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The Most Wasteful Ethanol Subsidy

Forbes |

In Brief...

With the 45 cent per gallon ethanol subsidy and the tariffs on imported ethanol both set to expire at the end of December, ethanol proponents and ethanol opponents have ramped up the rhetoric. The purpose of this essay is not to argue over the pros and cons of the role ethanol plays in the U.S. energy mix. Over the past three decades, the U.S. debt has steadily grown, and our children will have to pay for our debt. One is the 45 cent per gallon subsidy (called the VEETC) that is paid to oil companies to blend ethanol into gasoline. The second piece of legislation up for expiration is an ethanol tariff that is applied to ethanol entering the U.S. market. Brazilian producers want to see that tariff removed to open up the U.S. market, and U.S. producers want to see it maintained to protect their market. This is something that U.S. ethanol producers do not want, so they lobby to keep the VEETC, which then gives a reason to argue to keep the tariff.. When it became clear that the oil companies couldn't care less, the ethanol lobby started wrapping the notion of the VEETC in patriotism: This is the essence of the argument that chief ethanol lobbyist Bob Dinneen used recently when he talked about extending the subsidies without having a debate: But to the extent that oil companies are subsidized, the answer to that is to eliminate any wasteful spending, not add more on top by wastefully spending money on ethanol subsidies. Incidentally, what about Bob Dinneen's argument that it is simply too late in the year to debate the issue, and therefore the default position should be to extend the credits?. The problem with that is that Dinneen wasn't interested in debating that issue earlier this year either. When Growth Energy tried to have that debate way back in July, Dinneen wasn't interested. ?Now is not the time to add uncertainty and complexity to the energy tax debate,? said Bob Dinneen of the Renewable Fuels Association. Despite Bob Dinneen's plea, I don't think it's too late for debate.

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