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By Nathanael Greene on Jun 24, 2010 with 18 responses

New Ad Slams Ethanol Tax Credit Give Away to Oil Companies

Everyone who thinks Big Oil should get $31 billion from U.S. taxpayers, please sign on the dotted line. That’s the message of a new ad running today in Congress Daily sponsored by NRDC, the Union of Concerned Scientists, Friends of the Earth and the Clean Air Task Force. The ad highlights the wastefulness and redundancy of the Volumetric Ethanol Excise Tax Credit (VEETC), which amounts to little more than a massive government bribe to oil companies to get them to buy and blend gallons of corn ethanol they are already required to purchase under the Renewable Fuel Standard.

UCS-VEETC-Print-Ad.jpg

As I’ve discussed here and here, corn ethanol is a mature technology that has been commercially viable for decades and today provides nearly 10 percent of light-duty vehicle fuel in the United States. Though the ethanol industry argues that the VEETC is critical to its survival, the reality is that most of the VEETC value ends up in the pockets of oil companies as profit.

So why has Old Ethanol mounted a massive lobbying campaign pushing Congress to extend the VEETC?  Multiple independent analyses (see the blogs above) show that the ethanol industry will continue to grow without the tax credit, just at slightly slower rates. But corn ethanol producers have built out their industry to supply the additional gallons of ethanol oil companies purchase beyond RFS mandates as a result of the tax credit. So now this mainstream industry is asking American taxpayers to continue spending billions per year just so they can keep their market a little tighter and their profits a little higher.

And what do we tax payers get in exchange for these billions of dollars? Not much besides more greenhouse gas emissions, more of the water pollution that has caused a dead zone in the Gulf of Mexico as large as the BP oil spill, higher prices for the corn soil in our stores and fed to our livestock, and more deforestation, as I discussed here. The ad drives this point home by telling taxpayers not to be fooled by the name of the subsidy: it’s not about creating new or cleaner ethanol. The VEETC almost exclusively supports ethanol from corn, which, when all direct and indirect costs are added, creates more global warming pollution than the oil it is supposed to replace!

No matter how you slice it, the VEETC is a massive giveaway to Big Oil for obeying the law that buys us little to nothing in terms of new jobs, environmental performance or even additional domestic ethanol production beyond the quantities already mandated by the RFS. And by subsidizing the best and worst gallons of ethanol, the tax credit comes at the expense of developing new and cleaner biofuels, such as those made from dedicated “energy crops” like willow and switchgrass, which I’ve talked about here.

We can and should support ethanol producers who open new plants, create new jobs, produce more advanced biofuels more efficiently and deliver real environmental benefits—but not by continuing to use scarce taxpayer dollars to pay for every single gallon of ethanol produced at decade-old plants. We can do better by supporting emerging and more competitive energy technologies in non-polluting wind, solar, geothermal and advanced biofuels that create many more times the green jobs we need and far less pollution. Now is the time for Congress to stop subsidizing Big Oil and Old Ethanol and allow the corn ethanol tax credit and tariff to expire at year-end.

  1. By TheReviewer on June 24, 2010 at 5:15 pm

    Clearly they need that money to bribe MMS workers with. These environmental waivers arnt going to sign themselves.

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  2. By kc on June 25, 2010 at 12:05 am

    If the money ends up in the pockets of oil companies i agree that’s wrong. I’m an avid user of ethanol and have been for 3 years running. In a non ethanol car i converted. Ethanol is not far off from working the same as gasoline, just the American populace is too fu***NG stupid to burn it. IMO the blend could be 50/50 or greater and we wouldnt see any real effects to cars. I dont care anymore. The ancient people in politics are soo far out of touch with reality its ridiculous. It’s already been done. The planet is on a downward spiral. It’ll be fun to see the size of human population retract and the mass murders and deaths that’ll happen when every man, woman and child is trying to feed their families and satisfy their basic needs. See you all in hell.

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  3. By Sfork on June 25, 2010 at 2:07 am

    really? the solution to global warming is to grow crops to fuel our cars instead of using the land to feed people you talk about in your last sentence??

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  4. By mark on June 25, 2010 at 9:03 am

    sfork: i’m not sure what the situation would be about food..if there could be a way to grow fuel corn and not affect food supplies..but growing burnable fuel does make more sense since the carbon you get from burning it came from the air around us..converted by plants. vs releasing carbon stored in plants from ages ago and underground. but…yah we already seem to be using corn and it’s starchy goodness in everything already… :)

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  5. By mark on June 25, 2010 at 9:04 am

    oops its starchy goodness…doh!
    hmm and if it uses lots of fertilizer and pesticides..that might not be good either..

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  6. By Anon on June 25, 2010 at 11:51 am

    “We can and should support ethanol producers who open new plants, create new jobs, produce more advanced biofuels more efficiently and deliver real environmental benefits”

    No. No we shouldn’t. Corn ethanol is not a solution, it’s just adding to the problem.

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  7. By Chris on June 25, 2010 at 11:58 am

    Corn ethanol is not the solution. It is another industry subsidized by the government. Do a little bit of research and you’ll see that ethanol is causing more harm than good.

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  8. By Wayne on June 25, 2010 at 12:31 pm

    Chris is right, corn is an inefficient source of ethanol (but gets big heartland votes). THE most efficient source is sugar cane, but that would only help third world people – why would we do THAT! Shame on U.S. and our greedy stupidity, it’s boundless.

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  9. By russ on June 25, 2010 at 2:26 pm

    sponsored by NRDC, the Union of Concerned Scientists, Friends of the

    Earth and the Clean Air Task Force

    When I see something sponsored by that lineup I know something hokey is going on! They have become masters of spin the past few years.

    The ad highlights the wastefulness and redundancy of the Volumetric

    Ethanol Excise Tax Credit (VEETC), which amounts to little more than a

    massive government bribe to oil companies to get them to buy and blend

    gallons of corn ethanol they are already required to purchase

    under the Renewable Fuel Standard.

    It isn’t easy to be on both sides of everything – but these guys do a wonderful job of it.

    Cut the VEETC but leave the mandate and the oil companies will stop blending it? Come on!

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  10. By Gene on June 25, 2010 at 4:45 pm

    I admit, I didn’t read the two linked articles which may explain this away but can someone clear this up for me.

    Paragraph 2 says “….corn ethanol is a mature technology that has been commercially viable for decades and today provides nearly 10 percent of light-duty vehicle fuel in the United States.”

    Paragraph 4 seems to contradict the commercial viability of corn ethanol by stating “The VEETC almost exclusively supports ethanol from corn, which, when all direct and indirect costs are added, creates more global warming pollution than the oil it is supposed to replace!”

    What am I not understanding here?

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  11. By James P Louviere on June 26, 2010 at 3:33 pm

    It’s a crime against humanity, according to some expert on world hunger, to produce something a human can eat and feed it into a car, even a nice little “eco” car, instead of into the world food supply, where prices are rising faster than a BP oil plume (which is not there at all, according the BP propaganda).

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  12. By Engineer-Poet on June 27, 2010 at 3:02 pm

    According to widely-published calculations, one SUV-full of E85 uses enough corn to feed one person for one year.  Another news item I saw mentioned that there were enough ethanol plants in planning to turn Iowa into a net importer of corn (!).

    It doesn’t matter if you don’t like the UCS and NRDC; they happen to be right.  If they are the only ones willing to speak uncomfortable truths, it’s wrong to blame the messenger.

    Alt-E LLC in Farmington Hills has an F150 which achieves 32 MPG when operating on gasoline (it has a 52-mile all-electric range).  If a fat pickup truck can get 32 MPG there is no excuse for any people-carrier of similar or smaller dimensions, SUV or otherwise, doing worse.  Fixing that deficiency would do more to fix our oil problems than all the ethanol we could make.

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  13. By Engineer-Poet on June 27, 2010 at 3:05 pm

    Gene said:

    I admit, I didn’t read the two linked articles which may explain this away but can someone clear this up for me.

    Paragraph 2 says “….corn ethanol is a mature technology that has been commercially viable for decades and today provides nearly 10 percent of light-duty vehicle fuel in the United States.”

    Paragraph 4 seems to contradict the commercial viability of corn ethanol by stating “The VEETC almost exclusively supports ethanol from corn, which, when all direct and indirect costs are added, creates more global warming pollution than the oil it is supposed to replace!”

    What am I not understanding here?


     

    What you’re missing is that mature does not equal competitive without subsidy, and direct costs do not equal total costs.

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  14. By paul-n on June 28, 2010 at 12:35 am

    Joe,

    Just how do you define what is a “poor fuel” ?
    The mere fact that it has less btu/gallon than gasoline, in and of itself, does not make it a poor fuel.
    I define a poor fuel as one that leads to a lower thermal efficiency, i.e. less work output for the same energy input. In this regard, ethanol is a superior fuel to gasoline, an ethanol optimised engine can get a thermal efficiency of up to 41% (http://www.methanol.org/pdfFra…..XV-EPA.pdf)

    I am yet to see ANY gasoline engine that can get that efficiency.  

    The culprit here is the gasoline ICE, it as about the least efficient ICE you can have.  Go to a high compression (20:1) engine, and you can run any or all of ethanol, methanol, natural gas or diesel, in any combination, and get better efficiency.

    By wanting engines that can rub both gasoline and ethanol, we lose the ability to have high compression, and thus lose all the efficiency benefits of ethanol

    Unlike gasoline, ethanol is not carcinogenic, is readily biodegradable in soil and water, and is less flammable/explosive

    While I am no fan of the ethanol mandate and subsidies, ethanol as a fuel has certainly earned its right to exist.

     

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  15. By jaudette on June 27, 2010 at 7:20 pm

    Wayne said:

    Chris is right, corn is an inefficient source of ethanol (but gets big heartland votes). THE most efficient source is sugar cane, but that would only help third world people – why would we do THAT! Shame on U.S. and our greedy stupidity, it’s boundless.


     

    And…To add insult to injury, ethanol is a relatively poor fuel.  Ethanol contains only about 60% of the heat content of Gasoline per gallon, and since ICE’s are essentially heat engines, that translates into a reduction in gas mileage.   Here in the North, the amount of Ethanol in our gas fluctuates from a low in summer to a high in winter.   As a result, we see clear decreases in our mileage of between 3% and 7% in the wintertime.  It is the ICE that is the culprit, and we must Get the carbon out  of our daily lives.

    @

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  16. By Jim_E85 on March 10, 2011 at 8:57 am

    I’d support cutting the VEETC for the E10 mixtures that are mandated.

    Instead, I would KEEP the VEETC, and perhaps even increase it slightly, and give it ONLY to fuel station owners that sell higher-mixtures- E30, E50, E85. If you did that, then the VEETC would be much closer to the actual consumer, and the price of E85 would be better. As it is now, oil comanies scarf up the VEETC and consumers don’t see the benefit of it at all.

    Putting, say, 50 cents VEETC at the station, and installing blender pumps, would do a great deal at increasing flex-fuel consumption, and help lower our dependence on foreign oil.

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  17. By thomas398 on March 10, 2011 at 12:47 pm

    Paul: You make good points as always.  What would the mpg equivalent of a  small car with a 20:1 engine running on ethanol or NG? More than a similarly sized ICE? Hybrid?

     

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  18. By paul-n on March 13, 2011 at 12:33 am

    Huh – an old thred given new attention here!

    @Jim_E85 – what you are talking about is similar to what was discussed on this blog last August;

     

    @ Thomas398 – The answer there is very simple – just look at any of the Euro small diesel cars (here).  For example, the UK Ford Fiesta, with a diesel engine, gets 76.3mpg.  Now, that is British gallons, so that equates to 63 mpgUS.  Then take the 13% greater energy density for diesel, and you get to 55.6mpg gasoline energy equivalent – similar to a Prius.

    In fact, the Prius is in there, at 72 mpg gasoline, so that is 60mpg US.  The official US rating for the Prius is 50mog, so that gives you some idea of the testing differences.  

    So, a small, high compression engine can get near hybrid fuel economy, but in a car that is much cheaper to build.  if it is cheaper, then more people can afford to buy them – the Prius is still a niche car.

     

    When looking at other fuels (CNG, LPG, ethanol, methanol, butanol, mixed alcohols) you always need to go by the energy content, not the weight or volume.  But in a high compression engine, they can all get a peak of 40%, and probably an average of 30%.  Gasoline you get a peak of 25-30% (Prius engine is actually 33%) and average of around 15% – gasoline engines suffer more in idling and stop-start driving, that is why the city cycle for gasoline cars like the Corolla, Civic etc are so much lower than the hwy cycles.

     

    As I have said, give up the need to run on gasoline, and all the other options suddenly look much better, and can all run in the same engine

     

     

     

     

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