Alternative Fuel: Congress Saves $6 Billion Annually by not Extending Ethanol Subsidies

According to the Brazilian Sugarcane Industry Association (UNICA), more than 30 years of government subsidies for domestic ethanol production, as well as a tax on imported ethanol has ended as the U.S. congress ended the year without extending the measures.

Known as VEETC (Volumetric Ethanol Excise Tax Credit), the measure is scheduled to expire on December 31st without any congressional intervention. The end of the subsidies is expected to save tax payers in the United States about $6 billion annually. The numbers are based on what had bee a $.54 tax on imported ethanol, and a $.45 tax credit for domestic producers.

For countries like Brasil, the change is also welcome news as it gives them what they see as a more level playing field in the alternative fuels industry.

“With Congress in recess, there are no opportunities for further attempts to prolong the tax credit or the tariff, so we can confidently say these support mechanisms will be gone at the end of 2011,” said the Washington Representative for the Brazilian Sugarcane Industry Association (UNICA), Leticia Phillips.

This means that in 2012, the world’s largest fuel consuming market will be open to imports of less costly and more efficient ethanol, including sugarcane ethanol produced in Brazil, recognized since 2010 by the US Environmental Protection Agency (EPA) as an advanced biofuel because of its verified reduction of up to 90% in greenhouse gas emissions compared to gasoline.

“The raw materials used in ethanol production should be evaluated strictly on the quality and sustainability of the ethanol they provide, not with political or protectionist criteria favoring country-specific feedstocks without regard for efficiency. What should matter ahead of all other considerations is the lowest possible use of fossil energy to produce as much clean, renewable energy as possible, while reducing emissions that lead to global warming,” stressed Jank.