Prior to the government shutdown last week, Senator Harkin (D-IA) introduced a new bill to boost subsidies for the mature corn ethanol industry, despite the fact that even biofuels proponents have acknowledged that subsidies were no longer necessary once the industry got off the ground. S. 1563, the Biofuels Market Expansion Act of 2013, is more costly and far-reaching than other bills Sen. Harkin introduced over the past several years but ultimately failed to get signed into law. While the largest ethanol subsidy – the $6 billion-per-year Volumetric Ethanol Excise Tax Credit – and an import tariff expired at the end of 2011, corn ethanol continues to benefit from a 13.8 billion-gallon-mandate in the federal Renewable Fuel Standard (RFS); the industry also receives millions in federal subsidies through programs such as the U.S. Department of Agriculture’s (USDA) Rural Energy for America Program, Bioenergy Program for Advanced Biofuels, various tax credits, and other government programs.
The new bill, cosponsored by Sens. Amy Klobuchar (D-MN), Tim Johnson (D-SD), and Al Franken (D-MN), would expand corn ethanol subsidies by:
- Authorizing $1 billion in Fiscal Year 2014-18 discretionary spending (specific spending levels would be set by Congress each year) to subsidize half the cost of more ethanol blender pumps and storage tanks through a new Department of Energy (DOE) grant program (special infrastructure is needed to dispense higher blends of corn ethanol since it is more corrosive than gasoline);
- Creating new DOE loan guarantees to fund 80 percent of the cost of new biofuels pipelines which would transfer corn ethanol from refineries in the Midwest to gasoline blending and distribution facilities on the East Coast, for instance;
- Mandating that gasoline stations install at least one blender pump, a special piece of equipment that can dispense higher levels of corn ethanol blended into gasoline, at half of their locations by 2022;
- Setting up a new trading system for the installation of ethanol blender pumps (for instance, if one company installs more pumps than is mandated, it can sell credits to other companies failing to install the required number); and
- Requiring auto manufacturers to increase flex-fuel vehicle production (90 percent of model year 2017 and later vehicles – except for electric vehicles - would have to be flex-fuel, meaning they can operate on high blends of ethanol such as E85, or a mixture of 85 percent ethanol and 15 percent gasoline).
As we’ve said before, it’s time the mature corn ethanol industry survived on its own two feet without taxpayer support. After more than 30 years of federal backing, corn ethanol subsidies scattered throughout the federal tax code, USDA, DOE, and elsewhere should be eliminated once and for all. Taxpayers already subsidize corn ethanol blender pumps and storage tanks, and additional subsidies will only exacerbate unintended consequences of the fuel’s production and usage such as higher food prices, lower mileage per gallon, greater greenhouse gas emissions, more agricultural runoff and water pollution, among others. The government should stop picking winners and losers, and by doing so, can save taxpayers millions of dollars in both the short- and long-term.