Ethanol Subsidies Expire; Mandate Continues

by Brian McGraw on January 1, 2012

in Blog

From the 12/30/2011 Cooler Heads Digest:

This week the EPA finalized the 2012 biofuel volume mandates under the Renewable Fuel Standard, as established by the Energy Independence and Security Act of 2007. The controversial cellulosic “mandate” is currently set at 8.65 million gallons, down from an initial “requirement” of 500 million gallons as set by the EISA. In previous years, the EPA has held cellulosic requirements at levels greater than zero gallons, despite it being commercially unavailable. As a result, refiners have been required to purchase cellulosic “credits” from the EPA in lieu of purchasing the (nonexistent) cellulosic ethanol. Refiners expect to spend roughly $8 million complying with this bogus program in 2012 unless cellulosic ethanol finally materializes.

In related ethanol news, this week also marks the end of the ethanol tax credit (VEETC) and the corresponding tariff on ethanol imports. As the Wall Street Journal noted today: “Congress created ethanol subsidies in 1978, expanded them in a 1980 bill, and then rinsed and repeated in 1982, 1984, 1988, 1990, 1992, 1998, 2004, 2005 and 2007.” The more damaging mandate, the Renewable Fuel Standard, remains in effect.

The RFS will require oil refiners to blend 15.2 billion gallons of biofuels into our fuel supply this year, and will increase to 36 billion gallons by 2022. How this will be possible remains to be seen, as consumers have shown little interest in purchasing vehicles that run primarily on ethanol, and there are a number of difficulties in requiring that non-modified cars run on gasoline containing much more than 10-15 percent ethanol.


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