The current promotion of ethanol and other biofuels is a classic case of Bootleggers and Baptists.
Bruce Yandle’s theory “draws on colorful tales of states’ efforts to regulate alcoholic beverages by banning Sunday sales at legal outlets. Baptists fervently endorsed such actions on moral grounds. Bootleggers tolerated the actions gleefully because their effect was to limit competition.”
“Baptists” point to the moral high ground and give vital and vocal endorsement of laudable public benefits promised by a desired regulation. Baptists flourish when their moral message forms a visible foundation for political action. “Bootleggers” are much less visible but no less vital. Bootleggers, who expect to profit from the very regulatory restrictions desired by Baptists, grease the political machinery with some of their expected proceeds. They are simply in it for the money.
Biofuels offer something for everyone. Consumers worry about climate change and energy security. Politicians can be seen as doing something for the environment, while they postpone the hard choices that need to be taken. At the same time they placate the powerful farm lobbies in the U.S. and EU. The farm lobbies are happy because they will get subsidies, tax breaks, and regulations that will set targets for minimum amounts that must be blended in with fossil fuel.
Would extensive use of biofuels be good for the environment? Probably not.
Related: This interesting talk, Mike Munger and Russ Roberts, on private versus public risk-taking.