Good Ben Muse Post on the Ethanol Tariff

Lynne Kiesling

Ben Muse has a good, link-filled post about the ethanol tariff. I am shocked, shocked to hear that the Renewable Fuels Association argues that we should not eliminate the tariff … here’s my favorite part:

Renewable fuels are produced only in countries where programs have been created to assist in their production. Thus, any reduction in the U.S. secondary tariff on ethanol would result in U.S. taxpayers further subsidizing imported ethanol beyond the subsidies that are already be given in the country of production. Since imported ethanol receives the 51 cent per gallon tax credit, if the U.S. tariff on ethanol is removed or dips below 51 cents, then U.S. taxpayers would be effectively subsidizing imported ethanol. The subsidy would be equal to the difference between the tax credit and the amount of any reduced tariff.

[insert Jon Stewart-like head shake and “Whaaaa?” exclamation]

The self-serving logical gymnastics are beautiful; ethanol can’t pass a market test anywhere, so it gets subsidized, so if you reduce the tariff to below 51 cents you are subsidizing Brazilian production. I have two immediate thoughts. First, isn’t Brazilian ethanol from sugar cane, and therefore 7 times more energy intensive than ethanol from corn? Second, if it can’t pass a market test, why don’t we just eliminate the subsidy and the tariff, subject refiners to air-quality-based performance regulation, and be done with the corporate welfare?

Oooh, that felt good.

2 thoughts on “Good Ben Muse Post on the Ethanol Tariff

  1. 7x seems high. Maybe 20% more efficient to get sugar distilled rather than corn.

    ADM is running the sugar operations in Brazil, just to keep this interesting. They have twin plants in the US and Brazil depening on who is subsidizing and who is taxing.

    I agree let the market decide. Let’s quit paying for shipping subsidies from Saudi to Chicago and see what the market says. My guess would be Alberta Tar Sands, with a shot of Brazillian sugar, processed in Decatur.


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