Part I    Part II

Despite legitimate concerns about whether biofuels bring real, measurable environmental benefits, the politicians have decided to forge ahead with big subsidy programs.

Because ethanol is substantially more expensive to produce than gasoline, one of the first steps taken to prop up the ethanol business was to remove the 10 cent per liter federal excise tax on it. As part of the Liberal "Kyoto strategy" in 2003, the feds announced a policy requiring that at least 35 per cent of all gasoline sold in the country contain a 10 per cent ethanol blend by 2010. This, the government said, would reduce Canada's greenhouse gas emissions by 1.8 megatonnes per year.

These actions alone represent a pretty sweet deal for ethanol producers. It's the stuff of dreams for "entrepreneurs": have the government give favourable tax treatment to your product and force people to buy it.

The coup de grace is a 4.92 cent per liter tariff on Brazilian ethanol to protect domestic producers from foreign competition.

Of course, if Ottawa is going to pass an aggressive ethanol mandate, Canada will have to dramatically ramp up production in just a few short years. And that, says the government and the well-oiled ethanol lobby, will require direct subsidies. In order to increase production from the 2003 level of 240 million liters to the required 1.33 billion liter level by 2010, Ottawa handed out $118 million to ethanol producers which, when combined with provincial subsidy programs, would leverage $1 billion in total ethanol investment.

The federal Conservatives have continued the Liberal subsidy programs and committed to even more aggressive biofuel targets. When all is said and done, the dollar amount of combined federal, provincial and municipal support for ethanol over the next decade will be measured in the billions.

Take the government's commitment to meet greenhouse gas reduction targets at face value for a moment (if you can). Do we get the most "bang for a buck" out of tax dollars going into ethanol production when reducing greenhouse gas emissions is the objective

The ludicrous target set by the previous Liberal government to meet Kyoto obligations was an overall reduction of 240 megatonnes. The 1.8 megatonne reduction ethanol would theoretically contribute represents 0.75 per cent of that total, yet seven per cent of the total "climate change" budget was dedicated to ethanol supports - and that doesn't include provincial and local subsidies and tax concessions. Even under the rosiest of scenarios, ethanol can only offer a small but very expensive contribution to greenhouse gas reductions, as environmental advocates Sierra Club and Pembina Institute have pointed out.

Setting all the environmental questions aside, one has to consider the kind of world we'd live in if we throw all our eggs in the biofuels basket. In order to meet world ethanol demand, vast tracts of farmland will be diverted away from food production and toward fuel production. Agricultural economists are already attributing spikes in grain prices to the ethanol rush.

Look at it this way - it takes 450 pounds of corn to produce enough ethanol to fill a 25 gallon tank. That much corn provides enough calories to feed a human being for a year. The United States government says ethanol will swallow up 2.6 billion bushels of corn by 2010 - enough calories to sustain 325 million people per year.

Economists forecast there will be 1.2 billion malnourished people in the world by 2025, a number that can only increase with higher food prices.

Ethanol lobbyists argue that technology, improved crop yields, genetic modification and better production methods will all make ethanol more sustainable in the future. They may be right. The ethanol production process is getting more efficient all the time. Problem is we just don't know yet.

It's a perfect storm for the ethanol industry when their own economic interests converge with those of self-interested politicians. After all, biofuels are a vote-winner, and it's hard to argue against supporting an industry that helps troubled agricultural producers.

Ironically, global agricultural subsidies produced the depressed grain prices that have burdened prairie farmers for decades and now more subsidies are touted as a saviour.

It's not important to decide if biofuels are the answer, or the source of future problems. What's important is decide whether it's wise to sink public money into an industry that is surrounded by so many fundamental questions. The government's dismal track record in picking successful business ventures doesn't provide comfort for weary taxpayers.

At the end of the day it comes down to the "horse sense" prairie people are famous for. Ask yourself: Why are banks and investors so reluctant to invest private dollars in biofuels such that producers are begging for government support