I understand that some believe that singling out the U.S. oil industry for punishment would help level the playing field for alternative energy companies. I think the dream of many is that if we make U.S. oil companies uncompetitive, the alternative energy sector will flourish and make up for the lost production from the oil industry. The future can be cleaner and greener and the only losers will be the oil industry. This is an incredibly naive view. In fact, look at the situation in Europe. Gasoline costs $8 to $10 a gallon, and cars are still predominantly fueled by petroleum. And it will be the same in the U.S. if gasoline rises to $10 a gallon.

I do think he leaves out the fact that a history of higher gas prices have changed behavior in Europe, as they would in the United States as well. Europeans drive smaller cars, have a higher population density, and are more likely to use alternative means of transportation. However, it takes decades to make large changes like this, and these changes should be driven by consumer preference through the market, rather than those who want to force Americans into adopting their idyllic view of life.

The very simple picture of “oil industry subsidies” crafted by the media isn’t quite accurate. Lower corporate tax rates (or preferably, end the corporate income tax entirely) and simultaneously remove these deductions.

Finally, consider reading an article from CNN on the same topic, and note how differently these subsidies are portrayed.

I’ve written before about Obama’s tortuous logic when it comes to rising gas prices, and, this week, he again laid out “solutions” that don’t make any sense. Consider,

• Yesterday, the President implored Saudi Arabia to produce more oil. That is, he told the Saudis to “drill, baby, drill.” He did the same thing a month ago in Brazil. Meanwhile, U.S. production remains stunted by the Obama administration’s de facto moratorium on new oil and gas leases and permits. Why is “drill, baby, drill” appropriate for Saudi Arabia and Brazil, but not for the U.S.?
• Last Saturday, the President called for an end to tax breaks for the oil industry. He said, “They’re making record profits and you’re paying near record prices at the pump. It has to stop.” So, the President wants to end oil “subsidies” in order to relieve Americans pain at the pump. This doesn’t make any sense, because the effect of oil industry “subsidies” is to lower the price of oil. It’s a market distortion meant to lower the cost of producing oil. By removing these “subsidies,” the price of oil would better reflect the forces of supply and demand, and it would increase.
  [N.B. To an extent, I agree with the President on this one—loopholes in the tax code are a form of corporate welfare that should be stopped. That said, these tax breaks aren’t unique to the oil industry, and singling it out only makes the tax code more complicated. A better way, as articulated by Rep. Paul Ryan, is eliminate ALL corporate welfare.]
• The President wants to take away oil industry “subsidies,” and turn them into green energy giveaways, because, he says, this will “reduce our dependence on foreign oil.” For starters, it’s unclear how investments in unreliable, expensive electricity produced by wind and solar would “reduce our dependence on foreign oil.” Moreover, in the past, Obama’s has dismissed “drill, baby, drill” on the grounds that it would take years to impact the global oil market. The President claims that expanded oil production would take too long to have an effect on the price of gas, but that increased taxpayer handouts to wind and solar would somehow “reduce our dependence on foreign oil” in a more reasonable time frame.  This is nonsensical.

Instead, they blame those darned speculators (are they aware of the important role played by commodity markets?) again. The industry continues to find support in high places:

Speaking to farmers earlier this month, the Obama administration’s agriculture secretary said he found arguments from the like of Nestlé “irritating”. Mr Vilsack said: “The folks advancing this argument either do not understand or do not accept the notion that our farmers are as productive and smart and innovative and creative enough to meet the needs of food and fuel and feed and export.”

Well, the price of corn has almost doubled in the last 6 months. Now, its obviously unfair to blame this entirely on biofuels. Food crops are heavily dependent on a number of other important factors like the price of oil, the weather, crop yields, etc. However, with 35% of U.S. corn being turned into biofuels, it clearly has a major effect on the price, driving it upwards (and driving other commodities higher as well, as farmland becomes more scarce). Globally, U.S. exports provide about 60% of total corn supply.

As noted in the article above, this has consequences:

Peter Brabeck-Letmathe, the chairman of Nestlé, lashed out at the Obama administration for promoting the use of ethanol made from corn, at the expense of hundreds of millions of people struggling to afford everyday basics made from the crop.

Mr Brabeck-Letmathe weighed in to the increasingly acrimonious debate over food price inflation to condemn politicians around the world who seem determined to blame financial speculators instead of tackling underlying imbalances in supply and demand. And he reserved especially pointed remarks for US agriculture secretary Tom Vilsack, who he said was making “absolutely flabbergasting” claims for the country’s ability to cope with rising domestic and global demand for corn.

“Today, 35 per cent of US corn goes into biofuel,” the Nestlé chairman told an audience at the Council on Foreign Relations (CFR) in New York yesterday. “From an environmental point of view this is a nonsense, but more so when we are running out of food in the rest of the world.

“It is absolutely immoral to push hundreds of millions of people into hunger and into extreme poverty because of such a policy, so I think – I insist – no food for fuel.”

Consumers in the United States aren’t being pushed into poverty, because food represents a much smaller portion of the budget. Elsewhere, riots have been started over the price of food.

Absent subsidies, the domestic ethanol industry would be much smaller, and would likely be blended in small amounts with gasoline. Even if you assume energy independence is desirable from a national security perspective, ethanol policy is completely incapable of bringing that to the U.S. The amount of land required and the effects on other commodity prices would be unfathomable.

Tim Searchinger had a nice op-ed in The Washington Post last month covering the hard to define role biofuels play in food prices.

My CEI colleague Chris Horner and I have a piece in today’s Daily Caller, on the Department of Energy’s awful green bank.

This excerpt aptly summarizes out take:

The point of a green investment bank is ostensibly to facilitate the commercialization of new, dormant or otherwise commercially unsuccessful technologies by providing easier financing than is available in the real world, where people scrutinize where they invest their money. It turns bureaucrats into bankers, but with your money, and no real-world incentives to “invest,” as the word connotes and denotes.

Critics argue that these bureaucrats are picking winners and losers. If only. In fact, they just pick from losers.

I especially like that last line, about how the green energy industry is a loser. As Chris and I have explained elsewhere, any industry, like green energy, that owes its creation to government handouts is fundamentally uncompetitive, and, therefore, will always be on the taxpayer dole.

The proof is in the pudding. Solar, wind, and geothermal energy have been heavily subsidized since the Congress passed the Public Utility Regulatory Policy Act in 1978. For more than three decades, they’ve been “the energy of the future.” And despite 30 years of taxpayer supports, they are nowhere near close to being a viable competitor on the energy market. Instead, the wind, solar, and geothermal lobbies warn of catastrophic harm to their industries whenever the Congress reconsiders the generosity of green energy subsidies.