U.S. Green Chamber Of Commerce
25 July 2011
LEVELING THE PLAYING FIELD: ETHANOL SUBSIDIES & CONGRESS
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.
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 creating a disturbing link of corn prices to oil.
The current law causes the price of corn to rise which increases the cost of food and hurts the poorest and hungriest in the world. That is poor public policy. A far more positive move for our lawmakers would be to boost advanced biofuels like cellulosic ethanol which has no impact on food supplies and prices.
MANDATES AND SUBSIDIES: A DOUBLE EDGED SWORD?
Federal law currently 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 unless there is
legislative change to the RFS mandate.
On 16 June 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 perplexingly both were due to expire at year’s end anyway.
TIME FOR ACTION, NOT SYMBOLISM
On the same day as the Senate vote, 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.
Given these positive steps, why is the Senate continuing to debate the bill offered by Sen. Feinstein (D-CA) and Sen. Coburn (R-OK)? For one, the White House has said it opposes full repeal of subsidies for ethanol. With rumors circulating on the Hill that the underlying bill is unlikely to pass, it now remains to be seen if there will be movement in the House to schedule something to address the above subsidies.
The above actions suggest Congress is testing the waters to remove some subsidies for corn-based ethanol. Perhaps that will translate into the removal of some subsidies as a compromise during the current debt ceiling debate. But until Congress and more
importantly the Obama Administration signal interest in removing all requirements for corn-based ethanol to meet RFS mandates, a poor policy will remain in effect.
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.
Tell us your story. Contact the US Green Chamber to let us know ways in which your business has used corn-based ethanol fuel/products and what your experiences with it were.
John Reaves is the Policy Director at the US Green Chamber of Commerce and an Attorney at Law, based in San Diego and specializing in business and environmental litigation. He is also a mediator. You can contact John by email JohnR@usgreenchamber.com or follow @usgreenchamber for future opinion pieces