Happy New Year, 2012 kicks off with no more Ethanol Subsidies funded by tax payers. There was talk of this happening and when Congress recessed on December 23rd it became a reality.
The tax credit amounted to about 45 cents per gallon of ethanol that was blended into gasoline. The subsidy had been in place since 1980 with some reports suggesting that subsidies to the ethanol industry may have reached $45 billion.
Additionally, American corn based ethanol had been protected by a 54-cents-per-gallon tariff on imports of ethanol from other countries. The import duty has now also been ended by Congress.
With the ethanol tax breaks ending, about $2 billion will be saved over the coming years, with the savings being applied to cutting the national debt.
The debate about the use of ethanol fuel has raged for years. Al Gore even promoted the use of ethanol fuel, only to retract his endorsement years later. The biggest issue is, however, the food for fuel aspect along with the issue of corn just not being that productive in making ethanol. Sugar cane works much better at producing ethanol and counties like Brazil have benefited from this by getting twice as many gallons of ethanol per acre.
So, no more ethanol tax breaks means money and more food for Americans; so great news right? Not so fast. 2007 Energy Independence and Security Act, passed by Congress, require that 36 billion gallons of ethanol be blended into U.S. fuel by 2022. That 36 billion gallons figure is more than three times the 11.1 billion gallons used in 2010 and by 2015 the Energy Independence and Security Act raises the amount to 15 billion gallons. While this is the law on the books Congress has blocked the Environmental Protection Agency’s (EPA) approval of E15 gasoline, gas that has up to 15% ethanol in it.
Under the laws put in place by the 2007 Energy Independence and Security Act America is going to need more ethanol. But Congress just got rid of the tax breaks for making ethanol in America and will not let E15 gas hit the market. Oh yes, and Congress removed the import tax on importing ethanol. Could the actions done by Congress in 2012 set a potential scenario where the U.S. has dependency on foreign ethanol by as short a time as 2015?
Quick, take that corn cob out of your child’s mouth and shove it back into your gas tank!
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