“WHAT’S GOING ON WITH ETHANOL SUBSIDIES IN CONGRESS?”

LEVEL THE PLAYING FIELD:

Getting renewables on a level playing field with fossil fuels should be a top priority for Congress. Last month, we covered the need to end oil subsidies. This month, we discuss what is happening with ethanol subsidies.

DECOUPLE CORN FROM OIL:

Scientists agree corn-based ethanol does little to curb greenhouse-gas emissions because it consumes nearly as much fossil fuel in its production as the energy produced. It also ties up food sources (and water) for fuel while linking corn prices to oil. That drives up corn and everybody’s food prices, while hurting the poorest and hungriest in the world. A better policy would be to boost advanced biofuels like cellulosic ethanol which has no impact on food supplies and prices.

MANDATES AND SUBSIDIES:

Mandates and subsidies are both a problem. Federal law requires production of large amounts of corn-based ethanol. Congress amended the Clean Air Act in 2007 by endorsing the Energy Independence and Security Act, which increased the Renewable Fuels Standard (RFS) to an annual 36 billion gallons of biofuels by 2022, of which up to 15 billion gallons must be corn-based ethanol. This year, the RFS requires the use of nearly 14 billion gallons of biofuels with conventional transportation fuels. Even if subsidies are pared, corn-based ethanol will grow without legislative change to the RFS mandate.

SYMBOLIC VOTES?

Now the recent legislative activity: On June 16, 2011, the Senate voted 73-27 to end two key subsidies for corn ethanol: 1) a 45-cent per gallon tax credit to gasoline refiners to mix ethanol with their fuel, and 2) a 54-cent per gallon tariff on imported ethanol such as sugar-based ethanol from Brazil. The measure would have ended the subsidies, worth about $6 billion a year, at the end of June, 2011, yet both are set to expire at the end of the year anyway. Was this just a symbolic vote?

The vote was offered by Sen. Feinstein (D-CA) and Sen. Coburn (R-OK) by amendment to another measure. The Senate is continuing to debate that underlying bill which one insider believes is unlikely to pass. Moreover, the White House has said it opposes full repeal of subsidies for ethanol. Also, it remains to be seen if the House will schedule something to address the above subsidies.

On the same day as the Senate vote, June 16, the House voted 238-128 to approve an amendment by Rep. Flake (R-AZ) to the 2012 Agriculture Appropriations bill to prohibit federal funding of ethanol blender pumps and ethanol storage infrastructure.

Together, the Senate and House actions suggest Congress is testing the waters to remove some subsidies for corn-based ethanol, and perhaps that will translate into removal of some of them as a compromise during the current debt ceiling debate. Indeed, such discussions are currently underway in July. It is clear, however, that Congress and the Administration have not signaled any interest in removing all requirements for corn-based ethanol to meet RFS mandates, so a poor policy will remain in effect without further action.

WHAT YOU CAN DO:

Please consider contacting your member of Congress and urging the removal of the RFS requirement for corn-based ethanol and all associated subsidies.

John H. Reaves, Policy Director for the U.S. Green Chamber of Comerce

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