The Midwesterner: Blogging the Global Midwest

Pulling the Plug on Ethanol

The end may be in sight for government subsidies for corn ethanol. It's a hard thing for a native Iowan to say, but it's about time. Always a boondoggle, these subsidies have now become a boondoggle that we -- the United States and the world -- can no longer afford.

Two recent Senate votes sent contradictory messages. First, the Senate voted, 59 to 40, against a message to eliminate the 45-cent-per-gallon tax break which the government gives ethanol refiners. Then it turned around and voted, 73 to 27, for another bill to both end these credits and to wipe out a tariff on imports Brazilian ethanol, which is made from sugar cane and competes with corn ethanol. For various procedural reasons, neither vote is final.

But the tax credits expire at the end of the year. Renewing them looks like a battle for their corn-state backers. After all, getting rid of these credits would save $6 billion per year from a budget already badly in deficit. With pressure to cut spending on education and other truly vital programs, it only made sense to stop wasting money on non-essentials, like ethanol.

Corn-based ethanol uses the energy in corn kernels to produce a biofuel additive that can be mixed into ordinary carbon-based gasoline. It's easy to make, which is why there are so many ethanol plants around. The use of ethanol in fuel replaces imported oil -- not on a one-to-one basis, but close -- reducing our dependence on suppliers in the Middle East. Its use increases the demand for corn, raising income for farmers. Ethanol mills provide good jobs, largely in rural areas where jobs of any sort are scarce.

So what's not to like? Quite a lot, in fact.  

America Throws in the Towel

Everybody knows that the United States, and especially the Midwest, is in a competition with China and other emerging nations to survive and thrive in this new global economy.

Everybody's wrong.

Any race requires two rivals, each running flat out, each determined to win. Anybody who spends time in China -- as I have in the past month -- knows that the Chinese are treating this race like the economic Olympics, with their eye fixed on the finish line. But anybody who travels the Midwest -- as I do constantly -- knows we've stopped competing -- indeed, have made a policy decision to give up.

Basically, American has thrown in the towel. We owned the 20th century, but we've conceded the 21st century to China.

High Energy in Cleveland

Renewable energy is the buzzword du jour everywhere, and perhaps nowhere more so than in the Midwest. This is a region with lots of sun, water, wind, biomass -- all the ingredients of the green energy industry. It also is a region with an economy that desperately needs the kick start that energy investment could supply.

But like so much else, renewable energy seems to be happening more elsewhere -- especially in Europe -- than in the Midwest. If our region misses out on its energy opportunities, it may miss out on its future.

All this -- how to get this energy and to pay for it -- will be the agenda in Cleveland on Oct. 18 at a major conference at the City Club sponsored by the host of this blog, the Global Midwest Initiative of The Chicago Council on Global Affairs. I'll be there to emcee this conference, but the real stars will be speakers who wrestle with these issues every day.

The conference is our third annual conference and the first to be held outside Chicago. Click here for the venue and agenda.  It will be open to the public.

Guest Post: Toward the Vital Center - A New Energy Legacy for the Midwest

by Henry L. Henderson, Director, Midwest Program, Natural Resources Defense Council

It is a genuine honor to be a guest on Richard Longworth’s blog. Dick is an exceptional reporter, analyst and elegant writer. His work on the state of the Midwest in the 21st Century, set forth eloquently in his book, Caught in the Middle: America's Heartland in the Age of Globalism, is indispensable for those of us interested in the fate of our region.

Caught in the Middle examines the present constraints on the Midwest economy and culture, against the backdrop of a past that in many ways constituted the “Silicon Valley of the 19th Century.” Here, new and powerful ways of organizing industry, agriculture, personal mobility and the industrial economy that defined the 20th century were invented and successfully deployed. Thus, a dilemma confronts the Midwest today is that our current economic structures are in significant ways a legacy of a vibrant past that is out of touch with current needs, challenges and opportunities. The legacy structures act as a drag on the future, limiting our ability to create, compete and embrace a vibrant, productive and healthier economy in the new 21st century.

Nowhere is the example of a past vitality and present exhaustion more visible than in our current energy economy.

A Midwestern Energy Program

Anyone who has stood beside a Great Lake on a winter's day, with the cloudless sky overhead an icy blue and the wind pelting down from somewhere in Manitoba, knows the power of elemental nature. The water, the wind, the frosty sun -- this is energy, pure but untamed.

Recently, advocates of alternative forms of "green" energy have looked at this abundance of nature and seen something just as basic -- dollars, jobs, a new economy for the Midwest. If green energy is the energy of the future, and if the Midwest is so richly endowed with these elements, how can we miss?

The only problem is getting there from here. So far, we don't have the science to make this happen. We don't have the money to pay for the science. The Midwest is not exactly alone in seeing riches in the green economy, so the competition with other regions will be fierce. Private industry seems unlikely to make the huge investment necessary in an industry that may or may not pay off. Midwestern states should do it but these states, hard hit by the recession, are having trouble paying current bills and seem unlikely to make this investment in the future.

A valuable new paper, published by the Brookings Institution, tackles these issues by calling for federal investment to "launch a region-wide network of collaborative, high-intensity energy research and innovation centers." 

Some Straws in the Wind

It's been a long time coming but the Midwest may finally be joining the clean-energy era.

Not that we're all going green, or that the region's tired old factory towns are suddenly blossoming with producers of clean-energy technology. But a scattering of news from around the Midwest makes it clear that, at last, something is happening.

Up in Michigan, the state has awarded Dow Chemical Co. incentives that will leverage $1 billion in investments for three alternative energy projects, including solar roof shingles, that they hope will create 2,500 jobs. Newton, Iowa, the town created and abandoned by Maytag, is trying to recover on the strength of two factories making parts for wind turbines. A wind farm in north central Iowa is about to supply electricty for parts of Wisconsin. Everywhere, clusters of turbines march like giant windmills across Midwestern farms.

Most recently, Milwaukee announced it had landed a Spanish-owned factory to make electric motors for wind turbine generators. The factory, owned by Spain's Ingeteam, is expected to provide 50 to 60 jobs within a year and, with luck, 275 jobs by 2015.

The Canadians want to put 700 wind turbines in the water on their side of Lake Erie and Lake St. Clair. Eventually, the turbines will generate power that could fuel industry on both sides of the border. Right now, though, the proposal is generating mostly protests from local NIMBYs who fear the turbines will spoil their view.

In the meantime, the National Renewable Energy Laboratory has issued a new report that triples the estimate of potential wind power that could be generated in the U.S. Of the top 10 state for wind energy potential, it says, five -- Kansas, Nebraska, the two Dakotas and Iowa -- are Midwestern.

I'm not sure what this adds up to. But it's obvious that clean energy, as a generator of jobs and investment, has moved beyond the talking stage and is beginning to impact the Midwestern economy. It's also obvious that this has just begun, and there's a lot more activity to come.

A Green City for the Midwest

Not all the interesting ideas about the Midwest come from the Midwest. A consulting firm in suburban Boston has floated an idea for a "green city" to be built within an existing Midwestern city "that would offer a living, breathing opportunity to create an entire clean-tech infrastructure." They pick the Midwest because it's "an area of our country that's seriously in need of reinvention." Their idea is to build this "sustainable sub-city" within Detroit -- not exactly a trail-blazer in the move away from a fossil-fuel economy.

The authors are Mark W. Johnson and Josh Suskewicz, of the Innosight consulting firm in Watertown, Mass. The article, "Copenhagen: Why the US Should Build a Green City," appears on the Conversation Starter blog of the Harvard Business Review.

Their model, Masdar, in the UAR, is not yet a city, just a project being built in the desert outside the city of Abu Dhabi. Johnson and Suskewicz recognize that a greenfield project like this isn't feasible in the Midwest, which is not so much trying to create a new economy as to transition from an old economy. Instead, they want to revive a "declining industrial city."

Presumably, this project would be based on electric cars, public transport powered by alternative energies and on the clean/green technologies that all cities must adopt, sooner or later, if they are to survive in a post-carbon world.

As mentioned, Detroit doesn't jump to mind as the optimal site for this experiment. It is probably the world capital of fossil-fuel economics and the local opposition to new technologies remains intense. In addition, Detroit's survival as a city is still in doubt. If this "green city" is built in Detroit and the city fails anyway, that would be the end of the experiment.