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Published June 21, 2011, 10:17 AM

Gradual reduction of ethanol subsidy a sensible plan

LINCOLN, Neb. — If Congress ever gets around to making the sort of spending cuts needed to put the country’s finances on a sustainable path, the ethanol industry justifiably will be required to do its share.

LINCOLN, Neb. — If Congress ever gets around to making the sort of spending cuts needed to put the country’s finances on a sustainable path, the ethanol industry justifiably will be required to do its share.

As critics have pointed out, the industry currently enjoys a rare trifecta of government support. It’s subsidized. Its use is mandated. It’s protected from foreign competition.

Thanks to the government support, the industry has grown in the past three or more decades to the point that it now provides about 10 percent of the country’s transportation fuel needs.

Careful cut

But there’s a responsible way to cut the subsidy and a reckless way.

Some of the shriller budget hawks in Congress, joined by longtime critics of ethanol, are pushing for total elimination of ethanol subsidies.

A more sensible proposal drafted by Sen. Chuck Grassley, R-Iowa, has drawn bipartisan support.

The plan would cut the tax credit to refiners from 45 cents a gallon to 20 cents in 2012 and to 15 cents in 2013. Starting in 2014, the credit would be tied to the price of oil. It could rise to 30 cents if the price of oil is below $50 a barrel or disappear if the price rises higher than $90 a barrel.

In addition, the proposal would cut the tariff on imported ethanol from 54 cents a gallon to 20 cents in 2012, and then to 15 cents through 2016.

The last thing that consumers need in this tough economy is higher gas prices.

The gradual ethanol subsidy reduction in Grassley’s bipartisan plan recognizes the importance of domestically produced, renewable fuels. The proposal deserves to be part of a comprehensive national energy policy.

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