Study: Corn Ethanol Wastes Money, Hurts the Environment

Last Updated Jan 7, 2010 8:46 AM EST

A group of researchers at Rice University has released a two year study, funded by Chevron, finding that the large corn ethanol industry in the United States is more of a dead weight on the economy than a money-saving boon, as it's advertised.

The analysis in this case is rather pointed, in that it not only examines the problems with ethanol, but also criticizes the various government subsidies and encouragements for ethanol, which have thus far kept the industry growing.

Studies of this sort aren't uncommon -- they've variously found that ethanol production is harmful to the food supply, that the fuel isn't effective in terms of cost or energy output, that its production can cause more emissions than it saves, and that it can damage engines and areas where it's spilled.

The various takedowns have had next to no effect on the industry though, thanks to the powerful farm lobby. Still, researchers keep re-examining the issue. Here are some of the Rice scientists' key points:

  • Ethanol spilled into groundwater or the soil can prevent the breakdown of other harmful chemicals
  • Corn ethanol production is causing environmental damage to the Mississippi and Gulf of Mexico, as well as water shortages
  • Ethanol fuel isn't carbon neutral, and it's uncertain whether it's any improvement over gasoline
  • Taxpayers have been paying $82 per barrel of ethanol, a significant premium over oil prices
  • Current technology is unlikely to result in an effective pipeline distribution system for ethanol; distribution bottlenecks will persist
Speaking to the WSJ, the Renewable Fuels Assocation brushed off the Rice study because of its Chevron connection. It may seem a fair accusation on the face; but while Chevron may have hoped for an anti-ethanol report, it's unlikely the company guided the result.

Perhaps a better point is that if ethanol was truly a viable business, the oil majors would invest in it on their own. Better a reliable business at home than relying on the good will of unstable countries abroad -- unless, of course, the business isn't based on sound economics.

For corn ethanol, that seems like a fair description. It may have been an awareness of its own weaknesses that recently led the ethanol industry to suggest that it is necessary as a stepping stone to later-generation biofuels like cellulosic ethanol -- assuming those can ever move out of the laboratory without the same heavy subsidies corn ethanol continues to receive.