Annual biofuel subsidies will hit $60 billion in 2022 — Earth Track

by Marlo Lewis on May 12, 2009

Doug Koplow of Earth Track, assisted by researchers with Friends of the Earth, has produced a new study, A Boon to Bad Biofuels, on the taxpayer cost of federal biofuel tax credits and mandates. The numbers are staggering.

In 2008, federal support for ethanol and biodiesel totalled more than $9.5 billion. The subsidy system has two main components:

  1. The Renewable Fuels Standard (RFS), which mandates increased blending of biofuels into the national motor fuel supply, ramping up from 9 billion gallons in 2008 to 36 billion in 2022.
  2. Tax credits including the Volumetric Ethanol Excise Tax Credit (VEETC), which pays out $0.45 for each gallon of corn ethanol; a parallel program for biodiesel worth $1.00 per gallon; and a production tax credit that pays $1.01 for each gallon of cellulosic ethanol produced.

“In their current form, these tax credits scale linearly with production, without limit,” notes Koplow. This means that the $9.5 billion in subsidies in 2008 increases six-fold to $60 billion in 2022, “due both to more production and to a shift to more heavily subsidized cellulosic fuels.” The cumulative cost from 2008 to 2022: $420 billion, nearly 40% of which will go to the corn industry.

But wait, there may be more. As a candidate, Obama proposed to up the RFS to 60 billion gallons by 2030. If this proposal is adopted, “subsidies would top $120 billion per year by the end of the period, for a cumulative subsidy during the 2008-2030 period of more than $1 trillion.”

Kudos to Koplow and his colleagues at Friends of the Earth for this important contribution.

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