Tides are Turning Against Ethanol Subsidies

Tides are Turning Against Ethanol Subsidies

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The political tides seem to be turning against the ethanol subsidy “VEETC” (or the Volumetric Ethanol Excise Tax Credit… but we’ll call it VEETC from now on out) , as new developments over the last few weeks have proven VEETC is just another tax credit aimed at giving taxpayer dollars to Big Oil.

On July 14th, The Congressional Budget Office (CBO) released a report, stating that the cost to taxpayers to replace one gallon of fuel with ethanol is $1.78 per gallon. The report also reiterated what was stated by Iowa State University economist Bruce Babcock back in March—that corn ethanol producers are already exceeding the amount of corn ethanol fuel required to be produced by the Renewable Fuels Standard (RFS) mandate. This very obviously shows that the corn ethanol industry is not a fledgling industry as the Growth Energy and Renewable Fuels Association lobbyists claim, they are a giant industry that can easily produce ethanol without the need of taxpayer dollars.

A more recent report by Dr. Babcock finds that the elimination of the tax credit would continue to increase production of corn ethanol, reduce ethanol prices, and lead to consumer savings at the pump. This report made congressman and senators very aware of the disposability of the VEETC, and the tides began to turn out of favor for this tax credit.

Green Scissors champion,Congressman Jeff Flake (R-AZ), long time opponent to ethanol subsidies sent a Dear Colleague to his fellow representatives, asking for support for the expiration of VEETC at the end of this year.Congressman Earl Blumenauer (D-OR), another Green Scissors champion, authored an Opinion piece for the Hill also calling for the end of VEETC.

The damning economic analyses forced the industry to change its stance. Growth Energy, a pro-ethanol and pro-VEETC lobby, did an immediate Benedict Arnold. It suddenly turned its coat and said the ethanol industry didn’t need this tax subsidy. Then it turned the other coat and said the money could be funneled into new programs for building new ethanol service stations and other infrastructure.

Growth Energy finally confirmed the ethanol industry could stand on its own, why would the industry need money for fuel pumps? Because ethanol cannot be used in our existing fuel systems. But, why would we want to invest billions of dollars into an infrastructure that supports a type of energy that is by no means the fuel of the future? Good question. We must not spend taxpayer dollars in a needlessly and instead should investing this money in truly sustainable solutions such as solar fueling stations.

Valero – who has been quickly buying up many ethanol refineries in bankruptcy and are quickly becoming one of the big players in the ethanol refining industry – has admitted that the expiration of VEETC will not affect the price of ethanol or the rate at which it is blended. Gene Edwards, Valero’s Executive Vice President for Corporate Development and Strategic Planning, was recently asked if there would be financial ramifications for the corporation if the tax credit were removed. He assured his investors that the current price of a gallon of ethanol $0.30 below the price of a gallon of gasoline, and that removing the tax credit would not shave a single gallon off current ethanol production.

It’s time to let this wasteful subsidy die. Stay tuned.