Agriculture ethanol-gas-pump

Published on December 14th, 2011 | by Andrew Meggison

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Food Vs. Fuel And The End Of the Volumetric Ethanol Excise Tax Credit

 

The whole “Food vs. Fuel” debate is fascinating. The fact is that the U.S. now uses more corn for fuel than it does for food.  In a time where one in five American children goes to bed hungry every night, people have a big issue with food being used as a fuel source. On that bombshell, the Volumetric Ethanol Excise Tax Credit (VEETC) is coming to an end.

National Corn Growers Association president Garry Niemeyer, a farmer from Illinois, recently wrote an editorial expressing his opinion. VEETC expires by the end of the year and, as Mr. Niemeyer points out in his editorial, no one on the side of ethanol — meaning, the corn growers and others in the ethanol business — have tried to stop the death of VEETC. Mr. Niemeyer points out that, in the minds of the ethanol industry, the tax credit is already dead, and that the industry has known this for a while.

Rather than relying on the tax credit, the ethanol industry is in a stage of growth looking for alternatives to grow the ethanol industry. The ethanol industry has recognized that federal tax credits are not going to last, especially in a time where money in the U.S. government is very tight. Adapt or die seems to be the message and Mr. Niemeyer alludes to the fact that the ethanol industry has, indeed, adapted, and that the industry is not going six feet under – although many people wish it would.

Within the editorial, Mr. Niemeyer does take some jabs at groups and news articles that, in his view, have made some error. Mr. Niemeyer blasts the Green Scissors Project by saying that that the project’s accounting figures are in error by as much as 10% concerning ethanol expenditures.

The Green Scissors Project is designed to be a road map of spending changes allowing Congress to save up to $380 billion over five years by curbing wasteful spending that harms the environment. The Green Scissors coalition is a diverse group of public policy organizations including progressive environmental group Friends of the Earth, deficit hawk Taxpayers for Common Sense, consumer watchdog Public Citizen, and free-market think tank The Heartland Institute.

Depending on one’s stance on the issue of the future of the ethanol industry, this editorial can come across as reassuring — the industry is ready for the future and does not need any federal tax credit to stay afloat. Or, the editorial comes across as indicating that the ethanol industry is in deep trouble and the president of the National Corn Growers Association wrote this as a last gasp to keep hope within the industry alive.

Garry Niemeyer’s complete editorial can be found here.

The fact remains that VEETC is done and certain groups are happy to hear this, including representatives from the livestock, dairy, and poultry industries. Representatives from the livestock, dairy, and poultry industries testified on Sept. 14th about feed availability, or feed unavailability, in front of a subcommittee of the U.S. House Committee on Agriculture. The majority pointed to the ethanol industry as a main factor in rising feed prices and called on Congress to end government subsidies, particularly for corn ethanol.

Feed represents more than 70% of the cost to produce meat, poultry, dairy, and eggs, said Philip Greene, vice president of Foster Commodities, a poultry farm company. “Anything—I repeat, anything—that affects the cost of producing feed for livestock and poultry, directly impacts the cost of animals to the processor, meat, dairy and eggs to the retailer, and ultimately, the cost of food to the consumer.”

The “Food vs. Fuel” debate is far from over, but with VEETC coming to an end, the hope is that food prices will begin to drop, or at least level out. To put things into perspective, this past year alone, there was an overall increase of 5% to 7% in food prices, including increases of 11% for dairy and eggs, 10% for fresh vegetables, 7 % for baked goods, and 5% for meat in the United States.

Source: domesticfuel.com | Image: Carolina K. Smith via shutterstock

Andrew Meggison was born in the state of Maine and educated in Massachusetts. Andrew earned a Bachelor’s Degree in Government and International Relations from Clark University and a Master’s Degree in Political Science from Northeastern University. Being an Eagle Scout, Andrew has a passion for all things environmental. In his free time Andrew enjoys writing, exploring the great outdoors, a good film, and a creative cocktail. You can follow Andrew on Twitter @AndrewMeggison

 



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About the Author

Andrew Meggison was born in the state of Maine and educated in Massachusetts. Andrew earned a Bachelor's Degree in Government and International Relations from Clark University and a Master's Degree in Political Science from Northeastern University. In his free time Andrew enjoys writing, exploring the great outdoors, a good film, and a creative cocktail. You can follow Andrew on Twitter @AndrewMeggison


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  • Tim Cleland

    Ending the tax credit (i.e. subsidy) for ethanol is a good thing, but it’s not the main handout given to ethanol producers. The 2007 Energy Independence and Security Act (EISA) mandates that we need to consume 36 billion gallons of ethanol by 2022 and the way they’re meeting that is through the use of E10 and soon to be E15 gasoline. EISA needs to be repealed, and while they’re at it, repeal the 54 cent tariff on imported ethanol.

    • CP

      Tim
      You are absolutely incorrect.
      EISA 2007 mandates 15billion gallons of ethanol, which caps in 2012 or 2013. The rest of the 36billion gallons will be made up of biomass-based diesel, cellulosic ethanol and other advanced biofuels (defined by EPA as a fuel that can acheive a 50% ghg reduction over the fuel it’s replacing.)

      • pyotr petrovich

        Andrew: Where did you get the idea that we now consume more corn for ethanol than for food? 40% of the field corn goes to ethanol with the equivalent of 40% of that returning to cattle feed distillers grains. Distillers grains are much superior feed than corn and it costs much less than corn thus decreasing the cost to produce meat, milk, eggs, etc. Agricultural data shows that the farmers who grow the cattle are making more than at any historical period. Increased grain prices do impact food prices, but ethanol’s influence on this inflation has been grossly overstated. The real culprit for the vast majority of the food price inflation has been oil. Why do you give oil a free pass and allow their half century of subsidies to roll on when you select ethanol as the bad guy? VEETEC – the gift to the oil companies – has reduced the overall cost of gasoline. Are you sure that you will be happy with the gasoline increase which elimination of VEETEC will cause? So far, the only success we have had at reducing oil imports is ethanol. Yes, we need to become more efficient, we need to use electric cars (especially in cities), and we need the plethora of other alternatives that are being developed or promulgated, but for motor fuel, ethanol is today’s only contribution. The quantity of misinformation being promulgated as fact on all sides of the issue is truly alarming. Big oil and Big Food have not contributed honestly to this discussion.

      • Tim Cleland

        I apologize for the error, the website from which I read that didn’t differentiate.
        Nevertheless, my point still stands. Mandating that 15 billion gallons of ethanol
        will be purchased is a huge giveaway to the ethanol industry.

        • CP

          Sure it’s a huge “give away” to the ethanol industry, just as it’s a huge give away to the developing biodiesel industry and the fledgling cellulosic industry at the expense of the fossil fuels industry (not the tax payer(well to be fair the tax payer is paying to have EPA oversee the program)). Repealing this law would be Exxon’s wet dream.

          The conventional ethanol schedule will cap in a couple of years time. After that, the other three fuel types will be making up the majority of the program. This includes sugar cane ethanol, which can qualify as an advanced biofuel (60% ghg reduction over gasoline). As mentioned, the tariff on sugar cane has had a barrier that should be done away with, but this program is able to stoke demand to the point that economics are overcoming the tariff. The reason we see any sugar cane ethanol in this country is a result of this program, despite the efforts of the corn industry. So while this program does give government support to conventional ethanol, it’s a dramatic improvement over the first iteration of this program which was focused only on corn ethanol.

          On a final note, the conventional ethanol industry has lobbied to have volumes not met in the cellulosic portion to be filled with conventional ethanol. That’s something that does not need to happen, and likely wont.

        • http://www.sublimeburnout.com Christopher DeMorro

          @ Tim

          It is amazing how much mis-information really is out there. I have no idea what the truth is anymore.

          • Tim Cleland

            Ain’t that the truth!

          • douglas prince

            The Truth AIN’T Out There!
            (cue spooky music…)

  • Mike Massey

    Without the ethanol mandate, the U.S. would need to import 1.4 million crude oil barrels per day to replace the gasoline equivalent of ethanol that would be lost. Since the U.S. imports 1.4 million crude oil barrels per day from Saudi Arabia, then we would need to occupy Iraq and drill more wells to get their oil producing capacity higher. Or we could drill in ANWR in Alaska and prevent occupying another country. Especially given that Alaska has a 2 million barrel per day pipeline. Alaska’s oil production has dropped from 2 million bpd to 550,000 barrels per day since environmentalists started controlling Congress 10-15 years ago. Another idea is to require Detroit to produce multi-fueled vehicles that would run on natural gas, bio-fuels, gasoline, and/or electricity. Lets have government mandate more consumer choice. I want Exxon to provide me with fuel from Alaska and the cornfield. If I can’t choose where my fuel comes from, then I should be able to go home and plug into my 220. But thanks to Congress married to Environmentalists and cheating with Big Oil, the U.S. economy is over a Middle-Eastern barrel.

    • CP

      “environmentalist started controlling Congress”

      hahahahaha. I thought you were serious till I got to that line.
      Man, if that were true we’d have signed Kyoto, had a higher gas tax, and probably some sort of carbon control scheme.

  • http://MrEnergyCzar.com MrEnergyCzar

    Also, the key thing is that there’s an approximately 50 cent per gallon tariff for sugar cane ethanol from Brazil which is much cheaper to make. If that wasn’t there, we’d be using the less energy intensive Brazilian ethanol in the states. Eventually we’ll have to….

    MrEnergyCzar

    • T Adkins

      We could also remove the subsidy in place for refined (cane) sugar produced in the US, it would be nice to have our sugar price on par with the rest of the world instead of paying nearly 3 times as much for it. We already see with the Brazil ethanol prices just to keep them out we put a 54 cent per gallon tariff how much cheaper than can make it for and even with the tariff we are still importing it to meet our mandated ethanol needs. Between the Brazil tariff and subsidies to keep sugar prices in the US high and the price of corn low, is it a wonder we went to corn for ethanol.

      -T

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  • Uncle B

    How much public transport – electric bullet trains, trains, subways, buses, would it take to rid the U.S. of this food for duel folly?

    • T Adkins

      @Uncle B- something as simple as raising the gas tax up from the current 18 cents per gallon to 1 dollar over the next 5 years would finally start paying for the roads and bridges to be maintained at a more proper funding level. It would help to insulate us from fluctuating/higher oil prices, it would also help people rethink public transport. It should also help ease this food v. fuel debate.

      -T

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