Govt intervention harms one industry to subsidize another.

On the one hand we want to transition to alternative energies..  Do we do this by 1) taxing all the cheaper politically incorrect ones out of business with Cap and Trade?  2) Mandating an increasing amount in the fuel supply such as 10% ethanol or 3) Subsidizing the alternative's inclusion such as BCAP?

Corn Ethanol believe it or not has had the best success and that has been rocky...  It has taken almost thirty years to get to this point where today short of the blenders credit it is a significant player in the liquid fuels market.. and at times (despite it's naysayers) could have stood on it's own without supports.. over time I believe it will be able to do this.

Wind farms and Solar power may be the next best hope but face significant scale hurdles such as who will build the transmission lines between the best sources of wind/sun and demand?

I'm a proponent of Market signals being the drivers so that we do not end up building an industry that will not fly... right now the bio-diesel industry with it's $1.00 per gallon support comes to mind... while we are waiting on Congress to renew support most of those plants are shutting down.

I'm not opposed to incentives to launch an industry but over time we need to set a date or paramaters that allow the alternatives to stand on it's own.  So that scarce resources.. such as cooking oil are not burnt in someones SUV instead.

Surely we can recognize that a gradual transition in our nation's ability to produce resources.. look at the land base.. something like 2.3 Billion acres.. we can surely crank out A LOT of material that can be utilized for alternative energy sources... but extreme care must be used in crafting government incentives around improper allocation of resources.  Return of Energy on Energy invested.

Ethanol is going to take more feed grain production.. which can be done...  Bio-diesel will need more vegetable oil production.. which over time can also be done..  Cellulosic ethanol etc will need infrastructure enhancements... ditto.. it can be done.. but will take time.  Wind/Solar Farms need transmission lines to the population centers.. etc.

There is a place for the people to subsidize alternatives for an expected rising conventional fuel cost structure... if it takes 30 years to build a significant market share.. then we need to take a long term view to policy as well as a realistic one.

The support in the timber industry of the BCAP probably helped some weather the downturn in the economy.. but also may have added to the burden of others...  Someone needs to be aware of the unintended consequences as the story notes.

Again ethanol has done well because alot of the neccessary infrastructure components.. farmland.. source stock... harvesting... transport... storage.. secondary feed markets.. etc.. already were in place.  We talk about Cellulosic ethanol.. how much of that is already in place?  Not as much.. therefore it is no wonder that the side (timber) which is farthest along.. already a market in sawdust.. will make the most headway..  It's all about the infrastructure if something is only running at 40 or 50% of capacity then there are tremendous efficiencies to be gained.. even if a prof in some ivory tower says it won't work.  Using storage for a feedgrain that was built to store wheat in the off season comes to mind... etc...  We have to look at a WHOLE SYSTEM approach... Farmer supports for producing grain is now paid in ethanol blender credits which provides a two-for the buck return.  If you remove the blender's credit.. you replace it with the Ag support transfer.. but economic activity is reduced.  So there are lot's of policy overlaps.. again we need to utilize market signals as much as possible.

The policy wonks seem to get blindsided with this fact.