Ethanol Industry Allows Its Politicians to Permit Expiration of Its Tax Credit and Tariff

Michael Giberson

The Des Moines Register has one version of the story – the agribusiness industry decided it could do without the subsidy since the renewable fuels mandate seemed securely in place:

So established is corn-fed ethanol that the industry allowed the expiration of the 45 cents-per-gallon tax credit for ethanol production, as well as the 54-cent fee on ethanol imports, to lapse at the end of this year, preferring to fall back on defense of the Renewable Fuel Standard set in the 2007 law.

The New York Times describes the story somewhat differently. In the Times version, the end of the subsidy and tariff was a victory for environmentalists and fiscal conservatives over agribusiness. The story includes approving remarks from both the Senator Dianne Feinstein (D-CA) and Rep. Jeff Flake (R-AZ), from both Friends of the Earth policy analyst Michal L. Rosenoer and Competitive Enterprise Institute fellow Marlo Lewis.

The Register headline appears to predict ethanol industry growth, “EPA: Ethanol production expected to grow in 2012,” with the first sentence indicating “an increase of about 1.25 billion gallons from this year.” But the expected growth is actually just the increase in the mandate, as the story in the Sioux Falls Argus Leader makes clear: “The federal government has set its target for biofuels production in 2012, increasing by 1.25 billion gallons the amount of ethanol and biofuels that must be blended into the fuel supply.”

The Register story also notes the self-imagined munificence of the ethanol lobby:

“We may be the only industry in U.S. history that voluntarily let a subsidy expire,” said Matthew A. Hartwig, a spokesman for the Renewable Fuels Association, a trade group for ethanol producers. “The marketplace has evolved. The tax incentive is less necessary now than it was just two years ago. Ethanol is 10 percent of the nation’s gasoline supply.”

To me it sounds like the doctor telling me “now that the tapeworm is well established they’ve decided to remove several of the leeches.” Don’t get me wrong, I’m happy to see the end of the tax credit and tariff. But it is a little galling to see the ethanol industry package this story as a little gift they are giving to taxpayers and consumers.