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While You Were Recessing

by Joel Velasco on Aug 19, 2010

After a brief stint back in session for a House vote on a state budget measure, Congress has officially left town for the August recess. There might be a lull in policy activity, but it’s only expected to last another three weeks. Here’s a quick recap of recent developments that will prepare you for when the ethanol debate resumes after Labor Day.

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After a brief stint back in session for a House vote on a state budget measure, Congress has officially left town for the August recess. There might be a lull in policy activity, but it’s only expected to last another three weeks. Here’s a quick recap of recent developments that will prepare you for when the ethanol debate resumes after Labor Day.

Contradictions from RFA on the RFS2

The Renewable Fuels Association (RFA), who has long argued that removing the 54 cent-per-gallon import tariff would flood the U.S. market with Brazilian cane ethanol, now says it is “highly unlikely that there will be sufficient volumes of imported sugarcane ethanol” to meet the Renewable Fuel Standard’s (RFS2) current mandate for advanced biofuels!

The statement came in comments submitted to the EPA calling for a reduction in the 2011 advanced biofuel carve-out set forth by the RFS2, which alongside cellulosic and biomass-based diesel includes sugarcane ethanol. UNICA has consistently argued that the total and advanced renewable fuel volumes should not be lowered. Clearly the art of the ethanol flip-flop is alive and well - just ask Iowa congressional candidate Brad Zaun!

Valero Says Ethanol Subsidy is Unnecessary

Valero Energy Corp., one of the nation’s largest ethanol producers, said that eliminating the 45-cent-per-gallon subsidy would have zero impact on production. “You would not see blending down one barrel because of the credit being gone,” said Gene Edwards, Valero’s executive vice president for corporate development and planning. The comment came during the company’s quarterly earnings call, where Edwards further remarked that the subsidy is “almost irrelevant.”

The comments echo the findings of a report by Iowa State University’s Center for Agricultural and Rural Development released in July.

Cato Institute: Ethanol Tax Credit Worse Than You Think

The Cato Institute, a free market think tank, offered a blistering analysis of the recent report on the cost of corn ethanol tax credits by the nonpartisan Congressional Budget Office (CBO). Cato claims the report – which found the subsidy to be incredibly costly – severely underestimates the expense to taxpayers. As if $6 billion per year wasn’t enough, Cato finds the true cost could be exponentially higher!

RFA Data Shows Tariff/Subsidies No Longer Needed

Adding to the mountain of evidence that the U.S. ethanol industry is mature and can survive without trade protection and subsidies, the Renewable Fuels Association (RFA) released its June ethanol production and shipment data, boasting of a banner year for U.S. ethanol exports. According to RFA, exports for the first six months of this year already equaled total exports for all of 2008, the strongest year on record.

Clearly the U.S. ethanol industry is doing just fine – why are they so determined to avoid healthy market-based competition? The current policy is a bad deal for just about everyone. The U.S ethanol industry owes taxpayers an explanation as to why they still need a $6 billion per year subsidy and protectionist, anti-competitive trade policies to stay afloat in a mandated market.

copyright 2010 Brazilian Sugarcane Industry Association