Friday, February 08, 2008

Now do you believe me?

This blog has repeatedly criticized biofuels as a con being pushed by politicians in the guise of “environmental protection”. I have argued that biofuels, for the most part, are a very bad idea. They push up the price of food, increase starvation in poor countries, are more costly than petrol and, to top things off, we argued that they were environmentally worse than petrol. In a nutshell I said that the solution was worse than the problem. In other words it was a typical government program that does more harm than good.

Many friends on the Left, or those who like to think of themselves as environmentally sensitive, have disagreed. Now the New York Times is reporting the same thing. The Times notes that two new studies published in Science “or the first time take a detailed, comprehensive look at the emissions effects of the huge amount of natural land that is being converted to cropland globally to support biofuels development.”

These studies figured out something that most economists would have noticed long ago -- but the Green lobby tends to ignore economics since few of their policies hold up to such scrutiny. In fact, many Greens have poured scorn and contempt on the field of economics itself. What the studies found was elementary economics: the mandating of biofuels pushes up the price of crops. The increased price attracts more growers to the market who then convert land from its current use to farming, in order to reap the profits created by the higher agricultural prices which these regulations created.

What was added to this simple economics lesson was the impact of this land conversion on carbon emissions. One of the two new studies was co-authored by Timothy Searchinger, a researcher in environment and economics at Princeton. He politely described the push for biofuels as an “accounting error” because “land use change has been left out of prior analysis.”

In another paper, Joseph Fargione, a scientist for Nature Conservancy found that “clearance of grassland releases 93 times the amount of greenhouse gas that would be saved by the fuel made annually on that land,” according to the New York Times.

The Times also reports that “a group of 10 of the United States’s most eminent ecologists and environmental biologists today sent a letter to President Bush and the speaker of the House, Nancy Pelosi, urging a reform of biofuels policies.” They wrote that “many anticipated biofuels will actually exacerbate global warming.”

Biofuels are not market-driven. They are the result of government mandates, controls, regulations and subsidies. They are a problem that was wholly created by the political classes. Taxes were taken and used to subsidize wealth energy companies and Big Agro in order to produce a fuel that almost no one wanted. Mandates were put into place to force more and more use of this inefficient, dirty product. And the politicians turned a blind eye to havoc they imposed on world food markets and how that is directly leading to increased starvation in the world.

This is a “political solution” not a real-world solution. It solved problems for politicians. It was a way they could shower on money on the energy sector and the agricultural sector --- both of whom are big donors to political campaigns. Biofuels were also an immediate “solution” that politicians could promote to placate the panic stricken environmentalists. In politics it doesn’t matter if the problem is real or not. Nor does it matter if the solution will work or not. All that matters is that people perceive the politician as being “concerned” and “doing something”.

The unfortunate reality is that politics is a piss-poor method of solving problems. All the incentives in politics are perverse ones leading to bad solutions being heaped on previous bad solutions. The beneficiaries are the political class themselves and the special interest groups that the politicians need to stay in office.

And those wealth welfare-addicts started bleating the moment the reports were released. The biofuels industry has been greedily feeding at the state welfare trough from the very start. They only reason they exist is because they manage to get politicians to pick the pockets of poorer people to subsidize this unwanted industry. They exist through theft by politics. And the thieves at the Renewable Fuels Association immediately came out swinging. They don’t want the gravy train to stop running.

One indication of how lucrative it is to steal money through the political process was reported by the Times: “Syngenta, the Swiss agricultural giant, announced Thursday that its annual profits had risen 75% in the last year, in part because of rising demand for biofuels.” I challenge the idea that there was rising demand. The demand was forced on people by edicts by the governments of the United States, the EU and numerous other political bodies. That is not “rising demand”. Imagine Coca-Cola having politicians put guns to the heads of Pepsi drinkers, in order to force them to drink Coke. Do you think that they would then pretend that the increased Coke sales were the result of “rising demand”?

And while environmentalists are now realizing the errors of biofuels I should note that many of them were cheering along the legislations that created this crisis, when it was introduced. Their disdain for economics has caused them to make numerous such errors in the past and unless they learn from this experience, and start using the tools of economics, they will continue to make deadly mistakes. Second, at some point they will have to learn that politics is filled with perverse incentives that take the most well-intentioned policies and turn them into nightmares.

Politics isn’t the solution. More often than not, it is the problem.

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