US ethanol makes history by sacrificing a subsidy
By Bob Dinneen, president and CEO, Renewable Fuels Association – 01/05/12 11:26 AM ET
With growing concerns about gridlock in Washington and greed on Wall Street, Americans are wondering whether anyone with a stake in public policies is willing to sacrifice their short-term advantage for a greater good.
Well, someone just did.
Without any opposition from the biofuels sector, the tax credit for ethanol blenders (the Volumetric Ethanol Excise Tax Credit – VEETC) expired on January 1.
In fact, American ethanol may well be the first industry in history that willingly gave up a tax incentive. Facing up to the fiscal crisis in this country, industry advocates have engaged in discussions with the Administration, Congress and our own constituents in an effort to frame forward-looking policies that balance the needs for deficit reduction and the development of clean-burning, American-made motor fuels.
Incentives should help emerging industries to develop and grow, not to be forever subsidized by the nation’s taxpayers. The Volumetric Ethanol Excise Tax Credit — which actually accrued to biofuels blenders, not producers – has helped the renewal fuels industry to stand on its own two feet. So now it is time for this subsidy to be phased out.
But make no mistake: While this subsidy has gone away, American ethanol is here to stay. From the economy to the environment and energy security, ethanol is an American success story.
With more than 200 biorefineries in nearly 30 states, American ethanol directly employs more than 70,000 workers in plants, on farms and at construction companies and suppliers, while indirectly supporting an additional 330,000 jobs. In the midst of more than 8 percent unemployment, the ethanol industry provides high-skill, high-wage jobs that can’t be outsourced, with more than 99% offering healthcare and other benefits. The industry contributes $53 billion to the Gross Domestic Product, raises household incomes by $16 billion and pays $7 billion in federal taxes and $4 billion in state taxes.
Nor are ethanol’s benefits limited to the rural communities where the industry provides jobs for workers, markets for farmers, customers for businesses, and tax dollars for the local schools and police and fire departments. In 2010, the use of 13 billion gallons of ethanol reduced the need for oil imports by 445 million barrels, making our nation less dependent on increasingly unstable regimes in the Middle East. On the environmental front, ethanol use reduces greenhouse gas emissions by 48 to 59 percent, compared to gasoline. At the nation’s gas pumps, blending ethanol with gasoline saved American families an average of $0.89 per gallon in 2010, according to a study conducted by economists at Iowa State University and the University of Wisconsin.
By helping to reduce the federal budget deficit and the nation’s dependency on imported oil, the US ethanol industry is doing its part to address America’s challenges. Meanwhile, the well-established and highly profitable oil industry is still receiving huge subsidies and refusing to give up any.
Having benefited from federal subsidies for the past century, Big Oil rakes in federal tax breaks and other advantages totaling from $3.6 to $4.5 billion a year. Indeed, the Environmental Law Institute recently reported that, from 2002 to 2008, federal subsidies to fossil fuels such as oil and coal totaled approximately $72 billion, compared to only $29 billion in incentives for renewable energy sources, such as solar, wind, geothermal and biofuels.
When it comes to crafting policies that promote fiscal responsibility and energy sustainability, the US ethanol industry has proven that it is willing to come to the table.
But every energy policy must be on the table.
From coal to hydroelectric, nuclear, wind, solar and geothermal energy, virtually every source of energy has been subsidized in its early years. But there is no reason for established industries, such as Big Oil, to enjoy eternal subsidies for almost a century.
What’s needed, instead, are timely, targeted, and temporary subsidies so that new energy sources can be developed, commercialized and allowed to compete on a level playing field with established energy sources. That is why the biofuels industry is seeking opportunities to accelerate the development of new ethanol feedstocks, such as switch grass, wood wastes and even garbage, while modernizing the nation’s fueling infrastructure through blender pumps.
Now that the ethanol blenders’ tax credit has become history, let’s make history by incentivizing America’s energy future, not providing perpetual subsidies for fossil fuels.
** Bob Dinneen is the president and CEO of the Renewable Fuels Association, the national trade association of the US ethanol industry. **
You be the judge: A great moment in the history of U.S. public policy, or laughable nonsense?
Well, to be fair, not everything Dinneen says is laughable nonsense, for example he truthfully points out that the tax credit for ethanol blenders expired on January 1. Most of the rest of it is hilariously weak.