Federal Govt. is Using the Military to Provide Subsidies for Biofuel Producers

The Government Accountability Office (GAO) recently released a report which found that the military had spent up to $150 per gallon for alternative jet-fuel. This is one more example of how the administration is providing subsidies for renewable producers.

The latest GAO report found:

The federal government supports the development and use of alternative jet fuels through both broad and targeted initiatives. Broad national strategies promote the development of a variety of alternative fuels—including alternative jet fuel—to help achieve national goals, such as securing energy independence, fostering economic development, and reducing greenhouse gas emissions.

Of the three justifications the GAO gives for the federal government spending up to $150 a gallon subsidizing alternative fuels, the only one that is possibly true is a potential reduction in greenhouse gas emissions. The administration is not serious about securing energy independence nor are they serious about fostering economic development. Furthermore, the latest evidence shows that the alternative fuel actually increased greenhouse gas emissions.

If the administration were serious about energy security, then why are they subsidizing experimental products that may, potentially, increase energy security rather than taking concrete steps to actually increase energy security today? This is why the energy security argument does not makes sense.

The administration only leases 3 percent of federal lands for energy development. If the administration were serious about energy security, they would lease more lands and it would learn from the states how to increase oil production and protect the environment at the same time. On private and state lands, oil production has increased 61 percent over the last five years, but oil production has decreased by six percent on federal lands. This drop in oil production on federal land would not happen if the administration were serious about energy security.

The administration could also allow the Keystone XL pipeline to be built. Oil from Canada is just as secure as oil from the United States. If the administration were serious about energy security, they wouldn’t restrict oil from Canada. Instead, they would allow the Keystone XL pipeline to be built.

As for fostering economic development, again there is no evidence that the administration interested in fostering overall economic development. Buying fuel at above market rate is a waste of money. Wasting money does not foster economic development, instead it retards it. As Phillip Cross the former Chief Economic Analyst at Statistics Canada wrote:

Public sector investment never “kick-starts” more business investment, creating the virtuous circle governments always hope for when launching the latest wave of government capital spending. Instead, more public sector spending creates a vicious circle, where a “failure” of business investment to respond to higher public sector spending justifies the perceived need to further boost public sector investment “to fill the gap.

This is what has happed with energy subsidies. With biofuel, not only have there been subsidies for years, but the Renewable Fuel Standard mandates that Americans use billions of gallons of biofuel a year. If subsidies for mandates “kick-started” more business investment there would be no need at this point for the military to pay $150 per gallon for some exotic jet fuel.

Lastly, there is the potential for alternative fuel to reduce greenhouse gas emissions. But the evidence is not strong and is decreasing. The latest study from the University of Nebraska-Lincoln found that:

Using corn crop residue to make ethanol and other biofuels reduces soil carbon and can generate more greenhouse gases than gasoline, according to a study published today in the journal Nature Climate Change.

The findings by a University of Nebraska-Lincoln team of researchers cast doubt on whether corn residue can be used to meet federal mandates to ramp up ethanol production and reduce greenhouse gas emissions.

The justification the administration and the military give for spending massive amounts of money on alternative fuels do not hold water. It appears, therefore, that this spending is just one more example of unnecessary and economically harmful subsidies for alternative fuels.

IER Director of Regulatory and State Affairs Daniel Simmons authored this post

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