The Economist has a good article on what impact that farmers now growing corn for ethanol has on the global economy and also the environment.
Adding ethanol to the traditional markets for maize (food and fodder) inevitably pushes the price up. That encourages farmers, including those in poor countries, to boost production. If some of those farmers plough up savannah or cut down forest to grow the extra crops, the carbon dioxide released from the plants destroyed and soil ploughed up reduce the benefits of substituting the ethanol produced for petrol. If forests that are still growing are cleared, the environment loses the effect of their future uptake of carbon dioxide, too.
Of course having an honest discussion about ethanol like other green energies is hard to do because of politics.
A bigger problem, though, is the unstoppable desire of politicians to pick green winnersâ€”and not necessarily for green reasons. Ethanol, like â€œclean coalâ€, has a habit of being among them not because of its inherent virtues, but rather its political geography. Maize grows in crucial states, some of them â€œswingâ€ states like Iowa and Ohio. Barack Obama thus recently renewed his support for American, maize-based ethanol. Letting Brazilian ethanol, made from sugarcane, into the market tariff-free would be cheaper and probably greener. But that, of course, is not on. Eventually, new crops such as switchgrass and new technologies that allow whole plants to be converted into ethanol, rather than just their sugar- or starch-rich parts, will change the equation by boosting yields. In the meantime, the truth about ethanol is murky.