Reports of disappearing glaciers, shrinking arctic ice, rising sea levels, stronger hurricanes, and unprecedented European heat waves combined with an inexorable buildup in atmospheric carbon dioxide levels is increasing pressure on governments to respond with new greenhouse gas initiatives. California and other states are providing policy leadership in the United States

The evolution of the ethanol industry continues at a brisk pace. U.S. ethanol production capacity has grown tremendously over the past several years. But recent lower ethanol prices, combined with still strong corn prices, have put a damper on continued expansion. Figure 1 shows the price movements for ethanol in 2007. At the beginning of the year, the ethanol price started out at around $2.50 per gallon. But prices have backed off since then, with recent ethanol prices at between $1.50 and $1.70 per gallon. This price drop has tightened margins at ethanol plants across the nation. But at the same time, the price drop has provided new growth opportunities in ethanol, on the blending side.

The most vexing problem facing Congress as it works toward completion of the farm bill is where to fi nd funding to make changes in farm legislation. High commodity prices have drastically reduced available funds that supporters of change can tap to create new programs or expand existing programs. The agricultural committees have found only two signifi cant sources of funds under their control: direct payments and the crop insurance program. Reductions in either program could fund increased nutrition and conservation programs or could be used to redesign commodity programs. The rationale for cutting direct payments is that it is diffi cult to see why crop farmers should receive subsidy payments when farm income is at record levels. The rationale for cutting crop insurance subsidies is that taxpayer support for the program has ballooned with the higher commodity prices, far outstripping the costs of actually running the program.