Eliminating the tariff on ethanol imports, an idea that the secretary of the Energy Department hinted this week the administration might push, seems to have as much future as a cornstalk in front of a combine.
The combine in this case would be Congress, which would have to approve any effort to end the 54-cent tariff on ethanol prematurely. The tariff would expire at the end of this year unless Congress extends the tariff, which protects the domestic ethanol industry.
“They’d have to do [so] over my dead body,” Nelson said at a Wednesday breakfast sponsored by The Hill. “I’m not one who wants to be protectionist, but I will be in this case until we get this industry working here.”
Farm economies have been propped up in recent years by an explosion in domestic corn-based ethanol production, which has raised prices for corn and other crops. Nelson said ethanol production accounts for around 3,500 jobs in his home state of Nebraska.
Eliminating the tariff would be of particular benefit to ethanol producers in Brazil, who produce sugarcane ethanol that is cheaper than the U.S. corn-based variety.
Energy experts have argued one easy step policymakers could take to cut dependence on foreign oil and limit greenhouse gas emissions is to eliminate the ethanol tariff, opening the U.S. market to sugarcane ethanol.
Domestic ethanol producers, who already benefit from a federal tax break and renewable fuel production mandates, have lobbied aggressively in recent years to maintain the tariff protection as well.
But livestock producers and meat processors, who are paying high prices for feed because of the ethanol-fueled bump in crop prices, have lobbied for the tariff to be eliminated.
The Bush administration has repeatedly signaled interest in eliminating the tariff. Most recently, Energy Secretary Samuel Bodman hinted at a biofuels conference sponsored by the U.S. Chamber of Commerce on Tuesday that the administration might call for eliminating the tariff in its 2009 budget request, to be released Monday.
“The best I can tell is the industry is pretty close to being able to stand on its own,” Bodman said, according to a Reuters news report.
It wasn’t clear Wednesday what the administration planned. In its budget last year, the administration did not assume revenues from the import tariff beyond its scheduled expiration at the end of the year. That drew complaints from a number of lawmakers, including Sen. Chuck GrassleyChuck GrassleyMnuchin, Price meet with GOP senators Business groups express support for Branstad nomination 10 no-brainer ways to cut healthcare costs without hurting quality MORE (R-Iowa).
It is clear ethanol has broad appeal on Capitol Hill. Last year, Congress approved an energy bill that provided for a five-fold increase in ethanol production. To allay fears that the mandate will drive up food prices, lawmakers capped the amount of ethanol that could be produced from corn at 15 billion gallons. Another 21 billion gallons would have to come from ethanol derived from the cellulose of reedy plants like switchgrass or some other technology.
About 7 billion gallons of ethanol will be produced this year, according to the Renewable Fuels Association.
Matt Hartwig, a spokesman for RFA, said the imports accounted for 450 million gallons of ethanol in 2007. He argued that eliminating the tariff would have the effect of extending a U.S. tax subsidy designed to support the domestic industry to Brazilian producers, who are already subsidized by their own government.