Domestic Fuel

Seizing on last week’s CBO report and a proposal by Growth Energy to phase out and redirect the blenders tax credit for ethanol (VEETC), several long-time opponents of ethanol renewed their call for an end to all tax incentives for the home-grown fuel.

In a press conference this morning, representatives from the American Meat Institute (AMI), Environmental Working Group (EWG), Grocery Manufacturers Association (GMA), Natural Resources Defense Council (NRDC) and Taxpayers for Common Sense together said that the tax credit should be eliminated at the end of this year when it expires, and the corresponding tariff on imported ethanol should also be ended.

AMI president J. Patrick Boyle claims that the blenders tax credit distorts the corn market and increases the cost of feeding animals. “Thirty years of tax payer support for the corn-based ethanol industry has created a mature industry that now needs to compete fairly in the market place and allow for the next generation of renewable fuels to grow,” said Boyle.

NRDC’s Nathanael Greene called the tax credit a “bribe” for fuel blenders to comply with the Renewable Fuels Standard. “It’s sort of like paying people to obey the speed limit,” Greene said. He also called the VEETC an “environmental problem” that “drives up food prices, encourages agribusiness to pollute our water.”

The groups made it clear that they do not support Growth Energy’s proposal to redirect the tax credit and use it instead to increase blender pumps and flex fuel vehicles, but said that proposal shows the industry recognizes that the tax credit is in jeopardy. Steve Ellis with Taxpayers for Common Sense called Growth Energy’s proposal ironic. “At the same time they talk about a mandate for flex fuel vehicles and for pumps across the country, these are enormous subsidies, and yet they’re talking about a level playing and letting the free market work,” Ellis said.

They did indicate that the Growth Energy proposal was a game changer. “Growth’s announcement will help begin a new conversation about what are the right investments to improve our energy security without undermining our food security,” said Scott Faber with GMA. “This is an important opportunity to step back and ask important questions about our investment strategy with regard to fuel.”

While the groups talked about growing the next generation of fuels, they sidestepped a question about how not building up infrastructure might inhibit the growth of celluosic ethanol down the road. The only next generation fuels they voiced support for were biobutanol and other fuels that are more similar in nature to gasoline and would work with existing infrastructure.

Growth Energy responded by Twitter that ethanol is “the only commercially-viable alternative to oil. #ethanol is not a ‘someday’ fuel.”

Meanwhile, the Renewable Fuels Association, American Coalition for Ethanol, American Farm Bureau Federation and National Corn Growers Association sent a letter this morning to members of the U.S. House and Senate who are supportive of extending the tax incentives. “We the undersigned believe that it is critically important to pass an extension of these important incentives and move aggressively to expand market access for corn and cellulosic ethanol through policies which further build out E85 and blender pump infrastructure and deploy more flexible fuel vehicles,” they wrote.