ethanol

Free Market Coalition Urges Congress to Let Ethanol Tax Breaks and Trade Protection Expire

by Marlo Lewis on October 21, 2010

in Politics

Yesterday on this site I explained why a “Do Nothing Congress on Ethanol Would Do a Lot of Good.” I also mentioned that today, a coalition of free market groups would be publishing an open letter advising Congress to let the clock run out on tax favoritism and trade protection for corn ethanol.

The groups issuing the joint letter are the Competitive Enterprise Institute (CEI), Freedom Action, the American Conservative Union, Freedom Works, National Center for Public Policy Research, and National Taxpayers Union.

CEI’s press release appears below. It includes commentary by yours truly on Obama Agriculture Secretary Tom Vilsack’s announcement of new biofuel initiatives at a press conference this morning, a link to the coalition letter, and a link to video excerpts of a speech in 2006 by then Gov. Tom Vilsack. The video illustrates the famous French adage, plus ca change, plus c’est la meme chose (loosely translated, “The more things change, the more special-interest politics stays the same”).
 

CEI’s press release follows:

 

Contact:
Nicole Ciandella, 202.331.2773
 
Tax-Subsidized Ethanol Boondoggle Set to Expire
Coalition Urges Congress to End Tax Breaks Tariff Protection for Ethanol

 

Special tax credits and tariff protection for ethanol are set to expire at the year’s end. To counter the corn ethanol lobby, which urges Congress to reauthorize these special-interest giveaways plus enact new mandates and subsidies, a coalition of free-market groups advises Congress to “do nothing” and let the clock run out on the tax credit and tariff.

The domestic ethanol industry currently enjoys a 45¢ per gallon “Volumetric Ethanol Tax Credit” (VEETC), which costs taxpayers $5-6 billion annually, and a 54¢ per gallon protective tariff, which prevents lower-cost Brazilian ethanol from competing in U.S. markets.

“Congress has a rare opportunity to avoid $25-30 billion in new deficit spending, ease consumers’ pain at the pump, and scale back political manipulation of energy markets by literally doing nothing,” the coalition told Congress in a letter today.

The groups issuing the joint letter are the Competitive Enterprise Institute, Freedom Action, American Conservative Union, Freedom Works, National Taxpayers Union, and National Center for Public Policy Research.

The coalition released its letter today because Agriculture Secretary Tom Vilsack held a press conference this morning announcing new Obama Administration biofuel initiatives.

Vilsack said the VEETC should be extended on a “short-term, fiscally responsible” basis, but would not define what that means. Similarly, he said the tariff should “eventually” expire, but would not propose a timetable for phasing it out.

“In 2006, when Secy. Vilsack was Governor of Iowa, he said the exact same things – that the tariff and tax credit eventually had to end,” said Marlo Lewis, Senior Fellow at the Competitive Enterprise Institute. “Gov. Vilsack didn’t say then when the phase out should start – and Secy. Vilsack is still not saying.” A video excerpt of Gov. Vilsack’s 2006 remarks on ethanol is available on Youtube.

“For fiscal, humanitarian, and environmental reasons, the ethanol tariff and tax credit must go,” said Lewis.

Read the full coalition letter here.

A “Do Nothing Congress” on Ethanol Would Do a Lot of Good

by Marlo Lewis on October 20, 2010

in Politics

Congress has a rare opportunity to shave $25-30 billion from the national debt, ease consumers’ pain at the pump, and scale back political manipulation of energy markets by literally doing nothing.

At the stroke of midnight on December 31 of this year, statutory authority for the 45¢ per gallon Volumetric Ethanol Excise Tax Credit (VEETC) and the 54¢ per gallon tariff on imported ethanol will expire.

For economic, humanitarian, and environmental reasons, Congress should sit back and let the grim policy reaper sweep these special-interest giveaways into history’s dustbin, as I explain this week on National Journal’s Energy Blog.

Tomorrow, at the National Press Club, Agriculture Secretary Tom Vilsack will discuss the Obama Administration’s “strategy” to grow the biofuel industry.

I’ve seen no inside info on what Vilsack will say. However, the corn ethanol lobby is pushing for “reforms” that would not only reauthorize the tariff and tax credit but also mandate the production and sale of ethanol-fueled vehicles and provide new subsidies to build a gigantic ethanol pipeline network and install 200,000 ethanol fuel pumps at service stations.

Just in case Vilsack decides to join this bandwagon, and on general principles, the Competitive Enterprise Institute, Freedom Action, and other free-market groups will send an open letter tomorow urging Congress to embrace the unheard of option of doing nothing, thereby benefiting taxpayers, consumers, and the environment.

I plan to attend the Vilsack press conference. Will he come out swinging for renewal of the tariff and tax credit? Will he propose new mandates and subsidies? Or will he keep things vague? Stay tuned.

Behold the Power of King Corn

by William Yeatman on October 14, 2010

in Blog

Humor me for a moment and imagine that I am a superhero who is part of a Super Friends team at the Competitive Enterprise Institute. We have sworn to use our superpowers only to combat a particular form of evil: rent-seeking. Naturally, we’d need a nemesis. This caricature of evil would represent everything we stand against; it would be the ultimate political panhandler.

Without a doubt, our nemesis would be King Corn.

Fantasies aside, the corn lobby, a.k.a King Corn, is unbeatable inside the beltway. In the 1980s, it secured federal giveaways to NOT grow corn. The lobby has since moved on to the ultimate boondoggle: corn fuels. By playing up jingoistic fears of “energy dependence,” King Corn has convinced the Congress that ethanol, a motor fuel distilled from corn, is a national security imperative, despite the fact that it increases gas prices, it’s awful for the environment, it contributes to asthma, and it makes food costlier.

So, in 2007, the Congress passed a Soviet-style ethanol production quota that forces Americans to use corn-fuel in their gas. Thanks to this mandate, American farmers devoted a third of this year’s corn crop to ethanol. Thus corn, soy, and cotton (the three crops grown on corn-hospitable soil in the U.S.) have become recession-resistant.

You’d think that a production quota, along with generous subsidies (to the tune of 51 cents a gallon), would be enough, but there can never be “enough” for King Corn. Now it has its eyes on an even higher production quota. There was, however, an intermediate step to this higher goal-the EPA had capped the percentage of ethanol that could be included in regular gasoline at 10%, due to concerns about engine harm beyond that point. For years, the corn lobby has been trying to lift that cap to 15%. Yesterday, the EPA relented.

Raising the ethanol cap was opposed by the oil industry, the environmental lobby, and the public health lobby. These are K-street titans, and they were vanquished by King Corn.

Behold, the power of King Corn.

How the New Senate Ag Chair (Blanche Lincoln) Changes America’s Energy Policy

by William Yeatman on September 15, 2009

in Blog

Last week Senator Blanche Lincoln (D-AR) became chairman of the Agriculture Committee, after Senator Tom Harkin (D-IA), the previous chair, accepted the gavel at the Health, Labor, Education and Pension Committee (vacated by the passing of Ted Kennedy).

Lincoln becomes the first female to chair this powerful committee, and her ascension to the top-spot will have a big impact on the country’s energy policy.

For almost a decade, the Senate Ag Committee has been the primary benefactor of ethanol, a fuel made from corn. Regardless whether the Ag chair was a Republican or a Democrat, the Committee, which is dominated by corn-belt politicians, showered ethanol with subsidies and give-aways-and even a Soviet-style production quota that forces consumers to use it. Government support for ethanol has been great for corn growers (they’ve seen demand increase by almost 50% since 2005), but it’s awful for livestock farmers, who have seen the cost of corn-feed skyrocket. Consumers have also been harmed, as the price of corn derivatives (meat, dairy, soda, etc., etc.,) has increased so sharply that inflation of the cost of food doubled the historical rate in 2008.

With Lincoln taking the gavel of the Ag Committee, however, the ethanol gravy train might be coming to an end. That’s because Lincoln doesn’t represent the corn-belt. To be sure, they grow corn in Arkansas, primarily in the eastern part of the state. But in western Arkansas, farmers raise chickens. In fact, the Natural State is the nation’s #2 producer of broiler chickens. America’s ethanol policy has seriously compromised the chicken industry, so we can expect Lincoln to take a more conservative approach with fuels made out of food.

Lincoln is also likely to affect the climate debate. The Ag Committee has some jurisdiction over climate change legislation, and Lincoln’s vote on cap-and-trade is a priority for her caucus leadership, which is having a tough time finding support for a climate bill among Senate Democrats. But Arkansas politics are decidedly unfavorable to global warming alarmism. Rep. Vic Snyder (D-Arkansas), who represents Little Rock and much of Pulaski County, was the only member of his State’s delegation to vote for the American Clean Energy and Security Act, cap-and-trade legislation that passed through the House of Representatives in late June, and he has been hammered over the airwaves by utilities, agriculture interests, and political opponents ever since. Now, there is considerable speculation that his seat is in jeopardy-all thanks to his vote for a cap-and-trade. No doubt Lincoln has noticed Snyder’s plight.

Marlo Lewis on the Costs of Ethanol

by Richard Morrison on February 20, 2009

in Blog, videos

[youtube:http://www.youtube.com/watch?v=–fouxXwKB0 285 234]

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