Today marked the beginning of the end for the 45-cent-per-gallon ethanol blending subsidy, as the U.S. Senate voted 73-27 to end the subsidy. But that doesn’t mean the ethanol subsidy will end overnight. Here’s why.
First and foremost, President Obama and the White House have already released a memo stating that they do not support ending all ethanol subsidies, which cost the government about $6 billion. That means Obama could veto the bill (if it makes it through the House), even though the subsidy is widely regarded by deficit hawks and environmentalists alike as a wasteful windfall to the oil industry. As it is, the main beneficiaries of the blending subsidy are oil companies themselves, who earn a hefty 45-cents per gallon of ethanol they blend into gas reserves.
The bill that passed the Senate would also end a 54-cent-per-gallon import tariff on ethanol, which was largely designed to protect domestic corn growers from Brazilian sugarcane growers. So at the same time we would be ending an ethanol subsidy, we’d also be encouraging growth of the biofuel by allowing imported ethanol to compete on a level playing field. So don’t expect domestically-produced ethanol to just disappear. It’ll be around for a while yet.
Like I said though, don’t count on it happening anytime soon. That such a measure was even able to make it through the Senate, and with such a whooping majority, is a bit of a breakthrough. Just not enough of a breakthrough to make a difference. Make no mistake though, this is the beginning of the end for ethanol subsidies in America, and its days are numbered. So what’s next on the chopping block?
Chris DeMorro is a writer and gearhead who loves all things automotive, from hybrids to HEMIs. You can read about his slow descent into madness at Sublime Burnout or follow his non-nonsensical ramblings on Twitter @harshcougar.