Will Ending Tax Credits And Tariffs Increase Ethanol Use?

The end is nigh for the VEETC, also known as the corn ethanol subsidy which was mandated 30 years ago as a way to reduce dependence on foriegn oil. In a rare show of bipartisanship, Congress voted to end the VEETC program…and along with it, a 54-cent-per-gallon tariff on imported ethanol. Could this be a good thing for ethanol?Depends on who you ask. Much of the American ethanol industry have already accepted the end of the tax credit, making plans to proceed without it. The truth is though, the VEETC largely benefited oil companies and corn farmers, paying out 45-cents per gallon of ethanol mixed in with gasoline. With the current political climate all about eliminating “wasteful” spending, VEETC really didn’t stand a chance thoug. Ending the program will save taxpayers about $6 billion a year, though it is estimated that the credit cost taxpayers as much as $45 billion.

Less talked about though is that the end of VEETC also means the end of a 54-cent-per-gallon tariff on imported ethanol. This could prove to be a huge boon for Brazil in particular, where many vehicles run on pure ethanol produced from sugar cane, which has an 8:1 energy-out-to-energy-in ratio. Producing ethanol from sugercane is far cheaper than producing it from corn, about half the cost according to one study. Sure, transporting ethanol from Brazil to America won’t be cheap, but it is a much better alternative to shipping oil from Venuzala or the Middle East.

Hypothetically speaking, Brazilian ethanol without the tariff could be cost-competitive compared with traditional gas-powered engines. There’s still the problem regarding the lack of ethanol fueling stations in this country, but the end of this tariff could have a more profound affect on getting Americans to use ethanol than 30 years of the VEETC credit.

At what price-per-gallon would you consider switching from gas to ethanol-powered vehicles?

 

Christopher DeMorro

A writer and gearhead who loves all things automotive, from hybrids to HEMIs, can be found wrenching or writing- or else, he's running, because he's one of those crazy people who gets enjoyment from running insane distances.