Ethanol has as many different subsidies as it has negative side effects, and today we get word about two of those subsidies that are currently on life support.
First there's the 45-cent-per-gallon credit for gas stations that buy ethanol to blend with their gasoline. That credit, in the face of expiration, was extended last month by Congress, but only for a year. Right after the election I predicted that ethanol subsidies would be an early test for the GOP's professed interest in free markets. But I also reported an interesting twist: due to the ethanol mandate (different from the tax credit) it would seem that the tax credit isn't really helping ethanol companies -- it's just subsidizing gasoline consumption.
So, some parts of the ethanol lobby are asking for this subsidy to be transformed. Today Reuters reports:
Congress should transform the $6 billion a year ethanol tax credit into a program that underwrites the installation of "blender" pumps and pipelines so biofuels are more widely available, the largest U.S. farm group said on Tuesday.... Until now, the 6-million member American Farm Bureau Federation supported the tax credit as well as blender pumps, which can dispense fuel that is up to 85 percent ethanol. Delegates voted to change policy to emphasize biofuel infrastructure and to discontinue the tax credit.
And the other half of this subsidy is the tariff on imported ethanol -- 54 cents a gallon. I guess John McCain went down and met with leaders in Brazil -- where ethanol is much cheaper to make because (a) it comes from sugar instead of corn, (b) labor costs are lower, and (c) land costs are lower -- and McCain and Wyoming's John Barrasso are convinced that our ethanol tariffs couldn't stand up to WTO rules. This from another Reuters piece:
"I believe the WTO would rule against the United States because it's clearly a subsidy that is neither warranted nor in keeping with WTO regulations," Senator McCain of Arizona told reporters after a meeting with Brazilian President Dilma Rousseff in Brasilia. "We agree with the president here (Rousseff) that (the U.S. tariff) should not be there," Barrasso said.