NRDC and others slam ethanol tax credit give away to oil in new ad

Everyone who thinks Big Oil should get $31 billion from U.S. taxpayers, please sign on the dotted line.  That’s the message of a new ad running today in Congress Daily sponsored by NRDC, the Union of Concerned Scientists, Friends of the Earth and the Clean Air Task Force. The ad highlights the wastefulness and redundancy of the Volumetric Ethanol Excise Tax Credit (VEETC), which amounts to little more than a massive government bribe to oil companies to get them to buy and blend gallons of corn ethanol they are already required to purchase under the Renewable Fuel Standard.

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As I’ve discussed here and here, corn ethanol is a mature technology that has been commercially viable for decades and today provides nearly 10 percent of light-duty vehicle fuel in the United States. Though the ethanol industry argues that the VEETC is critical to its survival, the reality is that most of the VEETC value ends up in the pockets of oil companies as profit.

So why has Old Ethanol mounted a massive lobbying campaign pushing Congress to extend the VEETC?  Multiple independent analyses (see the blogs above) show that the ethanol industry will continue to grow without the tax credit, just at slightly slower rates. But corn ethanol producers have built out their industry to supply the additional gallons of ethanol oil companies purchase beyond RFS mandates as a result of the tax credit. So now this mainstream industry is asking American taxpayers to continue spending billions per year just so they can keep their market a little tighter and their profits a little higher.

And what do we tax payers get in exchange for these billions of dollars? Not much besides more greenhouse gas emissions, more of the water pollution that has caused a dead zone in the Gulf of Mexico as large as the BP oil spill, higher prices for the corn soil in our stores and fed to our livestock, and more deforestation, as I discussed here. The ad drives this point home by telling taxpayers not to be fooled by the name of the subsidy: it’s not about creating new or cleaner ethanol. The VEETC almost exclusively supports ethanol from corn, which, when all direct and indirect costs are added, creates more global warming pollution than the oil it is supposed to replace!

No matter how you slice it, the VEETC is a massive giveaway to Big Oil for obeying the law that buys us little to nothing in terms of new jobs, environmental performance or even additional domestic ethanol production beyond the quantities already mandated by the RFS. And by subsidizing the best and worst gallons of ethanol, the tax credit comes at the expense of developing new and cleaner biofuels, such as those made from dedicated “energy crops” like willow and switchgrass, which I’ve talked about here.

We can and should support ethanol producers who open new plants, create new jobs, produce more advanced biofuels more efficiently and deliver real environmental benefits—but not by continuing to use scarce taxpayer dollars to pay for every single gallon of ethanol produced at decade-old plants. We can do better by supporting emerging and more competitive energy technologies in non-polluting wind, solar, geothermal and advanced biofuels that create many more times the green jobs we need and far less pollution. Now is the time for Congress to stop subsidizing Big Oil and Old Ethanol and allow the corn ethanol tax credit and tariff to expire at year-end.

About the Authors

Nathanael Greene

Director, Renewable Energy Policy, Energy & Transportation program

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