Baucus tax bill has good stuff, but corn ethanol tax credit is poison pill

Montana Senator Max Baucus’ release of a tax bill proposal yesterday includes investments in clean energy that would be a step forward in creating a clean energy economy, such as an extension of a grant program for clean energy projects and a tax credit for construction of high efficiency new homes.  Unfortunately, the proposal undermines these investments by throwing even more good money after bad by extending the environmentally harmful and fiscally irresponsible corn ethanol tax credit—known as the Volumetric Ethanol Excise Tax Credit or “VEETC”.  This handout to the oil industry means doing more harm than good when it comes to investing in clean energy and must be eliminated.

The VEETC will cost $4.75 billion next year alone, more than 2 times the roughly $2.25 billion in tax incentives for all other renewables in the tax extenders package.  Last year, corn ethanol received more than 70% of all federal tax incentives for all forms of renewable energy.  Not only is the VEETC bad fiscal policy, but it’s sucking all the oxygen out of our federal budget for renewables. Continuing to pump scarce taxpayer dollars into polluting corn ethanol will kill any hope that we’ll be able to transition to the new, better-performing advanced biofuels we need.

Instead of paying oil companies billions in scarce taxpayer dollars to use corn ethanol they are already required to use by law, Congress and the Obama administration must begin investing in smart energy policies that support a transition to the advanced biofuels that will deliver more jobs, more energy security and a cleaner environment.  Cutting wasteful handouts to the corn ethanol industry is the only chance we have to turn around the direction of our biofuels policy. The VEETC must be allowed to expire at year-end.

About the Authors

Nathanael Greene

Director, Renewable Energy Policy, Energy & Transportation program

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