Ending the ethanol experiment

Despite visits to both the Bush and Obama administrations, Brazilian President Luiz Inacio Lula da Silva's request to end the U.S. tariff on Brazilian ethanol has fallen on deaf ears. Mr. Lula might be in luck - the tariff is set to expire at the end of 2010, and current congressional gridlock could prevent its extension. Supporters of sensible U.S. trade policy can only hope that happens. Ethanol represents a small percentage of the total U.S. fuel supply. Because of federal mandates, most gasoline purchased today is actually a mixture of 90 percent gasoline and 10 percent ethanol, E10. Ethanol has been unable to prove itself as an efficient form of renewable energy, though it may perhaps play an important role in our nation's future energy supply. Taxes on imported ethanol force consumers to rely on inefficient and expensive ethanol produced from corn in the United States. These tariffs, in effect, declare war on consumers, raising the price at the pump as well as the price of all goods and services that require transportation to their final point of sale. They also perpetuate our dependence on foreign oil by reducing investment in the global ethanol industry. If foreign ethanol is less profitable because the U.S. effectively shuts it out of our market, less money is poured into its development. The irony is delicious. While politicians pay lip service to diversifying our energy sources, trade policies such as import tariffs may have the opposite effect. Taxing foreign ethanol is bad, but subsidizing domestic production is as bad or worse. The current ethanol subsidy is a 45-cents-per-gallon federal tax credit, and payments since 2005 have exceeded $20 billion. This acts as a double benefit: Ethanol producers already are guaranteed income through legislation that requires gasoline to be blended with ethanol. These companies are provided guaranteed business and then a subsidy on top of it...more