Ethanol Subsidy Set to Expire
Sometimes it’s good when expiring measures expire. Case in point: while Congress wrapped up business today by extending the payroll tax cut, unemployment insurance and a doctor’s fix, they neglected a host of other expiring tax measures. I mentioned some of the more disappointing expirations, including production tax credits for wind power, and subsidies to commuters for mass transit. But there are also a lot of unnecessary corporate tax breaks that will go by the boards after December 31. One of the most important, and the most needless, is the corn ethanol subsidy. This release from Friends of the Earth tells the story:
Congress finished its tax legislation today without including a provision to extend a massive subsidy for corn ethanol that is set to expire at the end of the year.
The subsidy — the Volumetric Ethanol Excise Tax Credit — has provided the oil and agribusiness industries with $0.45 per gallon of ethanol blended into gasoline, amounting to a total of approximately $6 billion each year […]
Friends of the Earth biofuels policy campaigner Michal Rosenoer had the following response:
“The end of this giant subsidy for dirty corn ethanol is a win for taxpayers, the environment and people struggling to put food on their tables.
“Corn ethanol is extremely dirty. It leads to more climate pollution than conventional gasoline, and it causes deforestation as well as agricultural runoff that pollutes our water.
“The growing demand for fuel crops also means less land is available for growing food, so food prices are going up. This is something many families simply cannot afford.
“Given corn ethanol’s downsides, it’s outrageous that taxpayers have been subsidizing the industry to the tune of $6 billion a year. The industry’s inability to get this tax credit extended signals that it no longer has carte blanche in Washington — corn ethanol is no longer a sacred cow.
What sometimes happens in the case of expiring tax measures is that a retroactive bill passes in the new year. That can still happen, on the good expiring measures and the bad. So Friends of the Earth and the other groups who stared down the ethanol lobby need to remain vigilant.
Still, there’s reason to believe that this could really be it for the ethanol subsidy. Phasing out the ethanol subsidy was a part of the original debt limit deal. Back in July, a trio of bipartisan lawmakers in the Senate agreed to get rid of the ethanol subsidy that would essentially trade ethanol for green biofuels, in a way that would save $30 billion over ten years. The Senate voted back in June to repeal ethanol subsidies, with a bipartisan 73 votes. It’s definitely easier to extend a tax break that’s active than to retroactively extend it after it has expired. And with all the opposition in Congress, I think the ethanol subsidy really may have reached its end.
This would be good news for the environment and renewable energy. I wonder if this will come up in the final days before the Iowa caucuses.