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PRI's Environmental News Magazine

Senate Signals Goodbye to Ethanol Subsidies

Published: August 11, 2012


By Mitra Taj


Senator Tom Coburn's amendment to end federal subsidies for ethanol passed the Senate 73-27, but needs more support to become law.

Congress sends its strongest sign yet that the country can't afford to continue subsidizing ethanol.

By Mitra Taj

The end could be near for ethanol subsidies. An amendment to repeal the 45-cent per gallon tax credit and 54 cent-per-gallon tariff won the support of more than two-thirds of the Senate Thursday. Pressure to repeal federal support for the ethanol industry has been mounting since midterm elections last fall, when voters sent a message of fiscal conservatism to Washington. Many lawmakers concerned with the growing deficit view the ethanol tax credit, which adds up to about $5 billion a year, as a tax expenditure and not a tax increase.

They've teamed up with environmentalists who say ethanol helps fuel climate change, pollutes water and soil resources, and squeezes food supplies. "What we've done by directing this extra payment is we're actually not helping the environment, we're raising food costs, and we're sending money out of the Treasury we don't need to be sending," said Senator Tom Coburn (R-OK), who co-sponsored the amendment with Dianne Feinstein (D-CA).

But the legislation hasn't cleared the Senate yet. It was voted onto an economic development bill that's seen as unlikely to succeed. Senate Majority Leader Harry Reid has said he's considering holding another vote to ensure it's passed out of the Senate and into the House, where an amendment to stop spending on ethanol infrastructure also met the approval of a majority of lawmakers Thursday. Negotiations over how to cut spending from the farm bill, and how to trim the deficit, might also be vehicles for legislating an end to federal support for ethanol that's been around since the 70's.

The White House opposed cutting off ethanol completely from federal favors, preferring instead efforts to "reform and modernize" its tax credits. Ethanol supporters are pushing for compromises that could boost funds for blender pumps and industry access to federal loan guarantees.

The unprecedented support for repealing the tax credit, or at least letting it expire at the end of the year, has given momentum to efforts to cut other forms of energy subsidies. In May an effort to kill subsidies for the oil and gas industry found fewer than the 60 votes needed to pass, but some Republicans are setting their sights on ending support for wind and solar energy.

Click here for LOE's previous coverage of Coburn's efforts, and here for more on the unsual alliance to defeat ethanol subsidies.

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