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Bipartisan Senate Trio Agrees to Elimination of Ethanol Subsidy

Let’s celebrate perhaps the only bipartisan policy agreement that we’ll ever see this year, one that is actually not a bad policy. A group of Senators have come to an agreement to phase out ethanol subsidies.

Sens. Dianne Feinstein (D-Calif.), Amy Klobuchar (D-Minn.) and John Thune (R-S.D.) told Senate leaders that their proposal would repeal the 45-cent ethanol blender credit at the end of July, saving $2 billion through the end of the year.

It would also end a tariff of 54 cents a gallon on foreign ethanol this month. But it would extend a tax credit for green biofuels production for three years, expanding it to include fuels made from algae.

The lawmakers said the deal would cut $1.33 billion from the federal debt over the next six months, while investing $668 million in new energy technologies.

This will save even more over time, close to $30 billion in the ten-year window.

The writing was on the wall here once the Senate got 73 votes to end the ethanol subsidy back in June. It was just a matter of what the ethanol industry and their minders in Congress, namely Klobuchar and Thune, could salvage. They ended up shifting a chunk of the ethanol subsidy into a subsidy for green biofuels.

The ethanol for green biofuels trade sounds OK, but of course it depends on what qualifies as a biofuel. But I think corn producers see the writing on the wall. The government support for a cellulosic ethanol plant made from corn waste could spur innovations in that direction, and reduce corn yields overall. Anyway, there’s a federal mandate on alternative fuels that does plenty to prop up the market, so the subsidies aren’t needed anymore.

Of course, to actually get this, we’re going to need to endure a lot of needless pain and suffering. The Senators want their ethanol measure included in the debt limit deal.

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David Dayen

David Dayen

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