At the end of the year the Volumetric Ethanol Excise Tax Credit (VEETC) which gives blenders 45 cents to blend ethanol into the gasoline supply expires. Jeff Broin, chief executive officer of POET, the nation’s largest domestic ethanol producer, said VEETC’s expiration “won’t have a significant impact” on the industry which has become more efficient over the last 30 years at the same time the tax credit has decreased.
Broin said without the tax credit, ethanol will still provide a 16-cent cheaper alternative. However, consumers could pay an estimated 4 cents higher at the pump as the tax credit disappears, he added.
Interestingly, E85, a blend of 85% ethanol, could see prices increase more significantly with the tax credit expiration and become less competitive. Broin expects E85 prices could jump 40 cents and may not allow for buyers to purchase E85 at an economical discount which allows for the lower fuel efficiency of the blend.
The VEETC expiration received praises from many livestock and environmental groups, as well as taxpayer groups who have eyed the tariff as a mechanism to save in tight budgetary times.
Joel Brandenberger, president of the National Turkey Federation, said the federation “will continue to remain diligent to ensure the VEETC does not reappear and will continue to push for real reform of the Renewable Fuels Standard.”
The RFS mandates that close to 14 billion gallons of renewable fuel be blended into the nation’s fuel supply, but that includes advanced biofuels and biodiesel. Increased ethanol production is not expected in 2012 and production is expected to remain steady.
Hussein Allidina, head of commodity research at Morgan Stanley, said his consultants in Washington, D.C. don’t see any real risk to the RFS changing anytime in the near future, partially because of the other pressing details the government needs to focus on.
Gawain Kripke, director of Policy & Research at Oxfam America, said his group looks forward to working with Congress toward “creating a more effective and rational U.S. biofuels policy that supports both alternative energy sources and global food security.”
Stephen Ellis, vice president of Taxpayers for Common Sense, said there’s no guarantee that ethanol boosters won’t try to slip a renewal into a tax package expected early in 2012. “Now efforts turn to preventing the new and more inventive subsidies that the ethanol groups are peddling,” he said.
The ethanol industry has advocated an extension of the cellulosic tax credit which expires at the end of 2012.
The biodiesel tax credit lapsed in 2010, resulting in a significant drop in production, job losses and some plant closings. Eventually, it was extended retroactively for 2010 and through 2011. Biodiesel leaders hope the tax credit can again be reinstated in 2012. A draft package of tax extenders, recently circulated by Senate leaders, includes the biodiesel incentive.
Expiration of ethanol subsidy nears (Feedstuffs)
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