Politics of Poverty

Change is in the air for ethanol

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The time is ripe for new ideas and reforms around US biofuels policy.

On the floor of the US Senate, the struggle has begun that may eventually lead to a serious re-think of US biofuels policy. Yesterday was the first skirmish.

Budget pressures are driving the discussion at the moment, with the expensive ethanol tax credits on the chopping block. The famous budget-cutting Senator from Oklahoma, Tom Coburn (R), offered an amendment with Senator Dianne Feinstein (D-CA) to end the $6b tax credit. The issue got contentious and wrapped up in partisan procedural complaints. The amendment lost on a vote of 40-59.

While budget pressures loom large, other factors are also driving the need to review the US policies around biofuels. Last week, the US Department of Agriculture announced new projections for corn harvests and prices. The message was to expect high prices and small stockpiles. As one observer said, “It looks like [corn] prices are going to stay high for another year. The food versus fuel debate is going to hot up.” For the first time, more US corn will go to producing ethanol than to feeding livestock.

At the same time, the purported economic benefits of the US investment in ethanol are coming under scrutiny. While ethanol supporters, including US Secretary of Agriculture Tom Vilsack, claim that the industry supports 400,000 US jobs. Other economists are estimating something more like 46,000. That’s nearly an order of magnitude smaller. And others argue that ethanol and high corn prices aren’t translating into a rural revival.

More votes are expected in the Senate on ethanol subsidies in the near future, and later this year in the House of Representatives.

This all points to a sea-change in the public debate around US biofuels policy and a confirmation that the time is ripe for new ideas and reforms. Good news for the GROW campaign which made reforming biofuels policy a key objective of the effort.

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