Stay Out of the Way

In a recent post, Sarah Brodsky commented on the Department of Energy’s decision to fund biofuels research centers in three other states — but not Missouri. Sarah pointed out that we don’t need government funding to support alternative fuel research, because "If biofuel is really a good idea, it’ll be profitable to invest in it even without government funds." Indeed. But there’s more to it than that. Government has a critical role in helping biofuel succeed — not more funding and largesse, but getting out of the way of real entrepreneurs.

The Cascade Policy Institute in Portland, OR, last year reported on how government regulations squelch the efforts of the best biofuel research team the nation has — farmers:

In order to sell biodiesel one must register with, and make regular reports to, the EPA and either pay $2,500 to the National Biodiesel Board or spend millions of dollars to re-prove its environmental health safety. Otherwise one faces $25,000 daily fines.

The stifling effect of these obstacles can’t be overestimated. If it weren’t for the EPA, our family would have started a biodiesel business long ago, and so would many of the farmers I’ve spoken with. Making your own fuel is a financial solution. The incentives to plant are already there and the entire process can be done on a small-scale.

Farmers know it’s a bum deal to work through a middleman to reach customers. Fuel is sure to bring in a good price, but who can say what processors will pay for oil seed stock? If farmers can’t profit directly from biodiesel they will never plant enough crops to make a dent in America’s fuel demands and the price of biodiesel will remain too high for widespread adoption.

Biodiesel represents an enormous opportunity, not only for its environmental and economic benefits, but for its liberating potential. There is a reason the terms “fuel” and “power” also have political application. Petroleum can’t be obtained by just anyone so it is ripe for control. Biodiesel can literally put power into the hands of every person.

The biodiesel opportunity has been suppressed for over a century. Rudolf Diesel designed his engine to run on a variety of vegetable oils and thought the technology would be a boon to farmers.

Now that biofuels have finally regained the national spotlight, America is at a crossroads. We can pursue subsidies and use mandates to build on the petroleum fuel model, with large-scale agribusiness supplying a few giant processors. Or we can we remove counterproductive laws for a paradigm shift to an agrarian fuel model, where local farmers grow the industry from the ground up and reap the profits.

One of the most basic truths of government intervention in the economy is that intervention begets intervention, as the unintended consequences of government action become apparent, and then have to be "fixed" through more government action, spawning still more unintended consequences that require still more intervention, etc.

Sometimes the government’s best course of action is to stay out of the way and let the market do its work, without obtrusive regulations that kill alternative energy innovations before they have a chance to blossom.