I have always had admiration for those both audacious enough and skilled enough to hide a scam in plain site, undetected. That's what I view the US ethanol blenders tax credit as.
The credit is $.45 per gallon of ethanol blended into gasoline, and should not be confused with any of the numerous subsidies for agriculture. This credit amounted to $7.7 billion in 2009.
While the blender credit is controversial, almost no-one ever calculates the true cost of the credit for each gallon of new energy produced and blended. I don't think I have ever seen such an analysis.
To calculate the true cost of the blending subsidy for new energy produced you need to apply the realities of energy return on energy invested (ERoEI) to the stated tax credit.
It takes considerable energy to produce a gallon of ethanol. There is energy embedded in the fertilizer and pesticides applied to the corn crop, energy to run the machinery to fertilize, plant, spray, harvest, and transport the corn to the ethanol plant. Then there is the energy to process the corn through the fermentation stage, and more energy to evaporate most of the water. Finally there the energy used in shipping the ethanol to the blending site. There is a byproduct called distillers' grains which can be sold as animal feed to help offset input costs.
Estimates of ERoEI for corn ethanol vary widely. Naturally people in the industry tend to have higher estimates than those who aren't. There are credible university research papers that calculate there is a net energy loss in the production of corn ethanol.
For our purposes, let's examine two possibilities. The first would be an ERoEI of 1.5, which would mean 3 units of energy out for 2 units of energy in. This is on the high end of credible efficiency reports. The second possibility is an ERoEI of 1.1, or 11 units of energy out for 10 units in.
If you haven't unravelled the scam yet, I'm getting to it. In the first situation you pay $.45 for each of 3 gallons of ethanol. But only one of those gallons is new energy. The other two gallons were inputs of existing energy such as electricity (coal, natural gas, nuclear, etc. as energy sources), diesel fuel, gasoline, natural gas used directly or embedded in inputs such as fertilizer and pesticides. The process produces one unit of new energy and converts two units of existing energy.
So the taxpayer is paying $.45 for the blending of one unit of new energy and an additional $.90 for the blending of two units of energy that existed before, probably mostly as coal, natural gas, and diesel fuel. In essence, the taxpayer pays $1.35 per gallon of new ethanol energy just for the blending credit. This doesn't count any other subsidies to the farmers or ethanol plants, or the cost of the ethanol itself, just the blending credit.
Now you can see where I'm going with this. For the 1.1 ERoEI scenario, taxpayers would pay 11 x $.45 = $4.95 per gallon of new ethanol energy just to mix it into the gasoline. This does not include the cost of the ethanol itself, just the blending credit.
This is why it is critical to do some real science when introducing new energy options to get a true analysis of costs and benefits. It may make sense to convert coal and natural gas to ethanol via corn farmers. Then, again it may not. As more corn is used for ethanol production, the price of corn goes up for all other users of corn. (No ethanol producer ever puts that cost into their calculations.)
My personal feeling is that the ERoEI is closer to the 1.1 number than the 1.5 one (based on credible analyses I have read), which would make corn ethanol a huge boondoggle. (If the ERoEI were 1.5, why would there be a need for any subsidy anywhere in the system? Corn ethanol would be highly profitable without subsidies.) The fact is that the US government has no credible energy agency that compares various energy sources and the true costs of delivery of each to the end user. Without such analysis there is no way of developing a rational energy policy.
This is just one small example of what I believe is unproductive economic activity adding to the decline of the American Empire.