The expiration of the Volumetric Ethanol Excise Tax Credit (VEETC) at the end of 2011 has led to a number of ethanol plants shutting down, and others operating in the red:

After predicting they would survive the end of a major federal subsidy without problems, it looks like officials at the nation’s ethanol producers may have been too optimistic.

Since the subsidy ended Dec. 31, ethanol profit margins have declined sharply, even slipping into negative territory. Experts see no quick turnaround in sight.

Now that the subsidy has disappeared, the ethanol downturn is being felt nationwide, including in Minnesota. The state’s $2 billion-plus industry ranks fourth in the nation in capacity and production.

At the Al-Corn Clean Fuel ethanol plant in southeast Minnesota, CEO Randall Doyal sees how the loss of the subsidy has hurt this business. He said his profit margin — the difference between the cost of making the corn-based fuel and what he can sell it for — has disappeared.

“Since the first of the year it’s been even-to-slightly negative,” Doyal said.

It’s not exactly satisfying to see economic activity being shuttered during a time of high unemployment, as undoubtedly hard-working individuals at these plants are temporarily out of work. But those who support aligning our energy economy more closely with market principles are in a minority, so we don’t necessarily get to choose when and where some of these decisions (that can be painful in the short run) are made.

Aside from Minnesota, ethanol production in Iowa is struggling as well, operating at  a margin of -11 cents per gallon:

Figures from Iowa State University Extension confirmed that Iowa’s ethanol plants operated in the red during January, to the tune of 11 cents per gallon.

That comes after operating margins of 19 cents per gallon in December, 69 cents in November, 42 cents in October and 34 cents in September.

The first quarter is typically a tough period for ethanol as gasoline demand falls, but ethanol producers had feared a more severe downturn than usual this year due to continued high prices for corn and the loss of the 45-cents per gallon federal tax credit on Jan. 1.

As you can see from the huge swing in profit margins, the expiration of the tax credit certainly hurt the industry. Furthermore, demand for ethanol is currently low as refiners — forward looking economic actors — purchased significant quantities of ethanol prior to the expiration of the tax credit to take advantage of the tax credit before it expired.

In the long run, the industry is still supported by the Renewable Fuel Standard which keeps a floor on demand. Some plants have closed in the short run, though its likely that most will eventually open in the future when demand recovers.

January marked the first month that the ethanol industry had to stand on its own feet was only supported by a massive taxpayer mandate for their product, rather than tax preferences, tariff protections, and a mandate.

Do not fret, as sales for E10 (10% ethanol 90% gasoline, commonly purchased at the pump) will hold remarkably steady, because this is the primary venue the rent-seekers use to dilute our nations gasoline supply with ethanol. I only slightly kid, as it makes sense to blend small percentages of ethanol into our fuel supply, though not in amounts exceeding 10 percent.

However, in the United States there are also niche markets for E-85, which is made up of 85% ethanol and 15% gasoline. E85 sales more accurately reflect what an actual competitor to gasoline would look like, as E10 blends only supplement regular fuel production. While there are a number of flex-fuel vehicles on the road (FFVs) capable of running on any blend of ethanol and gasoline, E85 sales have never taken off in the United States. This is because, after adjusting for the lower energy content in ethanol, it costs more money per mile traveled to fuel your vehicle with E85 than E10. It has always been this way and its unclear if it will ever change.

The lapse of the volumetric ethanol tax credit (VEETC) in January made this much worse, as E85 was receiving a tax credit worth just short of 40 cents per gallon, allowing the fuel to be sold more cheaply than it would absent the tax credit. Sales of E85 in Minnesota are about to discover this new reality:

The post-subsidy era also brings tough choices for owners of flexible-fuel vehicles, including the state of Minnesota, which has more than 3,000 vehicles capable of burning E85, and in 2010 used 963,000 gallons of it.

They must decide whether to support a fuel that is 85 percent home-grown ethanol even it it’s no longer competitively priced. Minnesota is the nation’s fourth-largest ethanol producer, and leads the nation with 364 retailers selling E85.

“We have our eyes open, and we are watching this,” said Tim Morse, director of Minnesota’s fleet. “We think it is too early to make any kind of decision right now.”

Morse said he wants to see if the full 38 cents of lost E85 subsidy gets added to the state’s fuel price. That could boost the state’s annual E85 bill by $366,000.

Last week in the Twin Cities, E85 was 16 cents to 40 cents lower than regular gasoline, which also rose in price. That’s as little as a 5 percent price difference. E85′s price advantage has sometimes been more than four times better and averaged 17 percent last year, according to the state Commerce Department.

The state of Minnesota has been purchasing E85 for state-owned flex fuel vehicles in the past. It isn’t clear if this saved them money, which is incredibly unlikely, or if they were doing it out of “statriotism.” Regardless, even now they feel the need to balance budget savings versus the very minute and possibly non-existent environmental benefits of corn ethanol.

More broadly, this demonstrates why the ethanol mandate is non-sensical and needs to be abandoned. Cellulosic ethanol has hit its 4th or 5th straight year of still being “right around the corner” and even environmentalists are becoming skeptical of its touted environmental benefits, after seeing the realities of corn ethanol. Allowing increasing blends of ethanol beyond E10 into our fuel supply is a pointless handout to an industry friendly with the Obama Administration. It’s hurting our refining industries which already operate on very low margins, and consumers have demonstrated that they prefer the price savings to vague and questionable environmental benefits.

Something will have to give soon. Our fuels market is not ready to go beyond E10 (and absolutely not beyond E15 in its present form), and consumers are not going to purchase E85 or flex fueled vehicles unless it saves them money. If not abandoning the ethanol mandate completely, the EPA could start by capping it (or suggesting that Congress cap it) at its current level.

Just a few days after our previous post outlining the ethanol industry’s brave, unprecedented, legendary, and 100% voluntary decision to give up the ethanol tax credit, we see that there are still other subsidies that they are interested in keeping:

But the head of the Renewable Fuels Association—Bob Dinneen—says the industry will work to ensure that tax credits for cellulosic ethanol will continue past the end of 2012.

“We think that the production tax credit and the depreciation that is now allowed for cellulose needs to continue,” Dinneen says.

Extension of the cellulosic tax credits will send an important signal to the marketplace and encourage investment in the next generation of ethanol technology, Dinneen says.

And to those who consider it just another federal subsidy for ethanol…

“They need only look at the tax incentive for grain-based ethanol that has just expired–that demonstrates you don’t need a tax incentive forever,” Dinneen says.

“You need to encourage investment—convince the marketplace that there is going to be consistent government support that will allow the industry to get on its feet.”

Cellulosic ethanol has not yet been produced commercially, but according to the U.S. Department of Energy web site, several commercial cellulosic plants are under construction.

Not including the federal mandate for their product or various state-level incentives, the ethanol industry has been federally subsidized in some form for over 3 decades. Just think, at this pace, after another 2-3 decades of timely, critical subsidies for the cellulosic ethanol industry they might be able to make a tiny dent in our oil consumption. What a bargain!

Writing in The Hill’s Congressional Blog, lobbyist in chief for the ethanol industry Bob Dineen waxes poetic about the historic nature of the ethanol industry voluntarily giving up losing one of its subsidies, the Volumetric Ethanol Excise Tax Credit (VEETC):

With growing concerns about gridlock in Washington and greed on Wall Street, Americans are wondering whether anyone with a stake in public policies is willing to sacrifice their short-term advantage for a greater good.

Well, someone just did.

Without any opposition from the biofuels sector, the tax credit for ethanol blenders (the Volumetric Ethanol Excise Tax Credit – VEETC) expired on January 1.

In fact, American ethanol may well be the first industry in history that willingly gave up a tax incentive. Facing up to the fiscal crisis in this country, industry advocates have engaged in discussions with the Administration, Congress and our own constituents in an effort to frame forward-looking policies that balance the needs for deficit reduction and the development of clean-burning, American-made motor fuels.

Incentives should help emerging industries to develop and grow, not to be forever subsidized by the nation’s taxpayers. The Volumetric Ethanol Excise Tax Credit — which actually accrued to biofuels blenders, not producers – has helped the renewal fuels industry to stand on its own two feet. So now it is time for this subsidy to be phased out.

As a colleague wrote in an e-mail regarding this work of fiction, “BWAHAHAHAHAHAHA!!!” The ethanol industry did not voluntarily give up this subsidy. Last year they fought to get it extended, but were only able to secure a 1 year extension due to stiff opposition by competing interests. Earlier this year, the industry — knowing that this subsidy was going away — attempted to terminate it halfway through the year and capture the remainder of the funds and use them to create ethanol pipelines (ethanol cannot be piped through the oil pipelines set up throughout the country).

Finally, this subsidy is small potatoes for the ethanol industry. The important subsidy is the Renewable Fuel Standard, which is still set in stone and getting more lucrative for the industry every year, as refiners are required to blend increasing amounts of ethanol into each and every gallon of gasoline purchased by Americans. This is conveniently left out of Mr. Dineen’s op-ed, as he hounds tax credits for fossil fuel industries (and we agree here, to the extent that some of these things are indeed subsidies, they should be ended. Unfortunately, he is assuredly referring to standard manufacturing tax breaks that hundreds of different industries take advantage of).

He also makes it clear that though this subsidy is gone, they would love help (read: money) to build out ethanol pipelines and blender pumps for higher blends of ethanol that consumers do not want.

H/T to Knowledge Problem.

It’s now all but certain that the ethanol tax credit will expire at the end of the year, and the ethanol producers continue to claim credit for “giving it up” despite that it was obviously lost due to larger political considerations, and the fact that they lobbied initially for its extension and then eventually for a substitute which would have still funneled money into their industry. The tariff on ethanol imports also expires at the end of the year, and is likely to expire, though a bill was just introduced to extend it. It has no chance of passing through normal legislative means but its not impossible for it to be attached to larger omnibus bills in order to appease ethanol interests.

There are a few problems here. First, restrictions on trade are not normally good, but the fact that much of ethanol consumption is due to the renewable fuel standard mandate (and not market forces) complicates things. If imports of sugarcane ethanol are merely going to cut down on corn ethanol consumption/production, then it seems that the removal of the trade barrier would be a neutral/good thing. However, if imports of sugarcane ethanol require that Americans purchase additional ethanol relative to a baseline with the tariff, then an argument could be made for keeping the tariff. There are also other longer term political considerations: if sugarcane ethanol is kept out, the corn ethanol folks might lobby to lift the cap on corn ethanol and allow it to qualify as an advanced biofuel. Or, Congress might scrap the advanced biofuel RFS altogether as cellulosic ethanol is yet to exist.

However, the conversation has largely moved beyond the tax credit/tariff question. Now, environmental and free-market groups have yet again joined to request a hearing on the renewable fuel standard:

Yesterday a diverse coalition of hunger and development organizations, agriculture groups, budget hawks, free marketers and environmental groups called on the Senate Committee on the Environment and Public Works to hold hearings on the impacts of the Renewable Fuel Standard. A number of studies have recently been released criticizing the Renewable Fuel Standard for damaging the environment and increasing food price volatility, while a scandal involving fake credits has brought the Renewable Fuel Standard’s compliance system into question by the EPA and industry alike.

CEI has signed onto this letter along with groups like Friends of the Earth, Greenpeace, Americans for Tax Reform, ActionAid USA, Oxfam America, and a number of industry groups. Naturally, the ethanol industry countered with their own letter.

We hope that the Senate Committee on the Environment and Public Works will consider a hearing on whether it might be a good idea to stop the RFS in its place or perhaps remove it entirely and allow more efficient market based policies to govern our liquid transportation fuel sector.

The ethanol compromise did not make it into any debt ceiling negotiations and its future is now looking bleaker than ever before. The Congressional ‘super-committee’ established by the debt ceiling negotiations will have to decide by November 23rd some manner to reduce the deficit by $1.5 trillion or face potentially unpopular automatic spending cuts to defense and discretionary spending (though USA Today writes that these “threats” have failed in the past). None of the rumored super-committee members seem to be from regions that would require their support of the ethanol industry

The ‘ethanol compromise’ had legs because it funneled money into the domestic ethanol industry while still maintaining a facade of deficit reduction. It would have collected $2 billion in revenue from the ending of the domestic tax credit as of July 21 and used a small amount less than that to spend on items near and dear to the ethanol industry (mainly ongoing support for cellulosic ethanol and money for the installation of blender pumps at fueling stations), hence their support.

The deficit reduction from the ethanol tax credit is no longer possible because the ethanol tax credit is again set to expire at the end of the year (as it was extended for one year at the end of 2010). This means that any potential deficit reduction is slowly being eroded as the tax credit continues on towards the end of the year, and renewal of support for the industry will add to the deficit rather than reduce it, making it much more difficult for conservative politicians to support it (though, obviously, they have been willing to forget their supposed free-market ideology when it suits them).

So it seems likely that the tax credit and tariff will expire at the end of 2011. It is possible (though it is harder to get subsidies back once they’ve been gone) that future support for the industry will get stuck into a larger energy bill, especially support for ‘next generation’ biofuels which remains popular among those who have given up on corn based ethanol. The Renewable Fuels Association has high hopes:

Bob Dinneen, president and CEO of the Renewable Fuels Association said that because the debt deal includes a call for a future budget framework, the opportunity to discuss comprehensive energy tax policy still exists. This could include infrastructure support, tax incentives for second-generation ethanol technologies and feedstocks and the repeal of petroleum subsidies. “With the debt ceiling crisis looking as though it has been averted for now, we hope Congress and the administration are now prepared to address the nation’s worsening energy crisis, as oil and gasoline prices continue to rise and the nation’s investment in homegrown renewable fuels languishes,” he stated.

The much bigger problem with ethanol is still the renewable fuel standard. This fight will manifest itself in future years as virtually every related industry outside of those who produce ethanol revolt against higher blends of ethanol entering the fuel supply (this assumes that ethanol does not become cost competitive with petroleum, if it does, the government would do best to get out of the way).

As was widely reported, the Senate voted last week on a bill that would terminate the ethanol tax credit and corresponding tariff. While many were excited by the prospect of finally moving towards better energy policy, it seems likely that things will still get worse before they get better. The ethanol industry does not seem worried.

Consider the following: John McCain (R-AZ) offered additional legislation, while the Senate was voting down the tax credit, that would have ended federal subsidies for ethanol fuel pumps at gas stations. This was voted down 41-59:

“It lost because of the influence of the ethanol lobby,” McCain said on Fox News Thursday, alleging ethanol “is probably the greatest rip-off that I’ve seen since P.T. Barnum.

“It is one of the most outrageous examples of the influence of special interests,” McCain said.

He said that the rejection of his amendment thwarts the will of voters who handed Republicans major gains in last year’s midterm elections.

McCain said:

“The American people as of last November expected us to act. If we don’t, I think they will try to find somebody else that will. This example, the failure to address ethanol, at last to phase out these incredible subsidies to ethanol is really, I’m sorry to say, a signal to the American people we are not serious. And the special interests still govern here in Washington.”

He is right — though some Democrat’s have turned against ethanol, most haven’t, including the Obama Administration. And it seems, as some predicted all along, that though the tax credit might sunset, it will be replaced by some form of corporate welfare. The ethanol industry has suggested a number of different types:

• Require that all automobiles sold in the U.S. be flex-fuel vehicles — as many as 120 million — at no additional cost to the taxpayer.
• Eliminate artificial barriers to the transportation fuel market by building out the distribution infrastructure for ethanol, including 200,000 blender pumps and federal loan guarantees for ethanol pipelines. This infrastructure will provide consumers the access to choose ethanol in an open and free market.

Ignoring their abuse of language (free markets don’t involve federal subsidies and mandates), these subsidies will be much worse than the tax credit, as they will stick around forever and potentially be much more expensive. As more infrastructure and capital is invested into projects that cannot survive without federal support, the more money and fear mongering will be employed by the industry every time their federal support begins to dry up. Perhaps the relatively inexpensive $6 billion per year was a blessing in disguise compared to what they might get stuffed into a larger energy bill.

Everybody and his brother are reporting yesterday’s cloture vote on Sen. Tom Coburn’s amendment to repeal the ethanol tax credit as a widespread rejection by GOP lawmakers of the Taxpayer Protection Pledge, conceived and administered by Americans for Tax Reform (ATR). This is spin.

Many in Washington would like nothing better than for Republicans to disown their chief product differentiator, their promise in writing not to raise taxes. That may happen. Raising taxes is what politicians do, especially those who claim we have a deficit problem rather than an overspending problem. But repudiating the Pledge is not what went down in the Senate on Tuesday.

Here’s how one commentator, Howard Gleckman of the Urban Institute, described the vote:

In a small but important way, 34 GOP senators proved to themselves–if to no one else–that they can vote to “raise taxes.”  Most had signed the infamous pledge demanded by the self-styled protector of the faith, Grover Norquist, that they would never ever vote to raise taxes on anyone in any circumstances. Now, they have.

Actually, no, they have not, as I’ll explain below. But first, let’s be clear about one thing — even a false accusation of breaking the Taxpayer Protection Pledge can be damaging to GOP lawmakers. Consider this story by Ben Geman in yesterday’s edition of The Hill:

Mass. Dems bash Sen. Scott Brown on ethanol vote
 
Massachusetts Democrats are attacking Sen. Scott Brown (R-Mass.) for his vote Tuesday in favor of repealing a major ethanol industry tax break, alleging the vote broke with Brown’s signed pledge to a major conservative group not to raise taxes.

Brown — who faces reelection in the typically blue Bay State next year — voted with 33 other Republicans and six Democrats for Sen. Tom Coburn’s (R-Okla.) amendment, which fell well short of the 60 votes needed.

“During his campaign for U.S. Senate, Scott Brown told voters what he thought they wanted to hear and now that he’s in Washington, he’s breaking promises right and left,” said Massachusetts Democratic Party spokesman Kevin Franck in a statement.

Brown, ahead of his upset 2010 Senate win, touted his signing of the group Americans for Tax Reform’s (ATR) “Taxpayer Protection Pledge,” which states that he would opposes tax hikes and “any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.”

There are several errors here. To begin with, the Pledge that Brown and 33 other GOP Senators and all but six GOP House Members have signed is not to ATR but to the people of their respective states or districts. ATR administers the Pledge and monitors fidelity to it, but the Pledge is a promise from the lawmaker to his constituents.

More importantly, those claiming that Brown and other GOP Senators broke the Pledge are mistaken for two separate reasons.

First, yesterday’s vote was procedural — a vote on a cloture motion. It was a vote on whether to end debate and have a vote on Sen. Coburn’s amendment to kill the ethanol tax credit. It was not a vote for or against repeal of the tax credit. It does not count one way or the other under the Taxpayer Protection Pledge.

Second, even if the Coburn amendment had come to a vote, Sen. Brown could have voted for it without violating the Pledge.

Here’s why. Candidates who take the Pledge promise to oppose (1) increases in marginal tax rates and (2) repeal or reduction of tax deductions or credits “unless matched dollar for dollar by further reducing tax rates.” Had the Coburn amendment come up for a vote, Sen. Jim DeMint was prepared to offer an amendment killing both ethanol’s main policy privilege — the Soviet-style production quota euphemistically called the “Renewable Fuel Standard” — and the death tax. Repeal of the the death tax would overwhelm the tax increase from repeal of the ethanol tax credit.

Thus, by voting for the DeMint amendment, Brown and the other GOP Senators could have voted for the Coburn amendment and still kept their promise to oppose any net increase in taxes.

In what is being described as an ambush, Senator Tom Coburn (R-OK) has successfully forced a vote (next Tuesday, June 14) on legislation that would, upon July 1, terminate the ethanol tax credit and corresponding tariff. A back of the envelope calculation suggests it would save approximately $3 billion in the remainder of 2011.

According to the article, Coburn is cautiously optimistic that he has 60 votes. Politico gets it right, this is a big deal regardless if it passes:

Regardless of whether the underlining economic development legislation gets through the Senate and House and to the president’s desk, a vote on Coburn’s amendment could be a major symbolic vote.

Ethanol backers have been looking to try to stave off such moves by working behind the scenes on ways to quickly move off of the blender tax credit and transition to federal assistance for blender pumps and other infrastructure to grow the market base for ethanol and other biofuels.

Even if he gets the necessary votes in the Senate, it seems unlikely that both the House passes similar legislation that President Obama then signs. However, if this gets a significant number of votes, it could spell doom for the future of the industry. A repudiation of tax incentives for ethanol will certainly limit the industry’s ability to lobby for infrastructure assistance, which they have successfully framed as ending the subsidies. Of course, re-directing the current subsidies into money for blender pumps and ethanol pipelines is not in any form an “end” to the subsidies.

The industry, caught off guard, is angry:

The RFA statement from President and CEO Bob Dinneen is as follows:

“This is the same kind of political gamesmanship that nations like Iran and Venezuela are exercising to keep consumer energy prices artificially high and Americans addicted to oil.  If this were truly about sound policy and concerns over energy tax subsidies, then this amendment would include efforts to repeal the billions of taxpayer dollars oil and other mature energy industries receive each year while posting tens of billions of dollars in profits quarterly.  As few observers give this bill any chance of getting to the president’s desk, Sen. Coburn’s efforts are yet another example of oil-patch politics trumping sound national energy policy.  We encourage Sen. Coburn to lay down his arms and work with the ethanol industry to craft thoughtful and fiscally responsible legislation that allows for continued innovation and growth of domestic biofuel production and use without pushing the industry off a cliff.

“Ethanol is the only alternative to imported oil available today and the only technology keeping money out of bank accounts in Caracas and Tehran. Pulling the rug out from under a still maturing industry would force consumers to pay more at the pump, do nothing to mitigate impacts of rising food prices resulting from exorbitant oil prices, and jeopardize the commercialization of promising new ethanol and biofuels technologies. This is an amendment meant with an eye toward reelection, not deficit reduction.”

Despite their doom-saying, the industry will not be pushed off a cliff. Federal law still requires the production of something like 10 billion gallons of ethanol per year. It is telling that they refer to themselves as a still maturing industry, over 30 years after they began receiving subsidies, and given that they are now receiving tax credits for ethanol that is being exported to Brazil.

In an appearance on E&E TV, retired General Wesley Clark discusses the future of corn ethanol policy. Transcript here. Given that he is a member of Growth Energy, completely objectivity isn’t expected. However, he makes a number of incorrect statements and supports very poor economic analysis.

CLARK: And so we’re behind in cellulosic because we’ve been artificially constrained in the fuels market, first by the EPA blend wall at 10 percent, which meant there was no market for cellulosic. And then secondly then by the lack of infrastructure to be able to actually go out to the service agent and say, hey, I want to try 20 to 30 percent ethanol blend.

Cellulosic ethanol production is “behind” because its not economical, and investors are aware that the current market for cellulosic ethanol relies almost entirely on a government law that clearly isn’t guaranteed given how difficult it is to produce cellulosic ethanol at a price that is even close to something consumers would want.

Clark also complains about the 10% “blend wall” yet doesn’t acknowledge that the majority of ethanol sold is due to an “artificial” government mandate. I’d gladly end the EPA’s ability to determine what American’s can put in their gas tanks just as I’d gladly end the mandate requiring refiners to blend petroleum with ethanol.

Also, its obvious that a lack of infrastructure is due to a lack of demand for ethanol, not because of any artificial market constraints. E85 exists in almost all 50 states, yet sales are low because its still too expensive given the lower fuel economy. Why would anyone want to buy E20 or E30 if individuals with flex-fuel vehicles don’t purchase E85?

On fuel economy with higher blends:

CLARK: You know, our own personal research is that American cars that are flex-fuel cars, they work really great at 20 and 30 percent ethanol. And sometimes you get a falloff in mileage at 85 percent because the motor is not really tuned to use the ethanol. But at 20 and 30 percent, in some of these models, there’s no falloff and you’re saving.

I’m not sure what study he is referring to, perhaps an in-house, yet to be published, study. However, recent comprehensive studies show the exact opposite. As the percentage of ethanol increases as a percentage of the total fuel blend, fuel economy drops.

Here is a study by the National Renewable Energy Laboratory: “Effects of Intermediate Ethanol Blends on Legacy Vehicles and Small Non-Road Engines.” From the executive summary:

E.4.1 Fuel Economy
• All 16 vehicles exhibited a loss in fuel economy commensurate with the energy density of the
fuel.* With E20, the average reduction in fuel economy (i.e., the reduction in miles per
gallon) was 7.7% when compared to E0.
• Limited evaluations of fuel with as much as 30% ethanol were conducted, and the reduction
in miles per gallon continued as a linear trend with increasing ethanol content.

On importing foreign oil:

CLARK: They know, look, in the $14 to $15 trillion economy like the American economy, you cannot generate jobs if you are sending $400 billion a year, every year, abroad. It’s like a tax on the American people and that’s what our oil companies are — put a tiger in our tank and they look all-American, but they’re actually — they’re dollar extraction mechanisms. And the friendly service station operator there that some of them we’ve grown up with, they’re actually — it’s like a $1200 year tax on every man, woman, and child in America so we can import foreign oil.

The idea that importing goods from abroad is equivalent to a tax of $1200 is laughable, and I wish the host hadn’t been so easy on him. Perhaps Clark believes the world would be better off without any international trade.

Monica Trauzzi: Is corn ethanol being produced at the expense of other biofuels?

Wesley Clark: No, I don’t think it’s being produced at the expense of biofuels. This is market demand driven. Look, corn is a crop that people have learned to be increasingly innovative in growing. I mean the yield grows up — goes an average of maybe three, 4 percent per year, per annum. I mean year after year after year.

The demand for corn ethanol is not market driven. It’s government mandated.

2011 marks an important year for developments in ethanol policy. Building out infrastructure is just as big a waste of taxpayer dollars as is the current VEETC/mandate.