Coburn Moves to Eliminate Ethanol Subsidies

Nicolas Loris / April 05, 2011

Ethanol. Henry Ford called it the “fuel of the future” in the 1920s. Decades later, policymakers put laws in place to increase the amount of ethanol in our fuel supply. Environmentalists and the Midwest sold it as a way to decrease American dependence on foreign oil and a way to reduce greenhouse gas emissions. But it’s accomplished neither and instead become an industry reliant on subsidies, mandates and protectionism. Washington needs to reverse these policies and Senator Coburn’s (R-OK) amendment to repeal the Volumetric Ethanol Excise Tax Credit (VEETC) is a good first step, but it should be coupled with offsetting rate reductions elsewhere.

The VEETC is a 45-cent blender’s credit that doles out $5-6 billion a year for petroleum refiners to blend ethanol into gasoline. Although some claim this is another handout for oil companies, the credit will be passed up the line to the ethanol producers and corn growers, or as the Wall Street Journal says, ethanol producers “can charge some 45 cents a gallon more than the market would otherwise bear.” (more…)