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CBO, Chairman Bingaman and the Future of the Ethanol Tax Incentive (First Cut)

July 14, 2010


A new report from the Congressional Budget Office takes the issue of ethanol tax incentives completely out of context.   Nowhere in the report does CBO compare ethanol incentives to those provided to fossil fuels.  Neither does CBO give credit to America's ethanol industry for the environmental and efficiency improvements it has made or the production of coproducts such as livestock feed and corn oil. Any analysis of American energy policy must be done holistically.  It cannot occur in a vacuum where considerations to the money spent to subsidize fully mature fossil fuel industries are not given. Moreover, tackling the energy problems the country faces will neither happen overnight or for free.  It will take time and money to transition from a pollution-intensive energy economy to one relying on clean, renewable energies like ethanol. It will also take a redirection of funds away from fossil fuels to these renewable technologies.  As a recent International Energy Agency report details, the world spends more than $500 billion annually on fossil fuel subsidies.  The results have led to geopolitical instability, economic havoc as seen by the spike in oil prices in 2008, and environmental destruction that is unfortunately on display today. The report was requested by Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM).  Chairman Bingaman issued a statement on the report saying: "In determining whether to extend the VEETC, Congress should weigh all factors, including the credit's very high cost to taxpayers; environmental and energy security benefits; production mandates; and market prices." We agree that a meaningful discussion about tax policy and energy policy is needed.  Taken in context, the investments made in ethanol show tremendous benefits compared to money wasted on tax breaks for the oil industry.  This is the time to redouble our efforts and put even more resources behind renewable fuels, not to cut bait and hope for the best. A full analysis of the CBO report from the RFA will be up here on the E-Xchange as soon as we have had time to digest it.