By on December 2, 2010

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.

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20 Comments on “Ethanol Futures Tumble As Blender Credit Renewal Faces Opposition...”

  • avatar

    Why are we paying them at all? They got the 10% mandate, and almost 15%, yet we give them a subsidy too??

    • 0 avatar

      We are paying them because this is a subsidy on top of a mandate on top of regulatory threats on top of regulatory “nudges.”
      All to please the corn lobby and the ethanol refiner’s green lobby.  In particular, Al Gore’s firm Kleiner Perkins has important investment on the damned thing.

    • 0 avatar

      How about this Florida 9 to 10% mandate: “If a terminal supplier, importer, blender, or wholesaler is unable to obtain ethanol fuel at the same or lower price as unblended gasoline, then the covered entity may apply for a waiver. (Reference Florida Statutes 526.201-526.207)”
      There you go.  At least in FL, without a subsidy, the ethanol mandate is dead.

    • 0 avatar
      John Horner

      The cruel joke is that without the subsidy, much ethanol production would not be economically feasible. Subsidizing corn ethanol needs to stop, stat.

    • 0 avatar

      “Subsidizing corn ethanol needs to stop, stat.”
      Including the “you must use X million gallons in the nation’s fuel supply” nonsense. It’s nothing but a tax increase with the proceeds funneled directly to the ethanol industry. Like EVs, ethanol is not something the market or the users want. It’s something the Government is trying to force-feed to the public.

  • avatar

    We need 100-200 more cuts of this size. As a start, how about cuts in farm subsidies corresponding to the corn-o-hol production? And then just get rid of the stupid uneconomical and unGreen E-any level requirement – ie, repeal the law.

  • avatar

    So here in California, ethanol replaced MTBE because it’s safe to drink when it pollutes your well, unlike MTBE.  MTBE was added for the purpose of reducing air pollution (whether it did or not I’m not qualified to say).  Do these politicians even care to mention the scientific evidence for or against the public benefit of these laws or are they admitting it was all corporate welfare from the start?

    • 0 avatar

      Oxygenates (MTBE and/or Ethanol) do exactly zero to affect tailpipe emissions in any modern closed-loop fuel injected vehicle. The oxygen sensor detects the extra O2 in the exhaust as “too lean”, and injects extra fuel to compensate. Add to that the lower energy density of Ethanol over Gasoline, and their sole contirbution to your car’s performance is to reduce fuel mileage.

    • 0 avatar

      Right, except all cars aren’t modern and fuel injection systems fall back to open-loop mode in many circumstances.  This is why you need actual data to say we paid $X for Y benefit.

    • 0 avatar

      I thought MTBE was added to gasoline to reduce its freezing point – ethanol has this same characteristic.  MTBE is more toxic to the environment and ethanol is less.  I don’t mind the blends in order to fulfill these needs but the push for e85 with our gov’t giving large subsidies in many forms to make it competitive is inefficient – and even more so as our price of food rises as most ethanol simply comes from food stock.

    • 0 avatar

      And MTBE replaced lead.  Let’s not let perfect be the enemy of better.

  • avatar

    The presidential loony season begins soon. It’ll be interesting if the GOP group stays true and puts this tax cancer down. I’m not hopeful.
    Iowa and the farm belt will (sadly) get their vig. Especially if Obama is challenged from the loony left.

  • avatar

    Don’t get your hopes up. The chances of ethanol losing its sacred status seem slim indeed.

    • 0 avatar

      The reason for hope is that environmentalist opposition to ethanol has increased to the point where it provides effective political cover for greenwashing congressmen.

      Unfortunately, dropping ethanol may cause Washington to switch its saving-the-earth favors to the windpower boondoggle… got to have some greenness goin’ on, ya know.

  • avatar

    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.

    • 0 avatar

      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.

  • avatar

    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.

  • avatar

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

  • avatar

    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.

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