Welcome to the WC, wherein you’re trapped in my mind for eight to ten minutes weekly. A bit more today, perhaps.
Three weeks ago, I promised a follow up to my expose on the ethanol scam.
Unfortunately, I was distracted by investment opportunities in Haiti and Kmart’s collapse.
But now I’m making it up to you big time. I’ve gone way down the rabbit hole with far more detail than anyone wants.
How to Fix the Ethanol Scam
- What’s the problem? A refresher
- What’s my idea?
- The economics
- Transforming the land
- How will it impact the states
Remember, I’m just some idiot with a keyboard, not someone qualified to do (or even think about) any of this. So take it all with a mountain of salt.
Let’s go.
Table of Contents
What’s the problem? A refresher
Skip this section if you remember my ramblings from a few weeks ago.
Corn ethanol has long been a darling of American energy policy, though mostly for all the wrong reasons. Once hailed as a “green” alternative to gasoline, it’s now clear that ethanol’s economic inefficiencies and questionable environmental impact have made it a costly quagmire—one we just keep pouring money into.
The U.S. has devoted a staggering 35 million acres of farmland—the equivalent of Iowa’s entire landscape—to corn ethanol production. Despite its massive scale, the industry survives not through innovation or market demand, but by siphoning billions in subsidies—over $9 billion a year from U.S. taxpayers, to be exact. And here’s the kicker: the environmental benefits? Let’s just say they’re as thin as a corn husk.
Corn ethanol production has become a taxpayer-funded pipeline funneling cash to agribusiness giants. In a free market, ethanol would fold faster than a house of cards in a windstorm. The energy it takes to produce ethanol often exceeds what you get out of it. Throw in the environmental toll—like draining water resources and saturating soils with chemical fertilizers—and the supposed “green” alternative starts to look downright dirty.
But here’s the thing: corn ethanol has become firmly lodged in U.S. agricultural policy, thanks to a powerful lobby that ensures the subsidies keep flowing. What began as an experiment to reduce our oil dependency has morphed into an economically irrational and environmentally suspect juggernaut. In reality, these subsidies are corporate welfare on a grand scale, lining the pockets of a few large players while the planet reaps dubious rewards.
The real problem lies in how government incentives have conjured up an artificial market for ethanol, distorting how farmland is used. Prime agricultural land that could grow food or support more profitable crops is instead swallowed up by a fuel that doesn’t pay off. This creates a vicious cycle where more land gets sucked into ethanol production, pushing up food prices and delivering little in the way of environmental gains.
So, what’s the alternative? There are far better uses for those 35 million acres. Think high-value crops like fruits, vegetables, and nuts, or even solar energy farms and aquaculture. These options could provide a greater return for the economy, create jobs, and promote sustainability.
Corn ethanol has become the poster child for misallocated resources. It’s time we rethink this policy and consider how to put that land, labor, and capital to better use—before we waste another drop of taxpayer money on a fuel that’s running on fumes.
What’s my idea?
Note: everything I reference is based on an ungodly 43-page data-packed report I pulled together. It’s linked below for Alts Backstage members.
My plan aims to supercharge economic output while tackling the environmental headaches linked to monoculture farming and the endless cycle of government subsidies. By reallocating land currently devoted to corn ethanol, we can paint a clearer path toward sustainability, with multiple high-value use cases like fruits, vegetables, solar energy, and bioenergy crops. Of course, this is based on some back-of-the-napkin math and projections, so I’m not claiming to be a guru—just a number cruncher with a bird’s-eye view.
Key Benefits of the Reallocation
The biggest win from reallocating these 35 million acres away from corn ethanol? A more sustainable economic model. We’re talking about significant boosts in direct revenue, job creation, and overall economic output—while lightening the environmental load that corn ethanol production has saddled us with.
Take high-value crops, for example. Shifting part of this land to fruits, vegetables, nuts, and specialty herbs could turn a modest acre into a money-making machine. One acre of high-value produce can pull in up to $10,000 annually. Compare that to corn ethanol’s paltry $850 per acre. By repurposing 3.7 million acres, we could rake in $37 billion in annual revenue—combine that with a 20% profit margin and indirect economic benefits, and we’re looking at $55.5 billion in total economic output.
Solar energy is another golden ticket. Set aside 5 million acres for solar farms, and you could generate $140 billion in annual revenue with a fat 50% profit margin. Not only would this provide high returns, but it also aligns perfectly with the global pivot to clean energy. This shift alone could help build a massive renewable energy infrastructure, serving up both immediate profits and long-term energy security.
Other options—bioenergy crops, aquaculture, and agroforestry—bring even more economic potential. Bioenergy, for instance, could turn 6 million acres into a $7.5 billion industry, while 500,000 acres dedicated to aquaculture could yield $3.75 billion annually.
Timeframe: A Phased Rollout
I’m proposing a 20-year phased rollout, with $50 billion in annual investments. In the first decade, we’d focus on laying the groundwork: infrastructure, workforce retraining, and land-use transitions. Revenues would grow steadily, starting at $11 billion in year one and hitting $222 billion annually by year 20. After that, we’re in pure profit mode, with no additional investment required.
The key to this strategy is prioritizing high-ROI projects early on. Solar energy and high-value crops would take the front seat, given their quick economic payoff and relatively low setup complexity. As we progress, more complex industries—like bioenergy crops and vertical farming—would come into play, gradually diverting more land away from corn ethanol.
Cost Considerations
This plan comes with a hefty price tag: $1.025 trillion over 20 years. But let’s keep things in perspective. The U.S. economy is big enough to absorb this cost, especially when spread out over two decades. And the return on investment? Massive. High-value fruits and vegetables, for instance, need a $5.5 billion capital investment per 1 million acres. Solar energy is pricier at $200 billion for 1 million acres, but it also packs a bigger punch in returns.
Other options, like bioenergy crops, are more affordable, with a $900 million price tag per million acres. All told, by year 30, the total cumulative economic output could hit $7.2 trillion, with net profits around $961 billion—more than enough to pay back the initial investment and then some.
Environmental Benefits
On the environmental front, this plan offers a double whammy of benefits. First, it cuts down on the harmful impacts of monoculture farming—corn ethanol being the biggest culprit. Corn farming is notorious for degrading soil, guzzling water, and relying on heavy pesticide and fertilizer use. By transitioning to more diverse crops, like fruits and vegetables, we can dramatically reduce the environmental footprint.
Meanwhile, incorporating solar energy production across millions of acres would help slash greenhouse gas emissions, contributing to national and global efforts to combat climate change. Reallocating land to bioenergy crops and agroforestry could even create carbon sinks, offsetting emissions from other industries. Bioenergy crops paired with carbon capture technologies have the potential to produce negative emissions—making this plan a key component of a climate-friendly agricultural strategy.
Caveats and Uncertainties
Of course, we can’t ignore the fact that this is back-of-the-envelope math. I’m not an expert, and the reality of implementing a plan of this scale would be much more complicated. There will be political roadblocks—especially from the well-entrenched corn and ethanol lobbies. Supply chains could bottleneck, and farmers would need time and support to transition into new industries.
Plus, the projected costs and benefits are based on optimistic assumptions. Solar energy and high-value crop returns could face headwinds from market volatility, policy shifts, or unforeseen environmental challenges. And let’s not forget the heavy oversight needed to ensure sustainable agricultural practices take root.
The economics
Reallocating the 35 million acres currently locked into corn ethanol production could unleash a wave of economic growth over the next 30 years. By diverting this land toward more productive sectors—think high-value crops, renewable energy, and sustainable agriculture—the U.S. economy gains significantly in terms of direct revenue, wages, taxes, and overall GDP uplift.
Key Figures:
- Total Annual Revenue: $222.85 billion
- Total Annual Net Profit: $44.077 billion
- Total Economic Output: $334.275 billion annually
This $334 billion annual output represents a 1.59% uplift to U.S. GDP. While that might seem like a modest percentage, it’s substantial when applied to the current U.S. economy, which hovers around $21 trillion. This GDP boost translates into real-world benefits: job creation, increased tax revenue, and an economic revival in rural areas still tethered to the declining corn ethanol industry.
Direct Economic Impact
The real drivers of this growth are the industries that would replace corn ethanol production—leading the pack: solar energy, high-value crops, and bioenergy. Solar energy alone could rake in $140 billion in annual revenue from just 5 million acres, with a whopping 50% profit margin. High-value crops like fruits, vegetables, and nuts contribute another $47 billion in direct revenue from about 5 million acres—outperforming corn ethanol by a wide margin.
Indirect Economic Benefits
Beyond direct revenues, the report highlights $111.425 billion in indirect benefits. Supply chains, job creation, and increased local spending drive these ripple effects. Industries like food processing, transportation, and construction would see significant growth. For example, solar energy infrastructure projects would generate demand for engineering, construction, and maintenance services, amplifying the overall economic impact.
High-value crop production would also benefit secondary industries such as packaging and distribution, reinforcing the economic ripple effect. In short, the shift creates a far-reaching economic ecosystem, extending well beyond the farmland.
Wages and Job Creation
The reallocation plan shines brightest when it comes to jobs. The report estimates $31.5 billion in annual wages distributed across millions of workers in agriculture, renewable energy, and related industries. High-value fruits and vegetables alone could generate $7.4 billion in wages. In comparison, solar energy would contribute another $10 billion—injecting much-needed vitality into rural communities that have long relied on stagnant industries.
Taxes and Government Revenue
The plan also forecasts a healthy $11.14 billion in annual tax revenue. This includes federal, state, and local taxes derived from direct revenues, wages, and corporate profits. The tax windfall could fund infrastructure, education, and other public services, setting the stage for sustained long-term economic growth.
