07-07-2011 10:25 AM
I figured that it might happen, but I worry that cutting it to zero so quickly, instead of phasing it out over time might not give the industry time to prepare.
I'm all for dropping the ethanol subsidy, but while we are at it, maybe the oil tankers could pay their own security when they cross the ocean, as well?
07-07-2011 10:32 AM
One CME Group floor trader reacts to the ethanol news.
"The market knows the subsidies are going away…as long as the mandates are intact it changes the market little… taking away subsidy perhaps helps mitigate potential spike highs… as it will be easier to ration ethanol production/demand but again mandates support potential large baseline demand
Today we are higher on Chinese import sales announcement.. if you include unknown sales believed to be China than they have taken 3.2 million tons since last winter… USDA only has new crop balance sheet taking ½ million tons," he says.
07-07-2011 10:53 AM
If we are ending the 45 cent ethanol credit and 54 cent tax on imported, aren't we really not gaining anything at all? We should be promoting subsidies on the next generation of ethanol (from switchgrass and other biomass) before someone else gains that advantage. Guess we like to be dependent on other nations for energy.
07-07-2011 11:48 AM
Here's the latest RFA explanation of this ethanol legislative talk today. I post this to help some of us get a little more clarity on the subject. So, FWIW:
By Matt Hartwig, Renewable Fuels Media guy:
As many of you know by now, Senators Klobuchar, Thune and Feinstein
have reached a compromise on legislation to end the current ethanol
tax incentive, known as VEETC, and use the funds for debt reduction,
infrastructure investment, and cellulosic ethanol investment.
Under the compromise, $1.33 billion would be put directly to debt
reduction. To be clear, the ethanol industry is the only industry
that is sacrificing some of its tax incentives to help address budget
concerns. Where, for example, are the fossil fuel industries on
The compromise would also reform and extend what's known as the
Alternative Fuel Vehicle Refueling Property Credit through
December 31, 2014. The current AFVR PC allows fuel retailers to
take a 30% credit for the installation of alternative fuel infrastructure,
up to $30,000, including E85 infrastructure. The compromise reforms
and improves the credit for ethanol by allowing the entire cost of
dual-use blender pump to qualify for the credit rather than the
incremental cost, and allowing a broader range of ethanol blends
between E15 and E85, many blender pumps will now qualify. This is
an important change and will help expand the market for ethanol.
The compromise, however, reduces the credit to 20%, up to $30,000.
Additionally, the compromise would extend the existing $1.01 per
gallon tax credit for cellulosic biofuels through 2015. However,
the announced deal would cap how much money could be spent on this
incentive at $50 million, $100 million, and $155 million in 2013,
2014, and 2015, respectively. The RFA and the Advanced Ethanol Council
have concerns that such a cap sends the wrong signal to the market
and will work to improve this provision before it might become law.
The compromise also includes a 1-year extension of the Small Ethanol
Producer Tax Credit through 2012, but reduces the value from 10 cents
to 7 cents. It would also extend the depreciation allowance of 50%
for cellulosic biofuel plant property through 2015.
And, the compromise would end the tariff on imported ethanol as the
tax incentive would no longer be available. A quick reminder here:
American-made ethanol is the cheapest on the market today. Brazilian
ethanol, erroneously believed to be more cost-effective, is more
expensive and concerns over the industry have prompted a new round
of government intervention in the Brazilian ethanol market.
The $64,000 question is, How does this compromise become law?
Unfortunately, the answer is unclear. Speculation focuses on various
House-passed tax bills the Senate could take up and replace with
the language of this compromise. Remember, any provision that raises
revenue, as this one would because it is raising taxes on ethanol-blended
fuel, must originate in the House. There are three such bills currently
before the Senate. It is more likely, however, that proponents
will attempt to insert this language into the deficit reform package
currently being negotiated by the White House as part of the debt
07-08-2011 06:23 AM
Ending all ethanol subsidies would put a large segment of the U.S. in a bad position. Grocers, meatpackers, political columnists, oil industry analysts, etc. would all lose their favorite reason to bitch!. the void left by the ending of subsidies would cause a nation-wide quiet never before experienced in this republic. the prospect of losing our ethanol "whipping boy" would be unimaginable to many. then what???? I guess that will eliminate the budget deficit and we'll all be living in the 50's.
07-08-2011 08:04 AM
Mike I can see the government doing away with the subsidy but ending a tariff on Brazilian ethanol is what could hurt.... Maybe, as you had stated Bazilian ethanol is more expensive so maybe not. This issue sounds like every other foreign policy when it comes to American jobs. We can produce cheap ethanol here in the US and create jobs HERE but nope lets open up the doors for foreign ethanol and put some more people out of work.