Surging global food prices fuel critics of US ethanol subsidies

Producers of ethanol argue that the biofuel helps blunt the impact of high imported petroleum prices, but critics say the U.S. policy giving tax breaks for ethanol used in motor fuel ends up being bad for food, energy and the environment.

The issue has created unusual political alliances, with environmental groups and some lawmakers from both parties clashing with farm interests and legislators from the corn-producing Midwest states.

Senators Tom Coburn, a Republican from Oklahoma, and Ben Cardin, a Maryland Democrat, introduced a measure last month to scrap the tax credit of 45 cents per gallon for ethanol in gasoline.

“The ethanol tax credit is bad economic policy, bad energy policy and bad environmental policy. The US$6 billion we waste every year on corporate welfare should instead stay in taxpayers' pockets where it can be used to spur innovation, stimulate growth and create jobs,” said Coburn.

The lawmakers cited a Government Accountability Office report describing the tax credit as “largely unneeded today to ensure demand for domestic ethanol production.”

C. Ford Runge, a University of Minnesota professor of applied economics and law, argues that ethanol from crops has many “hidden costs” that should dissuade the government from subsidies.

Runge, who raised concerns about ethanol policy as early as 2007, says his research suggests some 30 percent of food price increases come from diversion of U.S. corn for ethanol.

“If you're taking 40 percent of the U.S. corn crop, the largest of any country on earth, and putting it to one use ... you don't have to have a Ph.D. in economics to know that's going to put upward pressure on prices,” he told AFP.

In an essay written for Yale University's Environment 360 online magazine, Runge cites “strong evidence that growing corn, soybeans, and other food crops to produce ethanol takes a heavy toll on the environment and is hurting the world's poor through higher food prices.”

The U.N.'s Food and Agriculture Organization has warned that rising food prices are driving unrest around the world, including recent uprisings in the Middle East and North Africa.

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