More Potential Giveaways to Ethanol in Energy Bill

For Immediate Release: 
Wednesday, July 14, 2010

WASHINGTON – July 14. In an bid to garner support for legislation to address the looming danger of climate change, Midwest senators are reportedly pressing to attach a long-term extension of biofuel tax breaks to a Senate energy bill being crafted by Democratic leaders. The Volumetric Ethanol Excise Tax Credit (VEETC), currently set to expire on Dec. 31, pays oil companies $0.45 per gallon in the form of tax credits to blend ethanol with gasoline.

Word of the senators’ move surfaced as the Congressional Budget Office (CBO) released a a sobering assessment Wednesday (July 14) of corn ethanol’s costs and effectiveness. The key findings from the report are:

- “Because the production of ethanol draws so much energy from coal and natural gas, it can be thought of as a method for converting natural gas or coal to a liquid fuel that can be used for transportation.”

- It costs taxpayers $1.78 to reduce gasoline consumption by a single gallon by substituting corn ethanol. The Department of Energy says the retail gasoline price currently averages $2.78. So ethanol’s $1.78 a gallon cost to taxpayers is two-thirds of the retail price of gasoline.

“In these times of tight budgets, growing deficits and a pressing need to make real progress on alternative energy, it makes little sense to continue lavish government support for corn ethanol, a fuel that has failed to live up to its promise as an environmentally friendly, financially viable alternative to burning oil,” said Craig Cox, Environmental Working Group Midwest vice-president in EWG’s Ames, Iowa, office.

“Corn ethanol is really agriculture policy masquerading as energy policy. The only beneficiaries of extending the ethanol tax credit will be large-scale industrial growers of corn -- who already enjoy billions in traditional farm subsidies -- and the oil companies that blend ethanol with gasoline,” Cox concluded.

On June 14, 2010, the Environmental Working Group (EWG) released a report detailing how U.S. taxpayers have spent a whopping $17 billion since VEETC was passed by Congress to subsidize corn ethanol blends in gasoline. Driving Under the Influence: Corn-Ethanol and Energy Security clearly showed that taxpayers’ return on their investment has been a reduction in overall oil consumption equal to an unimpressive 1.1 mile-per-gallon increase in fleet-wide fuel economy. Worse, ethanol’s much ballyhooed contribution to reducing America’s dependence on imported oil is even smaller – the equivalent to a measly six-tenths of a mile per gallon fleet-wide. That degree of energy independence in corn ethanol could have been accomplished for free, rather than from a massive taxpayer investment, by proper tire inflation, using the right grade of motor oil, driving sensibly and better enforcement of speed limits

In the context of an energy bill that will move America away from its addiction to foreign oil, it should be noted that British Petroleum (BP) and other major oil companies appear to be the main beneficiaries of VEETC. The National Journal reported that BP alone could stand to reap federal tax credits approaching $600 million this year for blending corn ethanol into gasoline.

Go here for the full report of Driving Under the Influence, authored by Craig Cox and Andrew Hug:


EWG is a nonprofit research organization based in Washington, DC that uses the power of information to protect human health and the environment.