Ethanol "Blender Credit" Under Attack Again

At the end of last year, the Volumetric Ethanol Excise Tax Credit (aka “Blender’s Credit) very nearly expired before congress passed a one-year, $6b extension to the subsidy. The near-collapse of the largest “renewable energy” subsidy on the federal books came as the backlash built against the EPA’s approval of E15 (15% ethanol) blends for certain vehicles, with a huge coalition of industries, environmentalists and budget hawks coalescing around the idea of ending government support for corn-based ethanol. That coalition lost some momentum as the VEETC was extended in order to drum up support for the controversial tax bill that was passed during December’s lame duck session. But now, SolveClimate [via Reuters] reports that the brewing deficit battles have put the Blender’s Credit back on the chopping block, as a new bill seeks to cut the wasteful, inefficient and unpopular (outside of farm states) subsidy.

Sponsored by a Maryland Democrat and an Oklahoma Republican (Sens. Ben Cardin and Tom Coburn, respectively), the bill is being pitched as a bipartisan effort to correct “bad economic policy, bad energy policy and bad environmental policy.” And the Cardin-Coburn bill doesn’t stop at corn ethanol, but ends government subsidies for all forms of feedstock-based ethanol, including sugar beet-derived fuels. A competing Democratic proposal, forwarded by Sens. Dianne Feinstein and Jim Webb, would cut support only for corn ethanol. That bill would also

ower the tariff on imported ethanol to match the 45-cent-per gallon subsidy that will remain in place under what the duo calls “non-corn, second generation advanced biofuels.”

“Ethanol is the only industry that benefits from a triple crown of government intervention: its use is mandated by law, it is protected by tariffs, and companies are paid by the federal government to use it,” Feinstein said. “By lowering the import tariff to match the non-corn ethanol credit, we allow refiners to purchase cheaper, environmentally-friendly ethanol from foreign sources while at the same time preventing foreign producers from benefitting from U.S. subsidies.”

Both bills face challenges, as the House and Senate struggle to create a budget that will keep government operating.

the anti-VEETC crowd might wonder why ethanol tax credits aren’t at the top of the trim list. Mostly it’s because of a Capitol Hill aberration that draws a sharp divide between legislating and appropriating.And that is eternally frustrating to Kate McMahon with the advocacy organization Friends of the Earth. Congress, she emphasized, could operate more efficiently and thoughtfully if it took less of a piecemeal and more of a holistic approach to policy.

“The hard part is that the budget is in a different world from appropriations and you can’t legislate in the appropriations process,” McMahon, FOE’s biofuels campaign coordinator, told SolveClimate News in an interview. “We could be doing both of these things at once and not doing them in silos. It’s an insane narrative. We need to be having a broader conversation.”

Still, perhaps the desire to create a leaner budget combined with bipartisan opposition to ethanol subsidies will be enough to send the corn juice scam packing. In any case, it seems that from here on out, the ethanol lobby will at least have its work cut out for it simply maintaining the status quo. And with the VEETC expiring again at the end of this year, 2011 could well be the year that the subsidy keeping ethanol afloat finally gets the axe.