The ethanol industry might have enjoyed a small popularity bump when NASCAR switched to E15 (15% ethnol blend) gas, but it’s facing one of its biggest tests yet, as the so-called “blender’s credit” draws within a month of its expiration date. And the signs aren’t looking good for the most important subsidy in the ethanol playbook. Bloomberg reports that 17 Senators from both parties are pushing to end the 45 cent-per-gallon tax credit for ethanol blenders (and 54 cent-per-gallon import duty), and they’re opposed by only 13 Senators openly pushing for renewal. Plus, they’ve got a pretty strong argument:
If the current subsidy is extended for five years, the Federal Treasury would pay oil companies at least $31 billion to use 69 billion gallons of corn ethanol that the Federal Renewable Fuels Standard already requires them to use. We cannot afford to pay industry for following the law
Ethanol futures have hit an eight-week low, as the market suddenly seems to be realizing that maybe, just maybe, popular concern about budget deficits will kill off the ethanol blender’s credit. If this actually happens, expect plenty of hand-wringing about lost “green jobs,” the death of the American family farm, and how much of a tool Al Gore comes across as. On the other hand, it will also mark the long-overdue end of an expensive, environmentally and engine-unfriendly boondoggle that the market never asked for. Ya win some, ya lose some.