Posts tagged “ethanol subsidies”
Were U.S. Taxpayers Subsidizing Ethanol Exports?
Over the past couple of years, U.S. ethanol exports have soared. Last year a news article in Financial Times charged that these exports were being subsidized with U.S. tax dollars. The U.S. ethanol industry strongly denied this, but I wrote several articles on the controversy:
To be clear, it wasn’t the exporting of ethanol that concerned me, it was the idea that taxpayers were potentially subsidizing the practice. Although many ethanol proponents denied it, I said at the time that we would know soon enough, because if ethanol exports fell once the tax credits expired at the end of 2011, that would be strong evidence that exports had indeed been benefiting from those tax credits.
The answer largely depends on your definition of a subsidy and what you mean by payoff.
I’d suggest that many, if not most, subsidies are a roll of the dice (crap shoot) when it comes to the purported pay off. They are social experiments without any guarantee of success, which is not to say they should not be undertaken as long as a mechanism is in place to end the subsidy in a timely manner.
There are many examples that have paid off royally, along with many that were (and are) a waste of time and money to varying degrees.
Last November, the Financial Times published an article charging that ethanol from the U.S. is collecting U.S. tax credits before being shipped to Europe, where it also qualifies for favorable tax treatment. I wrote an article about this called Taxpayer Subsidized Ethanol Exports May Bite Industry in the Future. The gist of my article was that if this charge is true, it completely undermines the supposed reasons U.S. taxpayers are subsidizing ethanol in the first place — to reduce dependence on foreign oil. In fact, as I showed in a later article, any ethanol that is exported actually increases our dependence on foreign oil because it takes some oil to make the ethanol and then ship it to the export… Continue»
The previous essay spoke of the selfishness of many of today’s political leaders in spending tax dollars for votes, while compromising the economic opportunities for the next generation. In this essay, I want to focus on the selfishness of a particular group: Ethanol special interests, who have succeeded in gouging taxpayers for another $6 billion in wasteful spending in 2011. Let me make it clear — again — that I am not against ethanol as fuel. In fact, I have spoken out many times in favor of ethanol in specific circumstances. I reiterated this position recently on a Podcast interview on This Week in Energy. For example, I think many areas of the Midwest could produce ethanol sustainably, use it… Continue»
Following my recent essay on the elimination of the VEETC, the major ethanol subsidy in the U.S., some ethanol supporters argued for continuing the subsidies because oil companies receive subsidies. There are many versions of the oil subsidy argument – some of them grossly in error – but I won’t argue about what is and is not an oil subsidy. I do believe that gasoline at the pump is subsidized in various ways. But these subsidies aren’t as simple as a credit based on the number of gallons of gasoline sold – as is the case with the ethanol subsidy. If they were, they would be much easier to eliminate. My solution to addressing these hidden subsidies would be to… Continue»
Ulterior Motives Behind the Ethanol Pipeline? Ethanol producers in the Midwest have lobbied for support to build a pipeline to ship their ethanol to the East Coast. As I have argued, given that the market for ethanol is nowhere close to being saturated in the Midwest (a large E85 market in the Midwest could consume all of the ethanol produced there), it would seem to be a better allocation of resources to build up the E85 market rather than try to export ethanol from the Midwest. However, some have claimed that the real reason ethanol producers want the pipeline is so they can export ethanol out of the country. They argued that U.S. taxpayers would end up subsidizing ethanol exports… Continue»
Next year the oil companies will be required to buy 12.6 billion gallons of conventional corn ethanol, but because tax payers are giving them $5.85 billion they’ll consume 1.4 billion more than required.
I started to notice a trend in the comments following my latest Forbes essay about the redundant nature of ethanol subsidies now that mandates via the Renewable Fuel Standard (RFS) are in place. Several comments in a row seemed to be regurgitated talking points that were just red herrings with respect to the point I was making. I knew that meant that somewhere a call had gone out to ethanol supporters to speak out against me. I now know the source, and at the end of this essay, I offer a debate challenge to the organization that issued the talking points. To review, my point is simple. Someone said that it would be great if I could reduce it to… Continue»
My latest is up at Forbes right now. It is about the redundant nature of our current ethanol subsidy: A Redundant Subsidy An excerpt: As many ethanol producers have argued – the gasoline blender and not the ethanol producer receives the subsidy anyway. The gasoline blender – ExxonMobil for instance – buys ethanol for $1.70 per gallon (currently), receives a tax credit worth $0.45 per gallon (the credit was reduced to that level in 2009), and then blends it into gasoline that is presently wholesaling at approximately $1.90 per gallon. With the tax credit, the current price of ethanol on an energy equivalent basis to gasoline is just about equal to the $1.90 wholesale price of gasoline. So the tax… Continue»
As we continue to develop biomass as a renewable source of energy, it is important to keep the cost of energy in mind, because this has a very strong influence on the choices governments and individuals will make. I sometimes hear people ask “Why are we still using dirty coal?” You will see why in this post. Last year I saw a presentation that projected very strong growth in wood pellet shipments from Canada and the U.S. into Europe. My first thought was “That doesn’t sound very efficient. Why don’t we just use those here in North America?” It didn’t take very long for me to find out the answer to that. It is because wood pellets are much more… Continue»