Friday, June 17, 2011

Senate votes to cut $6B ethanol tax credit

The U.S. Senate has voted to end a six billion dollar a year tax credit supporting the ethanol industry. But ending the subsidy would still leave ethanol with lots of federal support.

The Senate vote has a prominent ethanol export tolling the bell for the blending credit.

Professor Bruce Babcock, who drives past miles of corn fields on his way to work at the University of Iowa, says this would do the ethanol industry no harm. "The writing is on the wall that this ethanol tax credit is not long for this world," Babcock said.

Federal mandates already require oil companies to blend ever more ethanol into gasoline.

Looks like we’re going to be relying on the biofuels mandates to make sure blenders use biofuels, rather than bribing them to use it with six billion dollars," Babcock said.

In fact, Babcock thinks killing the subsidy could actually help ethanol by removing the stigma of being a subsidized industry.

It may strengthen support for the ethanol mandate, and the tariff on imports. Long as those two hold up, Babcock thinks ethanol’s golden.

Frank Morris, Harvest Public Media


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