July 15, 2010
Better Market versus Tax Credits
Published in DTN
OMAHA (DTN) -- As a new congressional report questions the value of ethanol subsidies, Growth Energy suggested the group will propose a shift in policies and possibly a phase out of government support for ethanol in return for better market access.
Growth Energy, which represents the biofuels industry, issued a news advisory late Wednesday stating the group has set a news conference for early Thursday in Washington, D.C., that "will call for the redirection and eventual phasing out of government support for ethanol in return for a level playing field -- infrastructure investments that will create competition in the fuels market and give consumers true freedom to choose their fuel."
Last week, Growth Energy leaders toured several Midwestern states pushing for an extension of the 45-cent ethanol blenders' credit and calling on the EPA to raise the allowable blend level to 15 percent ethanol in gasoline. At the same time, Growth Energy leaders said the ethanol industry could compete with gasoline if the industry had unfettered access to fuel stations nationally without interference from the petroleum industry as well as blender pumps at service stations.
With the blenders' credit at risk of expiring at the end of this year, lawmakers have proposed bills in both the House and Senate to extend the tax credit and address issues such as the indirect land use controversy from the 2007 energy bill. With an energy bill debate expected later this month in the Senate, there is more talk about attaching the blenders' credit to such legislation as well.
The Congressional Budget Office added fuel to the debate with a new report looking at the effectiveness of biofuel tax credits on reducing dependence on foreign oil and also reducing greenhouse gas emissions. According to the report, matching British thermal units (Btu) of energy, it costs taxpayers $1.78 a gallon for replacing 125,000 Btu of energy supplied by petroleum with the same amount of energy supplied by ethanol. Making a comparison to cellulosic ethanol, which is not in commercial production, the cost to taxpayers is $3 a gallon, the CBO stated.
The CBO examined studies from Iowa State University and the Food and Agricultural Policy Research Institute at the University of Missouri regarding how much ethanol and biodiesel production relies on tax credits. The tie-in to the industry's dependence on the tax credit also changed the value of the costs to the taxpayer.
"For example, if the biofuel tax credit for ethanol was responsible for 45 percent of current consumption, the cost to taxpayers of decreasing gasoline consumption would be about 50 cents per gallon lower than the costs based on the findings of the FAPRI study."
While stating that biofuels reduced excise tax collections by about $6 billion in 2009, the CBO added that the agency didn't look at any impact on farm incomes or the agricultural sector.
The CBO ...
