Ethanol receives at least six times the subsidy per delivered BTU that domestic oil does, even though their energy security benefits per gallon are identical.
The US corn ethanol industry doesn’t need to grow further, because it is already within striking distance of the target set by the government, which also appears to represent the maximum prudent level of output for a fuel source that makes such heavy use of water and fossil energy sources in its production, and that ultimately competes with the consumption of corn as food or feed, here and abroad.
The GAO report estimates the cost to the Treasury of the ethanol blenders’ credit at $4 billion last year, growing to $6.75 billion by 2015, if not sooner. Although at a time of trillion-dollar deficits that may look no more significant than a rounding error in the government’s books, continuing this outdated and unnecessary incentive sends a bad message to the developers of other, less mature alternative energy sources. It tells them that they don’t need to worry so much about making their technologies competitive with conventional energy, because the government is likely to subsidize them until the end of time–or until the Treasury runs out of money, a date that will surely arrive faster, the more unnecessary subsidies it hands out.
After having been extended by last year’s Farm Bill, the present Volumetric Ethanol Excise Tax Credit and the tariff on imported ethanol that mirrors it are due to expire at the end of next year.
After 30 years of assistance–spanning my entire career in energy–it’s time to find out whether this industry can either survive and compete on its own.