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EPA Decision Should Signal End to Ethanol Subsidies and Trade Protection

by Joel Velasco on Oct 14, 2010

Many U.S. ethanol groups have argued recently that after 30 years of tax credits and trade protection they are ready to compete without subsidies provided the government grants them greater access to America’s fuel pumps. With the U.S. Environmental Protection Agency’s (EPA) decision to increase ethanol limits by 50% for newer vehicles, that day has arrived.

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Many U.S. ethanol groups have argued recently that after 30 years of tax credits and trade protection they are ready to compete without subsidies provided the government grants them greater access to America’s fuel pumps. With the U.S. Environmental Protection Agency’s (EPA) decision to increase ethanol limits by 50% for newer vehicles, that day has arrived.

The attention now shifts to the U.S. Congress where lawmakers are debating what to do with the 30-year-old ethanol tax credit and import tariff that cost $6 billion annually. Allowing these subsidies to expire as scheduled at the end of the year will help lower gas prices, save taxpayers money and provide Americans with greater access to advanced renewable fuels like sugarcane ethanol.

As we indicated in our comments during the agency’s rulemaking, Brazil has decades of successful experience blending ethanol with gasoline at 25% concentrations. Brazilian ethanol is primarily sugarcane ethanol – a renewable fuel that is typically less expensive and cuts greenhouse gases much more sharply than other ethanol options. Allowing other alternative fuels like sugarcane ethanol to compete fairly in the U.S. would save American consumers money at the pump, cut dependence on Middle East oil and improve the environment.

Brazil took an important first step to build an open and global biofuels marketplace by eliminating its tariff on imported ethanol through the end of 2011. UNICA is asking the Brazilian government to make the tariff elimination permanent if the U.S. Congress will do the same and drop the tax on imported ethanol. As the world’s top producers of ethanol, the United States and Brazil should lead by example in creating a free market for clean, renewable fuel.

Consumers win when businesses have to compete in an open market, because competition produces higher quality products at lower costs. The same principle holds true for the renewable fuels market where competition will create a race to the future and generate better alternatives for consumers. Americans will benefit from having more options – like sugarcane ethanol – available at the pump, and that’s why the U.S. Congress should follow-up the EPA decision by allowing the ethanol tax credit and import tariff to expire on December 31, 2010.

copyright 2010 Brazilian Sugarcane Industry Association