Wednesday, January 25, 2012

Congress Ends the Ethanol Subsidy

Last month Congress ended the federal subsidy for fuel-grade ethanol made from corn, according to news reports. The original idea behind the 30-year subsidy was that ethanol would help the U.S. reduce its dependence on foreign oil. It never accomplished that. In fact, the subsidy (45 cents per gallon) cost the taxpayers 6 billion last year, driving up the price of corn feed stocks for livestock and increasing the price of many foods.

But even with the subsidy removed, there will still be ethanol in our gasoline. The federal Renewable Fuels Standard still mandates that we use 36 billion gallons of biofuels per year by 2022, compared to 7.5 billion gallons this year. And along with eliminating the subsidy for U.S. production of ethanol from corn, Congress also removed the tariff on ethanol imported from Brazil. The Brazilians make ethanol from sugarcane, which turns out to be much more energetically efficient than making ethanol from corn. So, a) We’ll still be using ethanol, and b) It’ll probably come from Brazil. So much for reducing dependence on foreign suppliers of energy…

Still in force is a $1.01 per gallon production subsidy for ethanol derived from cellulosic biomass, such as wood, grass, and waste plant materials. We can only hope that encouragement of the fledgling cellulosic biomass fuels industry will pay off better than the subsidy for corn-based ethanol ever did.

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