The wisdom of the markets is a joke

We Minnesotans have long prided ourselves on our problem-solving abilities, but today I read about a Minnesota first that should go down in infamy: the construction of the first coal-fired ethanol plant in Heron Lake, Minnesota. Folks, this is nuts! Is there any chance that this event will drive a nail in the coffin of the old "wisdom of the markets" adage? Investors, in their infinite wisdom, are putting their bucks behind a process that is going to burn coal, generating greenhouse gases, mercury and other pollutants, in order to fuel a corn-based ethanol plant. Robert Rapier, one of the main bloggers on The Oil Drum, recently wrote a lengthy overview of energy options which pointed out that the energy return on corn-based ethanol is very low, "Published studies put this number at around 1.3, but the return for fossil fuels in and ethanol out averages less than 1.1, " Rapier said. This means that for every one unit of energy input we expend on producing the energy, we get only 1.3 units of energy output.

The wisdom of the markets supported a coal-fired ethanol plant due to the rising price of natural gas, which is used in the 16 other Minnesota ethanol plants. The $97 million dollar Heron Lake plant is reportedly being financed by investments from farmers, which makes it clear whose interest this plant serves.

Could there possibly be a sugar lining to this whole fiasco? The idea of a coal-fired ethanol plant should remove all illusions that we are actually trying to solve our energy problems by producing ethanol. Instead, let's look at ethanol plants as what they are: an elaborate scheme to prop up corn prices in the Midwest, and to heck with any of the negative side-effects, including soil erosion, pesticide and herbicide use, increase in food prices, nitrogen run-off into the Gulf of Mexico, the drop in the Mexican peso and the rise in Mexican poverty due to the increasing price of tortillas, and on and on.

I'm also tired of Democratic politicians pandering to the corn-ethanol crowd. The standard party line is: "ethanol is a transitional fuel, until the technology improves so that we can..." and then they fill in the blank with something like cellulosic ethanol. Cellulosic ethanol could come from a variety of materials, including prairie grass, wood chips, or agricultural waste. Credible people argue for the feasibility of cellulosic ethanol, but the fact is, the wisdom of the markets has yet to support commercial production of cellulosic ethanol. If politicians really believe that corn-based ethanol plants are a transitional energy source, then they are perpetuating the same throw away mentality that got us into all this trouble in the first place.