Ethanol Subsidy Extension Headed To White House

Edward Niedermeyer
by Edward Niedermeyer

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?

Edward Niedermeyer
Edward Niedermeyer

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  • Jeffer Jeffer on Dec 17, 2010

    This Ethanol business really bugs me, I don't want to run it in my vehicle, so I buy higher-octane gas. Higher priced ,of course, as if it isn't expensive enough already.

  • Carve Carve on Dec 17, 2010

    Holy nested subsidies, batman! It isn't just a "triple crown", but a quadruple. 1) Corn growers are subsidized to grow corn 2) Ethanol subsidies are subsizided to make ethanol 3) Use of ethanol in gas is mandated 4) Tariffs limit competition You know the GOP and dems will vote for this though. I think we need to mover the 1st presidential caucaus somewhere else, or do them all at once. Jeffer: high octane gas is still 10% ethanol. Octane is actually one of the few ways ethanol could be used efficiently. Cars could be made to have higher compression ratios, improving efficiency, or be made smaller with high-boost turbos. Just enough ethanol would be injected when you put your foot in it to prevent detonation. Cruising and idling, you'd use cheap, low-octane gas. This would greatly improve efficiency and require FAR less ethanol than we use today. Win/win.

    • See 2 previous
    • MBella MBella on Dec 18, 2010

      Ethanol still has way less energy content than gasoline, and even as a octane booster it's less efficient than traditional octane boosters like toluene. Unfortunately even before the 10% mandate, it became the octane booster of choice because of the subsidized price. As a side note, has anyone noticed that after the E10 mandate, gasoline doesn't last as long. I've noticed that cars run poorly after sitting just a couple of weeks, vs. several months before. The last three years, I had to drain the fuel from my snowblower in the fall to get it to run. I used to be able to start it up fine one the older fuel.

  • CarPerson CarPerson on Dec 17, 2010

    Goody. Another year of "Sta-Bil" in the gas for the mower, chain saw, string trimmer, hedge trimmer, rototiller, generator, shredder, outboard, and probably two or three I can't remember at the moment. It's a $200 fuel system repair if ethanol-contaminated gas is left in the engine over the winter. Some states wisely exempt the top gas grade from requiring this pollutant. This state is not one of them. Anyone know what happens to babies, kids, and the environment when everyone is forced to dump Sta-Bil into every can of gas? I can't believe it's anything good.

  • PeriSoft PeriSoft on Dec 18, 2010

    Am I the only one who sees that corn cob truck and immediately thinks 'Dune worm'?