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Published May 16, 2011, 04:45 AM

Legislation would repeal ethanol subsidy, reduce tariff

WASHINGTON — If the cattle industry received the same government support as the ethanol industry, ranchers would get generous subsidies to raise their stock, the American public would be mandated to consume certain amounts of beef and most foreign cattle would carry punitive import tariffs. Of cours

By: Sen. Dianne Feinstein,

WASHINGTON — If the cattle industry received the same government support as the ethanol industry, ranchers would get generous subsidies to raise their stock, the American public would be mandated to consume certain amounts of beef and most foreign cattle would carry punitive import tariffs.

Of course, this is not the case.

Ethanol is the only industry that benefits from such a triple crown of government intervention: its use is mandated by law, oil companies are paid by the federal government to use it and it is protected by tariffs. I think it is time to end this outdated policy that is fiscally irresponsible, environmentally unwise and makes our country more dependent on foreign oil.

I have introduced legislation to repeal the 45-cent-per-gallon corn ethanol subsidies and reduce the ethanol tariff. My bill would eliminate a subsidy that costs taxpayers nearly $6 billion a year while continuing to support producers of noncorn, second-generation “advanced biofuels” that are more environmentally friendly and nonmarket distorting.

The practice of subsidizing the blending of corn ethanol into gasoline is fiscally indefensible. If this policy were to remain in place, the U.S. Treasury would pay oil companies at least $31 billion to use 69 billion gallons of corn ethanol through the next five years, even though the Federal Renewable Fuels Standard already requires those companies to use ethanol.

Competing for corn

It makes no sense, and we cannot afford to pay the oil industry to obey the law. Plus, large oil companies certainly don’t need more financial help from taxpayers. The cattle industry and other animal agriculture industries are disadvantaged in this equation. It is increasingly more expensive for ranchers to buy feed, largely because they directly compete with ethanol producers for corn.

In 2000, approximately 7 percent of the U.S. corn crop was used to produce ethanol. By 2010, that number had risen to 39 percent. And it will continue to rise until we shift from corn ethanol to advanced biofuels that lower pollution and do not distort markets for food and feed.

Another flaw with current policy: Ethanol tariffs make our country more dependent on foreign oil. The tariffs are more than 14 cents per gallon higher than the ethanol subsidy they supposedly offset. This lack of parity means imported ethanol suffers a competitive disadvantage against imported oil. By leveling the playing field between imported oil and imported low-carbon ethanol, my bill would diversify our fuel supply, replace oil imports from OPEC countries with low-carbon sugar cane ethanol from Brazil, India and Australia and expand our trade relationships with democratic states. The costs of ethanol subsidies and tariffs far outweigh the benefits.

Responsible energy growth

The Center for Agricultural and Rural Development at Iowa State University in Ames recently estimated that a one-year extension of the ethanol subsidy and tariff would lead to only 427 additional direct domestic jobs at a cost of almost $6 billion, or roughly $14 million of taxpayer money per job. According to a July 2010 study by the Congressional Budget Office, ethanol tax credits cost taxpayers $1.78 for each gallon of gasoline consumption reduced, and $750 for each metric ton of carbon dioxide equivalent emissions reduced.

Developing and growing clean energy sectors are important goals, but we must do so responsibly. Eliminating the corn ethanol subsidy, lowering import tariffs and supporting noncorn ethanol are all steps that move us in the right direction.

Editor’s Note: Feinstein is a Democratic senator from California.

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