Despite showing leadership in opposing a pork-laden farm bill, the administration failed to do so yesterday. EPA Administrator Stephen Johnson denied Texas Governor Rick Perry's request to cut in half the government-mandated level for ethanol in gasoline to help reduce soaring corn prices.
Governor Rick Perry of Texas, representing a major livestock-producing state hammered by rising feed costs, has petitioned the Environmental Policy Agency to suspend half of the mandated level for blending ethanol in gasoline. The EPA has the authority under the Energy Independence and Security Act of 2007 to suspend all or part of the mandate for up to a year if there is a "significant renewable feedstock disruption or other market circumstance" and the administrator is supposed to respond to Governor Perry's petition by July 24.
“A leading World Bank economist's claims that biofuels are a major cause of soaring world food prices could further undermine support for the alternative fuel worldwide and cause tensions with the White House, which fervently supports the new industry.
A report in the Financial Times by John Thornhill leads with a remarkable quote from French President Nicolas Sarkozy warning the EU that he would block a proposed World Trade Organization (WTO) agreement on agriculture that would reduce European production incentives:
"Asked how she could justify paying so much money to wealthy farmers when food prices are rising and Democrats are calling for change in Washington, [House Speaker Nancy] Pelosi listed the bill's nutrition and conservation spending.
"I justify it by saying this is the best farm bill I've ever voted on." - San Francisco Chronicle, May 15, 2008, p. 1.
And now for a really bad idea: according to the Financial Times Michel Barnier, France's farm minister, told a food crisis summit in Berne that Africa and Latin America should adopt their own versions of Europe's Common Agricultural Policy -- massive trade-distorting subsidies -- as a response to rising demand for food.
Policymakers in the U.S. and European Union have responded to rising oil prices, instability in the Middle East, and concerns about climate change by promoting biofuels as an alternative to petroleum-based gasoline and diesel. But biofuels are now getting much of the blame for soaring food prices and questions are being raised about the purported environmental benefits. As shown in the chart, US production of corn-based ethanol surged over the past two years, coinciding with the run-up in food prices.
The New York Times yesterday (and Paul Krugman earlier in the week) called on rich countries to "step up to the plate" in confronting the food crisis in developing countries -- in the short run by increasing their donations of food aid. and in the medium run by getting rid of economically inefficient, inequitable, and environmentally unsound subsidies for biofuels, especially corn-based ethanol.
The crucial role of the Ohio primary in deciding the Democratic nominee for president is having a regrettable impact on judgment and rhetoric in this campaign, as noted earlier this week by Lawrence MacDonald. But does this necessarily mean that a Democratic president--either Senator Clinton or Senator Obama--along with a Democratic Congress, which has been stubbornly blocking a vote on the trade agreement negotiated with Colombia, would be bad for trade, especially with developing countries?