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"Shed no tears over demise of US ethanol industry"
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Letter to the editor of the Financial Times, 27 October 2007
From Mr Thomas Andrew O’Keefe.

Sir, As a US taxpayer and someone genuinely interested in reducing global carbon emissions, my response to the woes afflicting the US ethanol industry is: good riddance! (“Investors suffer as US ethanol boom dries up”, October 22.)

US taxpayers will pay an estimated $9.2bn-$11bn in subsidy programmes in 2008 to support the domestic production of ethanol from corn. Ironically, the corn ethanol industry produces almost as much harmful carbon emissions as its inclusion as an additive to fuel was intended to reduce. It has contributed to a jump in global food prices and led to riots in Haiti and Mexico. It has also crowded out soybean production in the US and pushed more of it to Brazil. This has led to more grazing land in Brazil being given over to soybean production, pushing cattle ranchers deeper into the Brazilian Amazon and resulting in further deforestation and a depletion of natural means to take carbon out of the atmosphere.

Whoever becomes president of the US next week should push for a western hemisphere free trade area in both conventional and alternative energy resources. Eliminating the current mix of subsidies, a 2.5 per cent ad valorem duty plus a surcharge of 14.7 cents per litre, as well as restrictive volume caps which currently protect the inefficient US corn-based ethanol industry, will give US consumers access to less costly and more efficiently produced sugar-based ethanol from Brazil. A litre of Brazilian ethanol made from sugar cane costs almost half the "real" cost to produce a litre of corn-based ethanol. Furthermore, while it takes about as much fossil fuel to produce a unit of ethanol from corn, the input-to-output ratio is about one to eight if made from sugar.

Thomas Andrew O’Keefe,
Mercosur Consulting Group,
Washington, DC, US
©Copyright The Financial Times Ltd 2008. Reproduced for scientific not-for-profit reasons only.
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