Cane in the Tank = Money in the Bank

Sugarcane ethanol is typically less expensive than other renewable fuels currently available in large quantities.  It has cost on average $0.45 per gallon less than corn ethanol during the past five years.

However, Congress has erected an elaborate system of subsidies and trade barriers that make sugarcane ethanol more expensive and practically unavailable in the United States.  As a result, Americans are not reaping the environmental, economic and energy diversity benefits of this clean and affordable renewable fuel.

These subsidies and trade barriers are scheduled to expire at the end of 2011, and doing so would benefit Americans in two ways:

• Lower prices at the pump – The bottom line for American drivers is the tariff on imported ethanol amounts to a hidden tax that increases the cost of their fuel purchases, since most gasoline sold in the U.S. contains up to 10% ethanol. Without the import taxes, the average American could save about a nickel per gallon using gasoline blended with sugarcane ethanol.  Those savings add up with each fill-up!
• Taxpayer savings – In a time of soaring budget deficits, $6 billion annually is real money.  That’s how much the ethanol subsidies cost and ending the program would save that amount.

A Primer on U.S. Ethanol Policy

Corn ethanol has been manufactured in the U.S. for more than 30 years and has blossomed into a thriving industry.  American farms and refineries generate half of all ethanol produced around the globe.  Despite being a mature and profitable industry, corn ethanol producers are still protected by an interlocking series of government  mandates, subsidies (“tax credits”) and trade barriers (“tariffs”).

Mandate. The U.S. Environmental Protection Agency (EPA) oversees a program that requires adding continually increasing volumes of renewable energy into America’s fuel supply – growing from 12 billion gallons today up to 36 billion by 2022. The Renewable Fuel Standard forces fuel providers to use ethanol and sets aside a quota of up to 15 billion gallons annually for conventional biofuels like corn ethanol.

Tax Credit. On top of the mandate, domestic ethanol producers receive a 45-cents-per-gallon tax credit that costs American taxpayers approximately $6 billion annually. The nonpartisan Congressional Budget Office (CBO) released a July 2010 report, which found that the biofuels industry no longer needs tax credits to drive ethanol production since the mandates increase ethanol consumption.

Tariff. Congress imposes a 54-cents-per-gallon tariff (or import tax) on ethanol coming into the U.S. from most foreign countries. Historically, the amount of the tax credit and tariff were aligned to achieve a direct offset (commonly referred to as “parity.”) In 2008, Congress lowered the subsidy for corn ethanol to 45 cents, but left the import tax at 54 cents.

Both the ethanol tax credit and tariff are scheduled to expire on December 31, 2011, and Congress currently is considering whether to extend or change its ethanol policies. A broad and diverse group of experts say it’s time for Congress to eliminate the ethanol tax credit and tariff. Even leading agricultural economists in the heart of corn country found that Americans would benefit from ending the tax credit and trade protection.

If you think it’s time to phase down the subsidies, promote competition and diversify America’s energy sources, add your voice to the growing chorus who want greater access to the benefits of sugarcane ethanol.