The Renewable Fuels Association (RFA) announced the election of its new Chairman, Chuck Woodside yesterday, General Manager of KAAPA Ethanol in Minden, Nebraska. Not surprisingly, Woodside immediately placed the extension of tax incentives for conventional corn ethanol at the top of his agenda.
Corn ethanol incentives today come in the form of a $0.45 cent tax credit—the Volumetric Ethanol Excise Tax Credit or “VEETC”— which pays oil companies 45 cents for every gallon of ethanol blended with gasoline. The VEETC gets paid out regardless of environmental performance, equally subsidizing the best and worst gallons of corn ethanol, even though EPA analysis shows that when all the direct and indirect impacts are accounted for, corn ethanol emits more global warming pollution than the gasoline it is meant to replace. On top of that, it increases water pollution, erodes our valuable soils, and increases the cost of corn sold in our stores and fed to our livestock.
This year alone, American taxpayers will spend $5.4 billion on VEETC subsidies, essentially bribing oil companies to buy and blend corn ethanol. Why do I refer to it as a bribe? Because since 2006, we’ve also had the Renewable Fuel Standard (RFS), which requires oil companies to blend increasing amounts of biofuels, including ethanol, into our gasoline. So for four years now, we’ve paid the oil companies over $20 billion to blend ethanol that they were required to blend by law. And corn ethanol industry groups like the RFA are pushing for more—a five-year VEETC extension at a cost to taxpayers of over $31 billion.
Woodside’s own company, KAAPA Ethanol, is a 60 million gallon per year corn ethanol plant that employs 36 workers. This year alone, it will benefit from $27 million in VEETC subsidies, as well as $1.5 million in production income tax credits under the Small Ethanol Producer Tax Credit (SEPTC), available to ethanol producers with an annual production capacity up to 60 million gallons per year. The latter alone is enough to pay $40,000 salaries to each of the plant’s 36 employees, but all together, that’s over $790,000 in government subsidies per employee!
Facing a growing deficit and a stalled economy, everyone knows every dollar counts. That’s why continuing to pump billions in subsidies into a mature, mainstream and polluting industry like corn ethanol is indefensible. What we need are better incentives for better fuels and no incentives for harmful or mature technologies like conventional corn ethanol. Now is the time for Congress to stand up to corn ethanol lobbyists like the RFA and allow the VEETC to expire at year-end.
See NRDC’s fact sheet on the VEETC for more on how moving beyond corn ethanol means less waste, less pollution and more jobs.