Saturday, March 12, 2011

Bill to Stop U.S. Ethanol Credit Needs to Pass

The bill to stop the outrageous tax credit for the destructive production of corn ethanol needs be supported and passed, which will save taxpayers $6 billion a year and get us out of a policy which is as damaging to the environment as any there is.

Congressional opponents of the $6-billion-a-year blenders credit see eliminating it as a no-brainer, while stalwart advocates are likely to put up a fight

WASHINGTON—It turns out Sens. Ben Cardin and Tom Coburn have more in common than six-letter last names that begin with the letter "C."

The Maryland Democrat and Oklahoma Republican have drawn a substantially higher number of cheers than jeers for introducing bipartisan legislation this week to repeal a tax credit on corn ethanol that could save taxpayers roughly $6 billion per year.

Both senators refer to the blenders tax credit as costly and ineffective in a joint statement. What's officially known as the Volumetric Ethanol Excise Tax Credit, or VEETC, pays 45 cents for each blended gallon.

Coburn, a conservative long known as a fiscal watchdog, labeled the ethanol tax credit as "bad economic policy, bad energy policy and bad environmental policy."

"The $6 billion we waste every year on corporate welfare should instead stay in taxpayers' pockets where it can be used to spur innovation, stimulate growth and create jobs," the conservative Oklahoman said Wednesday.

"I'm hopeful my colleagues on both sides of the aisle will take a stand against business-as-usual special interest giveaways and eliminate this wasteful and harmful subsidy."


Friday, March 4, 2011

Get Rid of Ethanol Subsidies, Save the World

America's farmers are closely eyeing commodity prices to help them decide what crops they should plant in their fields.

For American farmers, the options look great economically. Soybean futures are fetching 44 percent more than last year; wheat futures now get 69 percent more than a year ago and corn futures are up a full 92 percent.

But for buyers, especially in countries like China, India, Tunisia, Philippines, Egypt, Jordan, Indonesia and Pakistan where food is a full third or more of consumptive income, this spike in food prices is an economic crisis.

Many factors contribute to the world's food emergency. The most severe come from natural causes: drought in Argentina, China and Russia; floods in Australia, Canada and Pakistan.

But there is a set of man-made policies that is having a particularly pernicious impact on marginal world food prices while simultaneously costing the U.S. treasury more than $5 billion annually.

These are our policies to support the production and use of ethanol, a corn-based fuel. Congress provides a subsidy for every gallon of gasoline blended with ethanol. Congress also mandates its use.

It is true that ethanol provides a cleaner and environmentally safer octane boost than its alternatives. But it remains highly debatable whether it offers any net energy savings or any net environmental benefit.

Indeed, by the time one factors in all the petroleum-based inputs that go into ethanol's production and distribution (fertilizer, tilling, harvesting and shipping), David Pimentel at Cornell University estimates that it takes 1.3 gallons of oil to produce one gallon of ethanol.

And even if it takes, as some contend, a little less than a gallon of oil to produce a gallon of ethanol, that claim that ethanol provides environmental benefits becomes more questionable when one considers the water consumption, the fertilizer-laden run-off and pollution inherent in its production and distribution.

In the meantime, however, ethanol's mandated and subsidized use has tilted farmer's planting decisions towards corn. More and more corn is going to ethanol production. And consequently, less and less of what could be food supply is going to address the increasing world demand for food.

Ethanol is an inefficient substitute for petroleum. Subsidizing it not only costs the U.S. taxpayer over $5 billion each year, but it artificially incentivizes converting what could be food production into inefficient energy production at a time when the world is facing a most serious food crisis.

Getting rid of our nation's ethanol subsidy would help improve our country's balance sheet. But more importantly, it would eliminate an artificial price distortion contributing to a global food emergency.