Q.: When is an end to ethanol subsidies not an end to ethanol subsidies?
A.: When it's part of the Feinstein-Klobuchar-Thune deal.
The good news: The three Senators' deal eliminates the $2 billion (through the end of this year) VEETC tax credit. Our tax dollars won't be used to pay ethanol blenders 45 cents per gallon. Of the $2 billion saved, $1.3 billion goes to deficit reduction.
The bad news: the deal involves paying ethanol blenders more money to develop infrastructure (ethanol pumping stations and the like) and gives a tax credit to small producers of ethanol.
Straight news story here, and details below the fold.
Last month the Senate voted 73-27 for the Feinstein-Coburn amendment to kill the ethanol tax subsidy; however, the vote was in the form of an amendment to a bill that's likely going nowhere, so another legislative vehicle would be necessary. Since it passed, DiFi has been negotiating with some of those Midwestern Senators who opposed the original amendments, and yesterday announced agreement with Sens. Klobuchar and Thune. Even Chuck Grassley (R-Iowa) gives muted praise to the compromise. Details:
Repeal of the 45-cent per gallon ethanol blender credit (VEETC) on July 31, saving $2 billion over the next five months.
Repeal of the 54-cent per gallon tariff on ethanol imports on July 31.
Cellulosic Biofuel Production Tax Credit (currently expires 12/31/2012)
-- 3 year extension of $1.01 per gallon credit (to 12/31/2015).
-- Annual cap of 50 million gallons in 2013, 100 million gallons in 2014, and 155 million gallons in 2015. Unused gallons roll to the next year.
-- Includes depreciation allowance for cellulosic plants, and expands the definition of cellulosic biofuel to include fuels from algae.
Score: $308 million
Alternative Fueling Infrastructure Tax Credit (currently expires 12/31/2011)
-- 3 year extension (to 12/31/2014), modified as proposed in S. 1185.
-- Investment Tax Credit reduced from 30% to 20%, effective 1/1/2012.
-- Covers technology neutral investments in electricity charging stations, blender pumps, or natural gas fueling stations, as specified in 26 USC 30C. Joint Committee on Taxation estimates that approximately half of qualifying investments will be in non-ethanol infrastructure.
Score: $253 million
Small Producer Tax Credit (currently expires 12/31/2011)
-- 1 year extension (to 12/31/2012).
-- Per gallon credit reduced from 10 cents to 7 cents per gallon.
Score: $107 million
This deal won't end the mandate that ethanol be blended into gasoline. It'll extend tax credits to biofuel producers and to small producers of ethanol. It'll extend the ethanol infrastructure. And it's probably lost Coburn's support because not all of the savings go to deficit reduction.
Who likes this deal, and who doesn't? The ethanol industry welcomes the compromise because it preserves the ethanol mandate. A strange bedfellows coalition ranging from Friends of the Earth to Americans for Prosperity call it a mixed bag.
So why is this compromise even being written? Politically, it doesn't make sense - last month's lopsided vote should demonstrate that support of Midwestern senators isn't necessary. As a policy compromise, it neither pleases deficit hawks (who'd like to see the entire $2 billion go to deficit reduction) nor climate hawks (who'd like to get rid of the mandate entirely).
The Washington Post editorial board has a better idea: no need for compromise in trimming ethanol subsidies. "It’s hardly time to “compromise” with yet another support for ethanol. Ms. Feinstein shouldn’t have to negotiate at all."