Congress needs to remove subsidies from the farm bill, not expand them

Congress needs to remove subsidies from the farm bill, not expand them

May 13, 2013 at 11:27 am

Design Pics / Dave Reede/Dave Reede/Newscom

Design Pics / Dave Reede/Dave Reede/Newscom

Slapping the word rural in front of a bunch of green subsidies does not mean they’re not subsidies. But that’s exactly what the Rural Energy Investment Act section of the Senate version of the farm bill legislation does.

The legislation includes direct handouts and loan guarantees for advanced biofuels and bio-refineries, renewable chemicals, and bio-based product manufacturers. It would also reauthorize the Rural Energy for America Program, which “provides grants for energy audits and renewable energy development assistance. It also provides funds to agricultural producers and rural small businesses to purchase and install renewable energy systems and make energy efficiency improvements.”

The Rural Energy Self-Sufficiency Program includes grants “to assess energy use in a rural community, evaluate ideas for reducing energy use, and develop and install integrated renewable energy systems.”

In other words, more wasteful green subsidies. These handouts come on top of a number of policies that already provide preferential treatment to biofuels and renewable energy—including the Renewable Fuel Standard (RFS), which mandates the use of biofuels—and a number of targeted tax credits incentivizing production of renewable energy generation.

Businesses do not need public investment to improve efficiency and cut costs; they make those investments regularly with their own money. Integrating more renewable energy will make economic sense for rural communities when it’s not artificially driven by politicians.

The Rural Energy Investment Act section also includes a biodiesel fuel education program that would spend $1 million a year for “competitive grants to nonprofit organizations that educate governmental and private entities operating vehicle fleets, and educates the public about the benefits of biodiesel fuel use.”

Well, here’s a free education lesson: The Environmental Protection Agency’s (EPA) biodiesel program is bad for both the economy and the environment. The EPA has acknowledged that its target of 1.28 billion gallons of commercial biodiesel for 2013 will increase soybean prices, which is good for soybean growers but bad for the rest of us.

For only 2013 and just for the biodiesel component of the RFS, net costs of the rule are projected to be between $263 million and $425 million.

The environmental benefit of more biodiesel production is nowhere to be found; in fact, it’s quite the opposite. Sofie Miller, policy analyst in the George Washington University Regulatory Studies Center, points out:

The EPA also estimates that this standard will cause up to $52 million in environmental costs from reductions in air quality, and will have modest but “directionally negative” effects on water quality, water use, wetlands, ecosystems, and wildlife habitats.

Also included in the bill are the Biomass Research and Development Initiative and the Biomass Crop Assistance Program (BCAP). The Department of Agriculture emphasizes that BCAP’s goals are to lower financial risk and solve the classic chicken-and-egg situation in which the government provides subsidies for commercial-scale production and consumption, because one won’t be successful without the other.

First, it is not the role of the government to lower financial risk. Markets take on risks all the time. Government involvement only privatizes the gains and socializes the losses. Second, good economic ideas overcome the chicken-and-egg situation all the time without government assistance. We have gas stations and gas-powered cars, cell phones and cell towers. No big government programs were necessary to make that happen.

Congress needs to remove subsidies from the farm bill, not expand them. Eliminating all of the programs in the Rural Energy Investment Act section is a good place to start.

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