With subsidies in the balance, Obama speaks up for ethanol
While the BBC explores the dark underbelly of the biofuel craze, President Obama affirms his support for crop-based fuels.
From The Hill:
President Barack Obama on Wednesday touted ethanol–both the current variety and next-wave fuels–as a key part of his energy strategy and a way to revive rural economies.
Obama endorsed expanded ethanol production during a speech at a Macon, Missouri plant owned by POET, the country’s largest ethanol producer.
“I believe in the potential of what you are doing right here to contribute to our clean energy future but also to our economy,” Obama told plant workers who produce 46 million gallons per year.
Obama’s declaration of support comes at a pivotal moment in the history of government subsidies for ethanol production. The long-standing $0.45/gallon tax credit for blending ethanol into the gasoline supply is set to expire this year. The credit costs the Treasury billions per year. In 2009, for example, 10.5 billion gallons of ethanol entered the auto-fuel supply at a cost of $4.7 billion to taxpayers.
That tax break has been in effect for years, and it’s highly unlikely that ethanol would ever have entered the U.S. gas supply without it. Ethanol provides just two-thirds the energy per unit volume of gas; it has traditionally needed the tax break to even approach competitiveness with petroleum-based fuel. I mean, how else could energy-light corn ever compete with energy-dense petroleum as an auto-fuel feedstock?
In 2007, Congress and President Bush dramatically upped government support for ethanol. They preserved the tax break, while imposing a “renewable fuel standard” which mandated that gasoline manufacturers mix ever-increasing amounts of ethanol into the fuel supply.
The mandates insured a growing market for ethanol, so you might think the industry would be sanguine about letting the tax breaks expire on schedule this year. Not so; ethanol’s political champions are fighting tooth and nail to keep the tax breaks in place. They are like spoiled children demanding an extra piece of cake, and to be paid for eating it, too.
Two corn-fed senators, Chuck Grassley (R-Nebraska) and Kent Conrad (D-North Dakota), have introduced a bill to extend the tax credits. They also want to extend another ethanol goodie due to expire: a long-standing tariff on foreign ethanol, which gives the domestic product yet another market advantage.
I’m agnostic about the tariff. With the “renewable fuel standard” in place, the tariff is probably all that’s keeping the U.S. market from being flooded with cheap Brazilian ethanol. While Brazil’s sugarcane-based product is likely more ecologically robust than our corn-based firewater, that’s not saying much. Indeed, for all the hype it’s gotten, Brazil’s sugarcane ethanol is fertilizer-intensive, relies on cheap and exploited labor, and is implicated in rain forest deforestation.
But I object to the extension of the tax credit; it should be opposed. The renewable fuel standard mandates that 15 billion gallons of ethanol enter the fuel supply by 2015. That will happen with or without the tax credit. If it’s going to happen anyway, why on Earth should taxpayers surrender $0.45/gallon for a grand total of $6.75 billion, in tax revenues?
Rather than mandating and subsidizing huge increases in biofuels, a truly progressive government would be investing in efficiency and low-impact fuels like wind and solar. In his remarks affirming his faith in biofuels, Obama didn’t specify whether or not he supports Grassley and Conrad’s absurd bill. Let’s hope he opposes it.