I’ll take my corn in a bottle, thanks
Posted July 15, 2010 at 8:39 am 
Filed in: Alternatives, Energy Security, Energy Supply, Gas Prices, Legislation, Renewables, Transportation This morning’s E&E ( http://www.eenews.net/EEDaily/2010/07/15/2/) continues the on-going debate over taxpayer subsidies for corn-based ethanol — a poster-child for the government picking winners based on persistent lobbying from well-connected industries.
Sure, ethanol has some advantages. As posters all over Washington indicate, we don’t fund terrorists when we buy ethanol — just good American family farms. Of course they aren’t really family farms anymore, but large-scale agribusinesses. And ethanol is renewable, which means we don’t have to worry about “peak ethanol” or the “end of cheap ethanol.” (Would be nice to see the beginning of cheap ethanol, but that’s another story.)
And, compared to gasoline, ethanol may have a positive effect on the environment — especially by reducing the emission of greenhouse gases. We say “may have” because the exact impact is a matter of great dispute. Ethanol is only clearly an environmental winner if it’s refined from waste products (often called “cellulosic ethanol”) rather than from fertilized and managed crops grown specifically for fuel. And then there’s the whole food versus fuel debate. Perhaps not relevant here in the U.S., but clearly so in other lands.
This morning’s report spotlights a different area of controversy, however, and that is the cost-effectiveness of the taxpayer subsidies. You’d think that subsidies put into effect when oil was less than $20 per barrel might need to be re-examined now that oil’s at $75. And in fact a recent Congressional Budget Office examination caught the eye of Senate Energy Committee Chairman Jeff Bingaman, quoted this morning in E&E as saying that the “blenders tax credit for ethanol should not be ‘reflexively’ extended.”
As E&E put it, ”Bingaman criticized the 45-cents-per-gallon blenders credit for ethanol, known as the volumetric ethanol excise tax credit, or VEETC. Before deciding to extend the credit, lawmakers should weigh the issue carefully, including its ‘very high cost to taxpayers,’ energy benefits, production mandates and market prices, Bingaman said.”
Why? Because “CBO found that it costs taxpayers $1.78 to reduce gasoline consumption by 1 gallon using corn ethanol. The cost goes up to $3 per gallon for cellulosic ethanol, which is eligible for a $1.01 per gallon tax credit.
“Altogether, corn ethanol producers receive 73 cents to produce the energy equivalent of 1 gallon of gasoline. Cellulosic ethanol producers receive $1.62 and biodiesel producers receive $1.08.
“‘This report by the nonpartisan Congressional Budget Office provides further evidence that our nation’s biofuels tax incentives might not be appropriately calibrated,’ Bingaman said in a statement.”
Calibration sounds like a pretty good idea. Is there any reason that taxpayer subsidies appropriate at $12 per barrel oil — a price at which when ethanol can’t compete — should remain in place at $75 oil? Can’t ethanol producers make money when gasoline sells for $3 a gallon? If they can’t, and still need the crutch of taxpayer subsidies, maybe it’s time to call a halt to our decades-long effort at “growing our way” to energy independence. Blindly “groping” our way seems like a better metaphor.
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