Bipartisan Senate bill would end wasteful corn ethanol subsidies this summer

Today, Senators Dianne Feinstein and Tom Coburn have joined forces across the aisle to introduce legislation that will completely eliminate the main corn ethanol tax credit—known as the Volumetric Ethanol Excise Tax Credit or “VEETC”—before year-end, as well as end the import tariff on foreign ethanol. Their effort speaks to the strong bipartisan consensus on ending subsidies to old, polluting corn ethanol, will save taxpayers billions, and finally force the mature corn ethanol industry to compete in the marketplace after three decades of government support.

As we’ve written about extensively, the VEETC is wasteful and redundant, paying oil companies billions in scarce taxpayer dollars each year—nearly $6 billion this year alone—to blend more and more ethanol into our gasoline supply, despite the fact that they are already required to do so by law. In exchange we’ve gotten little in additional domestic ethanol production or jobs. And because the VEETC was not tied to any environmental performance requirements, subsidizing the best and worst gallons of ethanol alike, these billions have come at the expense of developing the new and cleaner advanced biofuels that we need.

Corn ethanol lobbyists used to sell ethanol as a bridge to these better fuels, but now they try to dismiss them as fantasies making it clear they’re not really interested in competition.

With rising oil prices, we can now expect these same lobbyists to argue that we need more corn ethanol because it reduces the price of gasoline at the pump. But with corn prices breaking records, this impact is marginal at best. And it is certainly not worth billions in subsidies, the costly air and water pollution that corn production results in, or the ethanol industry’s devastating impacts on global food prices.

To get biofuels on the green and narrow path and quickly transition to new, better-performing advanced biofuels, we must first stop investing billions in the dirty biofuels of the past. Ending the VEETC and ethanol import tariff is a critical first step and we applaud Senators Feinstein and Coburn for their leadership.

Next, Congress must resist attempts by the corn ethanol industry to push for what amounts to more government support by a different name—infrastructure investments. Billions in additional giveaways to the corn ethanol industry, whether they come in the form of tax credits or costly loan guarantees for ethanol-specific pipelines and gas station pumps will just lock more old, dirty corn ethanol into the market at a time when advanced biofuels are being developed to drop right into our current fueling system.

Finally, Congressional lawmakers must put in place smart energy policies that reward the best performing biofuels—those that deliver substantial reductions in life-cycle greenhouse gas emissions, improved fossil energy balance, more sustainable farming practices that lead to cleaner water and healthier soils, less effect on food prices, and therefore more energy security. The Greener Biofuels Tax Credit we’ve proposed is one way they could do just that.