New NRDC fact sheet shows how moving beyond corn ethanol means more investment and more jobs in more states
Posted August 25, 2010 in Moving Beyond Oil, Solving Global Warming
A few months back, I blogged about USDA’s release of a roadmap illustrating the agency’s plans to help make ethanol a national industry. It’s certainly a positive sign that USDA is committed to investing in infrastructure and technology that would move us beyond corn ethanol and toward meeting the goals of the Renewable Fuels Standard, which mandates the use of 36 billion gallons of ethanol and other biofuels (including new and cleaner biofuels, such as those made from dedicated “energy crops” like willow and switchgrass) by 2022. However, this transition cannot happen unless we seriously reform our ethanol policies and stop pumping billions per year in taxpayer dollars into subsidies for the corn ethanol industry through the Volumetric Ethanol Excise Tax Credit (VEETC).
Last week, NRDC released a new fact sheet on the VEETC, highlighting how our government’s biggest incentive program for biofuels has almost exclusively supported the production of corn ethanol which, when all direct and indirect costs are added, creates more global warming pollution than the oil it is supposed to replace, and has failed to incentivize the development of cleaner and more cutting edge biofuels like cellulosic ethanol. As a result, the VEETC has not only concentrated the ethanol industry in just a handful of states, but siphoned scarce resources away from more competitive biofuel technologies that create far less pollution and would allow more than double the number of U.S. states to meaningfully participate in ethanol production.
Many states have substantial biomass resources that could be sustainably harvested for conversion into biofuels produced from cellulosic biomass, such as the leaves, stems and stalks of plants, while protecting or even improving soil, water, and wildlife habitats. Unfortunately, in terms of state participation, the ethanol industry today looks like a far cry from the national industry USDA envisions. The map below shows the distribution of VEETC value across states by production in 2009. As the map makes clear, corn ethanol tax credit benefits today are highly concentrated, with only those 11 states highlighted in yellow seeing more than $100 million in VEETC benefits.
Figure 1: 2009 State Distribution of VEETC Value by Production
However, if today’s VEETC was redirected to support cellulosic biofuels, it would more than double the number of states participating in the biofuels market in a meaningful way. If the $5 billion in VEETC subsidies we gave to corn ethanol in 2009 was instead redirected in support of cellulosic ethanol, 23 states would see more than $100 million in annual benefits.
Figure 2: State Distribution of Cellulosic VEETC Value
This is what a national ethanol industry looks like and this is what our biofuels policies should be supporting. We cannot afford to continue spending billions in taxpayer dollars propping up an old, polluting technology instead of the new, cleaner and more competitive biofuels we need. Congress must let the VEETC expire at year-end and replace it with a smarter, cheaper, and greener biofuels tax credit that rewards real environmental performance, saves taxpayers money and helps speed the transition to the kinds of biofuels that can make a real contribution to our energy security, and thus do more to generate both reinvestment and new investment across the U.S.
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Comments
Farmer John — Aug 25 2010 03:04 PM
How exactly would this create more jobs? Look at Bio-diesel, they are hurting and losing jobs daily since their tax credit expired. The same thing would happen to corn ethanol. Over 100k people will lose their jobs if VEETC is not renewed. So where are those people going to work and where will these additional jobs be created? Wouldn't it make sense to stop oil subsidies? Instead of telling consumers negatively biased stories about corn ethanol? Corn ethanol is currently our countries only available renewable fuel source which burns 52% cleaner than conventional gas according to the EPA.
John Valente — Aug 25 2010 05:29 PM
Farmer John may want to read Dr. Bruce Babcock's paper on the "Costs and Benefits to Taxpayers, Consumers, and Producers from U.S. Ethanol Policies." In a nutshell he says that there are about 300 jobs that would be gone in 2014 if VEETC went away at the end of this year. C'mom, that's like spending $20 million a year for each possible job loss. Corn ethanol doesn't need the subsidies anymore.
Farmer John — Aug 26 2010 03:10 PM
John, Babcock's study is completely biased as it was funded by UNICA, aka Brazilian Ethanol. Look, UNICA has been lobbying to get rid of VEETC to open their market opportunities which wouldn't do anything for the United States dependence on foreign fuels. Losing VEETC would be a disaster for the American Economy as gas prices will rise, jobs will be lost, billions will be lost in local, state, and feder al tax revenues, and our countries only readily available source of clean-buring, renewable, alternative fuel will reduced by 4 billion gallons annually, closing 2 out of every 5 ethanol plants.