The headline in a recent issue of Ethanol Producer Magazine says it all: "Colo.
Since its creation of the domestic market for corn ethanol after the energy crisis of the 1970s, the federal government has nurtured and maintained the ethanol industry with a steady stream of subsidies. Originally sold as a way to achieve energy independence and reduce greenhouse gas emissions, ethanol has been a favorite of many lawmakers: ethanol producers have received favorable treatment under the tax code, tariff protection from foreign competition, and even a government mandate for its use.
Doug Koplow of the policy consulting firm Earth Track said that the mandate is effectively another kind of subsidy for ethanol, and warns that it may be difficult to come up with new alternative fuels without adverse environmental impacts.
While there has been some enthusiasm about biofuels from switchgrass, cornstalks and algae, Koplow said, "I think people are painting that as too rosy a picture."
My first stint in the world of subsidies was looking as federal disincentives to recycling in an analysis for the US Environmental Protection Agency. Most often these took the form of subsidies to primary materials. The linkages between extraction, energy-intensive processing, and competition with recycling and reuse markets were fascinating, but ones that EPA seems to have steered clear of for far too long.
Earth Track presentation at the Biofuels Policy Forum briefing on April 14, 2011 in Washington, DC. The document provides an overview of the historical and projected level of subsidization to biofuels, and why this policy is not an efficient way to address concerns over greenhouse gas emissions or energy security.
Subsidy arbitrage in international trade is not a new issue. It is popping up again in the biofuels sector, this time regarding the collection of ethanol blending credits on fuel that is then shipped out of the United States. Not surprisingly, producers in the receiving markets are not happy about it. Robert Rapier has writting a good overview of the issue and the industry's denials (
I should have linked to this last month, but better late than never. Robert Rapier has done a nice review of the Renewable Fuel Association's rather exuberant claims on the impacts of killing VEETC. Given that the mandate still requires the use of almost all of the ethanol produced domestically, the mechanism of support may shift (from tax credits to transfers from consumers, as illustrated by rising prices on compliance credits under the renewable fuel standard) but the demand will remain.
Faced with expiration of the ethanol blender's credit in only a few months, the ethanol lobby has been working the halls Congress to fashion together a fallback mix of subsidies -- even though mandates to use ethanol in vehicles remains in force. Taxpayers for Common Sense summarizes the state of play, including assorted loan guarantees, support for new pumps and pipelines, and extension of the blender's credit, albeit at a slightly lower rate.
According to Bloomberg, the Obama administration will momentarily announce that current blend limits of 10 percent on ethanol in gasoline will be increased to 15 percent (E-15). Research has been ongoing on the impact of higher blends on the functioning of vehicles not built to handle higher blends. Older cars and other types of gasoline-powered vehicles such as boats are believed most as risk. Access the Bloomberg story here.
Thanks to Ron Steenblik for making me aware of a top 10 enemies list, recently developed by Tom Waterman at The Ethanol Monitor. Alas, neither Ron nor I made it. We'll just have to try harder I suppose. Robert Bryce, who has also been critical of the industry for some years, and has written a good summary of the whole affair, did squeek by with an honorable mention.