Last month, the Senate voted 73-27 to end a $6 billion per year tax credit to the ethanol industry as part of an amendment to Bill S. 782, also known as the Economic Development Revitalization Act of 2011. This vote was largely symbolic however, as the bill itself has yet and is not expected to pass the Senate.
Two weeks ago, three Senators reached another deal to repeal the same $6 billion ethanol tax credit, though the path to making the deal law is still unknown. Reuters reports that “it could be attached to a stand-alone tax bill or become part of a wider measure to raise the federal debt limit” as part of current deficit reduction negotiations.
What is the significance of these measures? Ethanol, along with other biofuels, has been portrayed as the future of energy by many, including those in the Obama administration. In 2007, Congress passed a law mandating the production of 36 billion gallons of ethanol annually by 2022, under the presumption that ethanol releases less greenhouse gas emissions than fossil fuels.
Since then, the issue of ethanol has become more complex. U.S. News and World Report points out that greenhouse gas emissions are hard to calculate for ethanol: “If corn is taken out of the food supply to make biofuel, global food prices can rise, which can prompt farmers in other countries to clear forests for new crops. And that releases CO2.” Currently, “the ethanol industry uses some 40 percent of the U.S. corn crop to make the alternative motor fuel.”
The environmental organization Friends of the Earth also considers ethanol production a polluting industry. They point out that “corn ethanol requires vast amounts of water, fertilizers and pesticides to produce,” and that these toxic chemicals contribute to an agricultural runoff that is severely damaging the Gulf of Mexico.
Both president Obama and his agricultural secretary, Tim Vilsack, are strong proponents of fighting global warming and creating a new biofuels industry that will help reduce the U.S.’s dependence on foreign oil. But perhaps the technology isn’t there yet for ethanol to be able to combine these two objectives into one. Indeed, the Christian Science Monitor reports that many environmentalists argue that reducing subsidies to corn-based ethanol is good because it will help boost the more advanced technology of cellulosic ethanol.
As discussed earlier in the GFS blog, many criticize the ethanol industry for removing corn from the food supply in order to create biofuels. They say that along with the increasing population, decreasing water tables, and other stresses on the world’s food supply and demand, removing corn from the food supply is helping increase already unstable prices.
The Obama administration opposed last month’s symbolic vote, with Vilsack saying: “we need reforms and a smarter biofuels program, but simply cutting off support for the industry isn’t the right approach. Therefore, we oppose a straight repeal of the Volumetric Ethanol Excise Tax Credit (VEETC) and efforts to block biofuels infrastructure programs.”
