OPINION:
A handful of farm-state senators were once again able to funnel ethanol subsidies to their constituents - without a debate or vote - at a cost of close to $6 billion to taxpayers for a single year. They achieved this by hiding the funds in the massive agreement between President Obama and the Republican leadership that will increase the national debt by another $850 billion.
Yet there was no mistaking the rising choir of voices opposing the subsidy, named the Volumetric Ethanol Excise Tax Credit (VEETC). Advocates representing oft-competing environmental, taxpayer, food, agricultural, anti-hunger, faith and free-market organizations have joined hands to say no to VEETC. Led by Sen. Dianne Feinstein, California Democrat, and Sen. Jon Kyl, Arizona Republican, 17 senators from across the political spectrum have called for its expiration. Even the corn-ethanol industry has quietly admitted that it really doesn’t need these subsidies so long as the fuel market is more open.
Once again, politics - not good policy - won in Washington. Perhaps looking ahead to the 2012 elections, and looking squarely at Iowa, where the 2012 presidential bid will begin, the White House signaled early on that it supported the subsidy’s extension. Iowa’s Republican Sen. Charles E. Grassley was more than willing to risk his reputation as a fiscal conservative to bring some pork for one of his favorite special interests.
While this sort of politics may play well in Iowa, the reality is that it will do little to help people in the fields. That’s because this subsidy does not assist farmers. It goes directly into the pockets of the oil industry. And even if it we are to believe in trickle-down economics that purportedly assist the ethanol industry, we have to remember that the ethanol producers are not necessarily farmers. Just 20 percent of the ethanol we produce in the United States comes from farmer-owned facilities. And just half of the farmers at those facilities are likely to represent family farms.
This subsidy pays fuel blenders 45 cents for each gallon of ethanol blended into gasoline, whether or not demand exists and despite the significant environmental impacts caused by corn ethanol. Producing more corn for ethanol requires massive amounts of land, fertilizers, water and pesticides - all of which result in ecological damage.
Some might even argue this would be worthwhile if VEETC moved us away from oil. But VEETC’s ability to reduce oil consumption is questionable and costly: The Congressional Budget Office noted that it costs taxpayers $1.78 to $4 for each gallon of gasoline conventional ethanol displaces. Next year, nearly 40 percent of our corn crop will be used for ethanol production, but it will displace barely 10 percent of our gasoline consumption.
Forty-five cents a gallon doesn’t even dramatically affect the level of ethanol consumption because in 2007, Congress passed a little law called the Renewable Fuel Standard, which mandates the consumption of ethanol at increasing levels until 2022. VEETC, originally conceived as a way to bribe oil companies into buying ethanol, has become duplicative. Oil companies have no choice but to buy ethanol and blend it into their fuel, no matter the price or whether they are subsidized to do so through VEETC. We are bribing oil companies with taxpayer dollars to do something they are legally required to do. That means our Senate just approved a $6 billion windfall profit to oil companies.
With our country in a fiscal crisis, Congress should be ashamed of itself for extending the subsidy for dirty corn ethanol.
Kate McMahon is biofuels campaign coordinator for Friends of the Earth. Ryan Alexander is president of Taxpayers for Common Sense.
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