The answer to THAT question determines how much life subsidies for corn-based ethanol have in the U.S. And the clock may be ticking on other subsidies.
As fiscal pressures mount, both politically and financially, it is becoming increasingly difficult to defend the 45-cent-a-gallon subsidy to refiners and a 54-cent-per-gallon tariff on imported sugarcane ethanol. Together, they add up to $6 billion a year for an industry that is
widely viewed to be very profitable with help from the federal Renewable Fuels Standard. The standard requires that 12.6 billion gallons of ethanol be blended into the U.S. gasoline pool.
The Renewable Fuels Association was quick to strike back at Senate action that would end the subsidies in January 2012, accusing some Senators of hypocrisy given their recent support for Big Oil subsidies.
While full action by Congress to end all corn-based ethanol subsidies remains a long shot and perhaps a veto by President Obama, what is slipping through cracks in this debate is the growing possibility that many other types of energy tax breaks and subsidies might find themselves on the chopping block, including tax credits for wind, solar and nuclear energy.
The Brazilian Sugarcane Industry Association heralded the Senate move as a means for sugarcane ethanol to compete fairly in the U.S. without affecting corn prices which, in turn, can drive up food prices. Several international organizations including the World Bank are calling on governments to stop subsidizing any form of ethanol because they inflate food costs.
Where the recession, international competition and U.S. fiscal policy collide over ethanol subsidies remains to be seen. But just about every special interest inside Washington’s Beltway is on high-alert to defend their what they might have thought were sacred cows.