Tag: Biofules

By on May 24, 2011

Over the course of TTAC’s coverage of US ethanol subsidies, I’ve often wondered why nobody made a political issue out of slaying an ever-growing waste of tax dollars ($6b this year on the “blender’s credit” alone). And with the political rhetoric about America’s debt prices rising, I’ve been wondering with more and more regularity when someone will finally take the ethanol fight to the American people, who are already voting against ethanol with their pocketbooks. But just last December, Al Gore explained why not even he, an environmentalist standard-bearer, could oppose the corn juice he knew was bad policy, saying

It is not a good policy to have these massive subsidies for first generation ethanol. First generation ethanol I think was a mistake. The energy conversion ratios are at best very small… One of the reasons I made that mistake is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in the state of Iowa because I was about to run for president.

The Iowa primary is a key early contest in the Presidential election, and because Iowans grow and refine a huge amount of corn ethanol, campaigning against ethanol subsidies in Iowa is a non-starter. At least that’s what the conventional wisdom was before today, when, with nearly nine months to go before the primary, the impossible just happened.
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By on December 17, 2010

Both the Senate and the House have passed a one-year extension of the Volumetric Ethanol Excise Tax Credit (aka “blender’s credit”), the Small Ethanol Producer Credit and the ethanol import tariff and the Alternative Vehicle Refueling Property Tax Credit, as part of a tax bill that now needs only the President’s signature to become law. The full suite of ethanol subsidies were extended at their current levels, despite an attempt to lower the blender’s credit to 36 cents per gallon instead of 45 cents per gallon. These subsidies will cost in the neighborhood of $6b next year, keeps cheaper Brazilian ethanol out of the US market, and may inspire a WTO complaint with Brazil. And, as Senator Diane Feinstein (D-CA) puts it:

The ethanol industry is the only one to ever receive the triple crown of government intervention. Ethanol use is mandated by law, its users receive federal subsidizes and domestic production is protected by tariffs. That policy is not sustainable.

And she’s not kidding: even with these subsidies in place, ethanol plants are still losing money on each gallon they produce… and analysts are predicting record-high grain prices after the extension is signed. What’s not to love?

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