Sugar cane group favored expiration of ethanol tariff, subsidiesWASHINGTON — Despite calls from across the country to reform 30 years of U.S. ethanol policy, some in Congress are intent on making a bad situation worse.
By: Joel Velasco,
WASHINGTON — Despite calls from across the country to reform 30 years of U.S. ethanol policy, some in Congress are intent on making a bad situation worse.
Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, had considered legislation that would cut the U.S. ethanol subsidy — known as VEETC, or the blenders’ tax credit from 45 cents per gallon to 36 cents per gallon, but extend the tariff on imported ethanol at its current rate of 54 cents per gallon — doubling the effective trade barrier that benefits corn ethanol from 9 cents to 18 cents.
Congress recently passed an extension of the 45-cent-per-gallon ethanol and $1-per-gallon biodiesel tax credits and the 54-cent-per-gallon ethanol import tariff.
Lame-duck lawmakers pushed ahead with a plan to charge American taxpayers more than $5 billion per year to subsidize the mature corn ethanol industry and increase a trade barrier that denies consumers choice at the pump.
These ethanol earmarks will make gas more expensive at a time struggling consumers are looking to Congress for relief.
The ethanol tariff and subsidies date back to the days of President Carter, and the historical basis always has been clear: to offset the tax credit so America does not subsidize foreign producers.
Bob Dinneen, president and CEO of the Renewable Fuels Association, underscores the rationale, saying: “We’ve always supported parity on the secondary tariff with the tax incentive. We think the only reason to have the secondary tariff is to protect the taxpayer, not the industry.”
Now, some in Congress have tried to change the rules by making the tariff a true trade barrier rather than a subsidy offset.
The corn lobby may cheer this increased trade protection, but the real losers are American drivers since the lack of competition will keep ethanol prices artificially high.
Importantly, such a blatant move by Congress to create further inequities will risk a trade war between the United States and its trade partners.
America’s corn ethanol industry has blossomed into a thriving business with booming exports to other countries and accounts for half of all ethanol produced around the globe.
Brazil is the world’s second-largest producer and the leader in sugarcane ethanol.
Brazil ended government subsidies for ethanol more than a decade ago and eliminated its import tariff early in 2010.
America should do the same. As the world’s top producers, the United States and Brazil need to lead by example in creating a free market for clean, renewable fuel.
Allowing sugar-cane ethanol to compete fairly in the U.S. would save drivers money at the pump, cut dependence on Middle Eastern oil and improve the environment.
The best option for Americans was to let the ethanol tariff and subsidies expire as scheduled because competition benefits consumers.
With Congress choosing to continue the ethanol subsidy instead of eliminating it altogether, it’s better to have a reduced import tax.
The ethanol import tariff shouldn’t exist at all. But if it must, the tariff should be a direct offset of the tax credit that protects Americans from subsidizing foreign production, not a punitive trade barrier.
Editor’s Note: Velasco is chief North American representative for the Brazilian Sugarcane Industry Association, or UNICA.