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Key Developments in the Ethanol Debate

by Leticia Phillips on Mar 15, 2011

It’s been a little quiet here on the Sweeter Alternative blog for a couple months. But as you’ll see below, there’s been no stoppage in the ethanol debate since our last post. Today we’re picking things back up, and I’m excited to introduce myself and another new voice in our campaign to make cleaner, more affordable energy choices available to Americans. I’m Leticia Phillips, the representative in North America for the Brazilian Sugarcane Industry Association (UNICA).

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It’s been a little quiet here on the Sweeter Alternative blog for a couple months.  But as you’ll see below, there’s been no stoppage in the ethanol debate since our last post. Today we’re picking things back up, and I’m excited to introduce myself and another new voice in our campaign to make cleaner, more affordable energy choices available to Americans by eliminating the tariff on imported ethanol.

I’m Leticia Phillips, the representative in North America for the Brazilian Sugarcane Industry Association (UNICA). Here I serve as an ambassador of sorts, linking our efforts in Brazil and the U.S. and working closely with our allies in support of ethanol policy reform.

Joining me is David Thomas (aka DT), our Congressional expert and chief lobbyist. With 12 years of experience working in the Legislative and Executive branches of the federal government, DT will bring an insider’s view of the latest political developments surrounding ethanol in Congress.

As a tag team, we’re filling some big shoes. In December we bid adieu to Joel Velasco, who ran UNICA’s Washington office since 2007 and was the blogger-in-chief for the Sweeter Alternative campaign. Joel remains an informal advisor to our organization and offered some poignant parting insights about the progress we made last year and the challenges that remain. Honesty, consistency and humor were the guiding principles Joel set forth in his first post – and you can trust we’ll carry the torch on all three!

With that it’s time to catch up on the past two months. DT and I compiled the following rundown of recent need-to-knows that have and will continue to shape this year’s debate.

Gas Prices Soar, So Why is Congress Taxing Affordable Alternatives?

Civil unrest in the Middle East and North Africa is putting new pressure on international oil supplies and spiking gas prices for consumers here in America. The possibility of $4 or $5 gas prices this summer highlights the ever-greater need to diversify our energy sources and eliminate trade barriers that block access to affordable alternatives like sugarcane ethanol. As Congress searches for ways to lower prices at the pump, we’ll make sure eliminating the import tax on clean renewable fuels is part of the discussion.

Trouble in the House

In a sign of deep, bipartisan skepticism in the House of Representatives on greater funding for ethanol, Reps. John Sullivan (R-OK) and Jeff Flake (R-AZ) offered two amendments to the spending bill that would strip ethanol of key federal supports, both of which passed by large margins. The Sullivan amendment would stop the EPA from spending money on E15, while Flake’s would halt funding for ethanol blender pumps. Sen. Charles Grassley – arguably the industry’s staunchest ally – later acknowledged he would vote for a deficit-cutting bill even if it contained anti-ethanol measures.

The debate in the House centered on appropriations – that is spending for the current year – so tax measures like the ethanol subsidy and tariff weren’t in order. However, just yesterday a new bill from Rep. Steve Womack (R-AR) proposed an immediate repeal of the VEETC. As of today there are four co-sponsors from across the country and political aisle including Reps. John Campbell (R-CA), Tim Griffin (R-AR), Dan Boren (D-OK) and Bob Goodlatte (R-VA).

With a large, bipartisan majority is disinclined to spend more on this mature industry, it’s more likely than ever that the ethanol tax credit and tariff will expire as scheduled on December 31, 2011.

Respected, Nonpartisan Authority Questions VEETC

Earlier this month, a new report by the Government Accountability Office (GAO) found that the ethanol tax credit “can be duplicative [with the Renewable Fuels Standard]… and can result in substantial loss of revenue,” pegging the taxpayer cost at $5.7 billion in 2011. GAO is very respected on the Hill, and with greater focus by the day on plans to reduce spending and slash the deficit, expect this report to get lots of attention.

Domestic Producers Recognize Status Quo Cannot Continue

As they vow to challenge serious reform and preserve their government support, opposition groups are also recognizing that the days of the VEETC and import tariff as they currently exist are numbered. At the group’s annual conference in Phoenix, Arizona, Renewable Fuels Association President Bob Dinneen conceded that expiration of the ethanol tax credit “is a very real possibility.” Likewise the American Farm Bureau Federation (AFBF) voted to support ending the tax incentive program at their annual gathering. To boot, in a sit down with the Wall Street Journal, Secretary of Agriculture (and former Iowa Governor) Tom Vilsack candidly questioned the level of government support for the industry, suggesting that a phase out of the tariff and tax credit was one option under consideration.

Back to the Future: Clinton Versus Newt

Former President Bill Clinton joined Al Gore in questioning the unintended consequences of increased corn ethanol production, while expressing support for biofuels that don’t compete with food supplies. Meanwhile former Speaker Newt Gingrich was staking his own claim for a likely run at the White House. Gingrich defended the industry’s subsidies against “big-city attacks” in a keynote speech delivered to the Iowa Renewable Fuels Association, adding that “urban newspapers want to kill it because it’s working.” Luckily Newt’s on a bit of an island with that view – the rest of the GOP presidential field is under intense pressure from the Tea Party to oppose ethanol subsidies.

A Step in the Right Direction

Just last week, Sens. Dianne Feinstein (D-CA) and Jim Webb (D-VA) unveiled new legislation to repeal the subsidy for corn ethanol and restore parity with the tariff. Feinstein's bill would redirect the current subsidy toward so-called advanced biofuels. Sugarcane ethanol is already recognized as an Advanced Renewable Fuel by the U.S. Environmental Protection Agency for its superior environmental performance. The bill comes hot off the heels of another proposal by Sens. Tom Coburn (R-OK) and Ben Cardin (D-MD) that would do away with the VEETC entirely.

Sen. Feinstein’s bill to restore parity – that is setting the tariff at an identical level to the tax credit so it is a direct offset preventing Americans from subsidizing foreign production, not a punitive trade barrier – represents a step in the right direction. We commend her for her work and for being such a champion on this issue. We look forward to continuing to work with Senator Feinstein and others in this Congress to make sure that the both VEETC and the tariff expire at the end of this year as scheduled.  Allowing sugarcane ethanol to compete fairly in the U.S. would save American drivers money at the pump, cut dependence on Middle East oil and improve the environment.

copyright 2010 Brazilian Sugarcane Industry Association