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Senators Unveil Bipartisan Deal to End Ethanol Tariff

by Leticia Phillips on Jul 11, 2011

Congress took another important step toward establishing a global market for clean energy last week. A bipartisan group of farm-state senators and ethanol critics unveiled a compromise agreement on Thursday to end the ethanol tax credit and import tariff later this month, apply most of the $2 billion saved to deficit reduction and divert the remaining funds to support advanced biofuels and alternative fueling infrastructure. The proposed deal provides further evidence that lawmakers are committed to ending these costly and unnecessary subsidies already set to expire on December 31, 2011.

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Congress took another important step toward establishing a global market for clean energy last week. A bipartisan group of farm-state senators and ethanol critics unveiled a compromise agreement on Thursday to end the ethanol tax credit and import tariff later this month, apply most of the $2 billion saved to deficit reduction and divert the remaining funds to support advanced biofuels and alternative fueling infrastructure. The proposed deal provides further evidence that lawmakers are committed to ending these costly and unnecessary subsidies already set to expire on December 31, 2011.

Last month, the U.S. Senate overwhelmingly approved an amendment to eliminate the ethanol tax credit and import tariff by a vote of 73-27. But with the fate uncertain of the underlying legislation to which that amendment was attached, Senator Dianne Feinstein (D-CA) began negotiations with Senators Amy Klobuchar (D-MN) and John Thune (R-SD) searching for a bipartisan compromise that could be enacted into law quickly. To announce the agreement, the three senators sent a letter to Majority Leader Harry Reid and Minority Leader Mitch McConnell informing the Senate leaders that "we have reached a compromise that will repeal the current ethanol blender subsidy and tariff, as of July 31, and invest two-thirds of the savings in deficit reduction and one-third of the savings in tax incentives that increase our energy independence."

Time of the Essence

However, timing is critically important to pass this deal and end the unfair tariff that denies Americans access to clean, affordable alternatives like sugarcane ethanol. The letter emphasizes that that if "Congress fails to enact this proposal before it adjourns for August recess, the substantial levels of deficit reduction and investment achieved by this compromise will no longer be possible, and we cannot commit our support after that point. Therefore, we ask for your assistance in moving this agreement through Congress before we adjourn."

The Obama Administration appears to be on board, which could help speed passage. A White House spokesman called the deal "[c]onsistent with the Administration's goals" and said it "provides a roadmap for the American biofuels industry to navigate their own future expansion - addressing infrastructure needs while supporting innovation for the next generations of biofuels." You can see more of the details and reactions from key players in coverage by The Wall Street Journal, The New York Times and Associated Press.

Urge Congress to Act Now

Brazil ended trade-distorting subsidies for ethanol more than a decade ago and eliminated its ethanol tariff early last year. We are pleased that this agreement would have the United States do the same and thank Senator Feinstein for her leadership on this important issue. As the world's top producers of ethanol, the U.S. and Brazil should lead by example in creating a free market for clean, renewable energy.

Please contact your members of Congress and urge them to end the 30-year-old tariff on imported ethanol this month. Doing so will help lower fuel prices and provide Americans with greater access to clean and affordable renewable fuels like sugarcane ethanol.

Let your representative and senators know that 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 renewable fuels. Allowing other alternative fuels like sugarcane ethanol to compete fairly in the U.S. will save Americans money, cut dependence on Middle East oil and improve the environment.

copyright 2010 Brazilian Sugarcane Industry Association