Ethanol Futures Tumble As Blender Credit Renewal Faces Opposition

Edward Niedermeyer
by Edward Niedermeyer

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.

Edward Niedermeyer
Edward Niedermeyer

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  • Harry Cordner Harry Cordner on Dec 03, 2010

    I don't think we can blame the loony left for this one. Even your most fervent, one-world-government enviro-fascist would never say that ethanol was a perfect "green" solution. It was made convenient by those august US Senate members who legislate for ADM and Cargill (and 200,000 odd constituents). Some environMENTALists simply saw that a particular gravy train was kind of going in their direction and ran off to hop aboard. If the Grun-Polizei were the only ones pushing ethanol fuels it would have gone all of nowhere.

    • Daanii2 Daanii2 on Dec 03, 2010

      That's true. Republican Senate leader Bob Dole was a big ethanol supporter at a time the ethanol people needed votes. Blame this one on the farm states, presidential politics, and the agriculture lobby. Not the greens.

  • Shaker Shaker on Dec 03, 2010

    I've read that fossil fuels are subsidized more than renewable energy right now - talk about entrenched interests "greenwashing" the public! If Exxon could play their "Berkley Scientist Loves Algae" crap any more, they might ask for a government subsidy to push their lies even further. That aside, until there's an affordable variable compression-ratio ICE, ethanol (over 5%) is a big loser - we should be subsidizing green tech that has more of a future.

  • Celebrity208 Celebrity208 on Dec 03, 2010

    ...and the need for dies with them. Good riddance. Boaters everywhere sigh a sign of relief.

  • Thx_zetec Thx_zetec on Dec 03, 2010

    What is the purpose of the subsidy if there is already an ethanol mandate? The current ethanol subsidy is design to partly cover up the un-competitive nature of ethanol. Even *with* current subsidies, tax breaks etc. ethanol gives you fewer miles per dollar. Eliminating 45 cent subsidy for e10 will increase cost of e10 about 5 cents per gallon, making ethanol even less competitive. Also the insane push for e15 will add about 2 more cents (and it can damage cars, and requires another pump, and lower energy content). Or look at e85, again already not competitive. This will add ~35 cents per gallon. The real problem is that the US energy policy is largely copied from the old Soviet playbook: rigid, centralized planning without market forces. What if we have a terrible corn harvest and ethanol ends up using 80% instead of 40% of the corn harvest? What ever happened to free markets? One thing *not* mentioned is continued, even bigger subsidies for cellulosic ethanol. I call this "super ethanol" - even more expensive, even less competitive, with even more political support needed. BTW this program is way behind, probably can't meet 5 or ten year goals.