US ethanol support termed a ‘$100bn tax burden’

23 October 2007 15:37  [Source: ICIS news]

WASHINGTON (ICIS news)--US federal, state and local government subsidies for biofuels will put a $100bn (€70bn) burden on taxpayers within five years and should be sharply reduced, an international sustainability group said on Tuesday.

 

In its second annual report on government support for biofuels in the US, the International Institute for Sustainable Development (IISD) also urged Congress to resist increasing the federal biofuels production mandate.

 

The Geneva, Switzerland-based institute, which is funded by Canada and other countries, argues that in addition to being very costly, many subsidies and use mandates are “ineffective in achieving greater energy security and lower greenhouse gas emissions, the objectives that have officially been used to justify increasing subsidy levels”.

 

“Despite a growing awareness of both the fiscal and environmental concerns about biofuels, legislative support has not abated,” the study said, noting that proposals now before Congress would boost the US biofuels mandate to 36bn gallons by 2022 and 60bn gallons by 2030.

 

Current US ethanol production, which is wholly corn-based, is nearing 7bn gal/year.  The existing US mandate for biofuels production and consumption as a transportation fuel is set at 7.5bn gallons by 2012, a goal that is likely to be reached next year if not sooner.

 

The report also is critical of legislative proposals to expand government support for cellulosic ethanol production, which is widely viewed as the second-generation ethanol technology that will bring more clear-cut energy and environmental benefits. 

 

“As such, the new legislation compounds the current distortions to crop markets with a host of new programmes to underwrite production, harvesting, storage and the transport of cellulosic feedstocks,” the report said.

 

In addition to expanding subsidies and increasing production and use mandates, the group warns that “the US government has not indicated an exit strategy to wean the biofuels industry from protection and subsidies”.

 

“Indeed, as is often the case with subsidies, current legislative proposals appear to entrench existing arrangements, which will ensure that the biofuels industry remains a significant drain on US taxpayers for decades to come,” said the report.

 

The institute recommended that the US eliminate its tariff on imported ethanol, avoid new production mandates and additional subsidies and reduce existing financial support for biofuels.

 

($1 = €0.70)

By: Joe Kamalick
+1 713 525 2653

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