If annual production increases by three billion gallons in 2012 -- a plausibly modest number when the EPA made its own calculations -- we estimate that the costs will exceed the benefits by about $1 billion a year. If domestic production reaches the more "optimistic" Energy Department projection for that year, net economic costs would likely top $2 billion annually.
Our analysis is deliberately weighted to give ethanol the benefit of a doubt. For example, we assume that, on balance, ethanol from corn reduces greenhouse emissions, even though recent science suggests that substituting ethanol for gasoline might actually have a negative impact (it increases emissions of nitrous oxide, a more potent greenhouse gas than carbon dioxide). Ethanol distilled from grasses and waste materials has a better environmental payoff, but has much higher direct production costs.
Thursday, November 29, 2007
More bad news about ethanol
American Enterprise Institute and Brookings weigh in: