Common Tragedies

Thoughts on Environmental Economics

Can my ethanol bum a ride from one of you guys?

Posted by Evan Herrnstadt on October 1, 2007

The New York Times reports that ethanol prices are crashing as supply outstrips the distribution network:

Because ethanol is corrosive and soaks up water and impurities, it cannot be shipped through the country’s fuel pipeline network. So it must be transported by train, truck and barge, a more expensive transportation network that is suddenly finding it hard to keep up with the surge in ethanol production.

Oops. With high demand on the coast, and a huge amount of corn in the heartland, it turns out that we actually need infrastructure for the market to work. Since corn ethanol is so inefficient in terms of energy balance (not to mention the economic inefficiency of doubly-subsidizing corn), we should be taking this ethanol boom as incentive to invest in fuel transport infrastructure. If we make a breakthrough in cellulosic ethanol, hopefully production will be less concentrated in my beloved home state; still, we’ll be needing to distribute it to truly harness market forces.

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