Editorials make case against corn ethanol subsidies, industry can't get all it wishes for anymore

Yesterday, we talked here about just how far we’ve come from early this year, when the corn ethanol industry was demanding $31 billion in subsidies over 5 years, to today, when they’re begging for a fraction of that. And now, as the Senate nears a vote on the possible extension of tax incentives for renewable energy, editorials in The New York Times, The Washington Post and the Chicago Tribune are once again making the case for ending the wasteful and redundant corn ethanol tax credit—know as the Volumetric Ethanol Excise Tax Credit or “VEETC”—once and for all.  

Together with the Wall Street Journal, the nation’s four major newspapers highlight the massive costs to U.S. taxpayers of redundant corn ethanol subsidies and just how little we receive in return.

The Washington Post editorial argues:

“For decades, the idea behind corn ethanol has been that fuel derived from the crop could diminish America's dependence on distasteful foreign regimes for fuel…Congress established an overlapping and expensive system of subsidies, requiring that billions of gallons of ethanol be blended into the nation's gasoline, slapping tariffs on foreign ethanol and handing those who blend the fuel into gasoline a tax credit of 45 cents a gallon.

In other words, the government pays the industry for the privilege of selling to a captive market, spending $6 billion in 2009 on the tax credits alone. Without the tax credits, the amount of corn ethanol produced would still increase over the next 10 years, the Agricultural Policy Research Institute at the University of Missouri calculates. Yet the Congressional Budget Office (CBO) estimates that taxpayers still pay $1.78 to replace a gallon of gasoline with its energy equivalent of corn ethanol."

The Chicago Tribune editorial agrees:

“The fiscal tab of the federal tax credit comes to about $6 billion a year, which is more than the entire savings from President Obama's two-year freeze on federal civilian pay. The more dire our fiscal predicament grows, the harder it is to justify this special-interest expense.”

The New York Times editorial makes clear that ethanol industry lobbyists like Growth Energy and the Renewable Fuels Association (RFA) pushed hard all year for a 5-year extension of the main corn ethanol tax credit for a total of more than $31 billion in subsidies.

But as The Washington Post points out:  

“Typically, the farm lobby has won out on such issues. But this year it's meeting stronger than usual opposition from a bloc of fiscal conservatives and environmentalists, backed by such strange bedfellows as Tea Party organizer FreedomWorks and ultra-liberal pressure group MoveOn.org - even Sen. Jim DeMint (R-S.C.) and Al Gore.”

RFA and Growth Energy started off the year calling for a five-year, $0.45 cent-per-gallon extension of the VEETC. But it’s clear that they won’t always get what they wish for anymore. At most, it seems that lawmakers will approve a short-term VEETC extension, most likely at the reduced rate of $0.36 cents-per-gallon. That’s a big win for U.S. taxpayers. But there’s still time for Congress to stand up and sunset the VEETC entirely, ending wasteful, unnecessary tax breaks for mature, mainstream and polluting corn ethanol, while showing their support for smart tax incentives for clean energy projects like wind, solar and energy efficiency.

About the Authors

Sasha Stashwick

Senior Advocate, Energy & Transportation and Food & Agriculture programs

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