The Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

Some debates just won’t die (and that’s a good thing!)

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The Volumetric Ethanol Excise Tax Credit (VEETC) is just plain expensive at a time when congress has vowed to radically reduce government spending.

As I wrote a few weeks back, Senator Coburn lit a fire in the ethanol debate with a proposal to eliminate the Volumetric Ethanol Excise Tax Credit (VEETC), the troublesome subsidy given to ethanol blenders that keeps demand for biofuels artificially high. After he agreed to pull the bill before it was voted on last month and worked with Senator Feinstein, who had crafted a similar piece of legislation, a new proposal was introduced in the Senate on Wednesday. The Ethanol Subsidy and Tariff Repeal Act would eliminate VEETC by July 1.

The tax credit is not set to expire until the end of the year, but the fight is getting heated. In response to the Coburn/Feinstein proposal, Senator Grassley introduced his own proposal that would cut, though not eliminate, ethanol subsidies, an idea the ethanol industry has embraced.

Accompanying this latest effort is the announcement by the FAO that food prices for the month of April remain at historically high levels. Prices remained virtually unchanged in April, though the price of cereal grains, corn in particular, shot up as a result of bad weather in the US. The ethanol lobby will tell you biofuels (and biofuel mandates) have nothing to do with global grain prices. Unbiased experts have a different opinion (.pdf) though.

Maize that will be stored in a village grain bank in Malawi.  Food prices for the month of April remained at historically high levels.  Photo by Carlo Heathcote/Oxfam.
Maize that will be stored in a village grain bank in Malawi. Food prices for the month of April remained at historically high levels. Photo by Carlo Heathcote/Oxfam.

And even if you don’t buy the argument that our (artificially high) demand for biofuels is behind at least some piece of food price issues, VEETC is just plain expensive (at a time when Congress has vowed to radically reduce government spending). According to one estimate, total government support for ethanol between 2006 and 2012 averaged roughly $10 billion per year (.pdf).

We’re not the only ones on board with Coburn and Feinstein’s effort to repeal VEETC. Fifty organizations signed on their support to the legislation. It’s a shame that ideological rigidity is keeping more critics of our flawed biofuels policy from supporting Senators Coburn and Feinstein.

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