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Ethanol Fight Moves to Renewable Fuels Standard

Ethanol production (phoyo: Sweeter Alternative/flickr)

The $6 billion-a-year ethanol subsidy really will expire in a matter of days. But that may not spell the end of ethanol-based tax credits. Specifically, the $1.01-a-gallon production tax credit for cellulosic ethanol – made from switchgrass or wood chips or corn husks – is a priority for the renewable fuels industry. That production tax credit does not expire until next year, and the industry wants a five-year extension.

More troubling for environmentalists is the renewable fuels standard that includes corn-based ethanol. This federal mandate requires 7.5 billion gallons of renewable fuel next year, and up to 36 billion by 2022. Corn-based ethanol, which is most ready to produce, takes up the lion’s share of the RFS at the moment. The fight for the environmental community is to kick corn-based ethanol out of the RFS.

“We will now also turn our attention to ending other federal policies that support dirty corn ethanol, including the Renewable Fuel Standard,” said Rosenoer.

Some environmentalists say that standard could be a useful tool to incentivize clean ethanol.

The standard needs “to be strengthened and improved over time” to avoid “being taken over by corn-based biofuels,” Nathanael Greene, director of renewable energy policy for the Natural Resources Defense Council wrote in his blog last week.

Greene’s fear is that the standard might be weakened by those opposed to measuring a fuel’s emissions of gases tied to global warming and its impact on land use.

There’s certainly room for a biofuels standard to spur innovation and reduce reliance on foreign oil. But a biofuels standard that includes a product that takes lots of energy to produce, and which raises food prices by taking up so much land, defeats the purpose of the RFS to create cleaner fuels and a cleaner planet.

Meanwhile, the fact that the dirty ethanol subsidy was allowed to expire, despite its centrality in the kickoff state to the Presidential primaries (just a few days away), represents a triumph of political polarization, says Matthew Yglesias. Put another way, the increasingly national tenor of our political debates means that parochial concerns like ethanol in Iowa get subsumed in favor of broader ideological concerns. If that’s what it takes to rid ourselves of a wasteful subsidy, all the better. It certainly makes Iowa less disappointing as a first-in-the-nation caucus state if it does less to distort national policy around peculiar, state-specific ends.

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David Dayen

David Dayen