Tax Breaks for Corn-Based Ethanol Threatened
Tax breaks for corn-based ethanol threatened
Obama administration proposes end to subsidies for corn-based ethanol
By Jim Tankersley
May 6, 2009
WASHINGTON – — The Obama administration proposed draft rules Tuesday that could undercut $3 billion a year in federal tax breaks for producers of corn-based ethanol, a move that sets the stage for a battle between Midwestern grain producers and environmentalists, who say the gasoline substitute worsens global warming.
Corn ethanol is widely used as an additive in gasoline to reduce hydrocarbon and carbon monoxide emissions. For much of the last decade, federal officials, touting it as a potential large-scale substitute for gas and a tool for reducing global warming and foreign oil dependence, lavished it with subsidies.
More recently, however, environmentalists and other critics have increasingly questioned that support.
The global rush to produce more corn for fuel has raised environmental concerns, including the possibility for clearing of forests as farmers seek new cropland.
On top of that, a recent Congressional Budget Office study found that increased ethanol production contributed 10 percent to 15 percent of last year’s higher food prices.
The EPA’s proposed rules would take those things into account. How big a factor those impacts are in the final rules, which will face public comment, will determine the effect on corn producers and their tax breaks.
The range of possibilities was evident in the EPA’s analysis of fuels’ contributions to global warming. It shows corn ethanol ranges from substantially worse for climate change than gasoline to substantially better, depending on how it is produced and EPA methods for tallying its greenhouse gas emissions.
"The rules are kind of in the category of wait-to-see-what-happens," said Rodney Weinzierl, executive director of the Illinois Corn Growers Association.
Industry officials were cheered by companion plans the administration announced with the draft Renewable Fuels Standard, including nearly $1 billion in stimulus funds for biofuel research and new steps to promote ethanol-powered cars and fueling stations.
Though biofuels, including grasses and algae, are considered promising alternatives to petroleum, some researchers are challenging the use of corn for this purpose.
In particular, they point to the "indirect land-use" effects of pulling corn out of the world food supply, which could force farmers to log rain forests, releasing massive amounts of carbon dioxide in the process, to plant corn.
Congress set an increasing national mandate for biofuel production in 2007, peaking at 36 billion gallons in 2022, with corn ethanol initially accounting for much of that. Later, qualifying biofuels must emit up to 60 percent less greenhouse gas than gasoline.
The EPA rules proposed Tuesday represent the first step in what will be an intense lobbying fight over how to tally emissions.
The administration "looked at the science and decided they were going to do the best analysis they could on land-use impacts. … They stuck by it through a lot of political pressure," said Nathanael Greene, director of renewable energy policy for the Natural Resources Defense Council.
A lot of money hangs on this, with 9 million gallons of ethanol made in the U.S. last year.
Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita. Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol. Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program. Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector. On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline. Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.