Ethanol Industry Loves America, Gives Up Subsidy

by Brian McGraw on January 6, 2012

in Blog

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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.

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