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Bipartisan Groups Want to End Ethanol Subsidy and Save Taxpayers Billions

A diverse coalition of organizations and lawmakers say the ethanol subsidy is fiscally irresponsible and environmentally unwise.

By Elizabeth McGowan

Dec 6, 2010

WASHINGTON— It’s a rare day when somebody pleads with Congress not to take action.

But that’s exactly the stand Kate McMahon, biofuels campaign coordinator for Friends of the Earth, is proposing. By not lifting a finger to renew a corn ethanol tax credit of 45 cents per gallon—which will expire at the end of this month if federal legislators choose to let it—she estimates taxpayers will reap an annual savings of roughly $6 billion.

And she’s not alone.

Friends of the Earth is part of an unconventional and diverse amalgam of 59 organizations from the faith, progressive, environmental, agricultural, conservative, humanitarian and public interest sectors that made a case against the subsidies in a late November .

“At a time of spiraling deficits, we do not believe Congress should continue subsidizing gasoline refiners for something that they are already required to do by the Renewable Fuels Standard,” they wrote. “Experts like the Congressional Budget Office and the Government Accountability Office have concluded that the subsidy is no longer necessary, and leading economists agree that ending it would have little impact on ethanol production, prices or jobs.”

And those same concerns seem to have traction on the Hill. In a bipartisan move uncommon in Congress these days, 17 Democratic and GOP senators spearheaded by Sens. Dianne Feinstein, D-Calif., and Jon Kyl, R-Ariz., requesting an end to the ethanol subsidy. The document addressed to Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., pillories the 45-cent-per-gallon subsidy for blending ethanol into gasoline as fiscally irresponsible and environmentally unwise.

 Will Farm States Let Go?

But the subsidy—known as the Volumetric Ethanol Excise Tax Credit, or VEETC—is the classic political football. Legislators from agricultural states such as Iowa Republican Sen. Chuck Grassley are longtime advocates of ethanol subsidies.

Grassley, who lists his occupation as farmer, is so fired up about the idea of losing ethanol subsidies that he made a floor speech December 2 asserting that the cutback will make the nation “more dependent on those oil sheiks.” He also said it is “ridiculous to claim that the 30-year-old ethanol industry is mature and thus no longer needs the support they get.”

Grassley has already butted heads with fellow Republican Sens. Tom Coburn of Oklahoma and Jim DeMint of South Carolina. Both conservatives have urged Congress to let the tax credit fade away.

“We need to let the ethanol subsidies expire and we need energy developed based on market forces,” Coburn told Washington Post blogger Greg Sargent. Coburn contended senators who are not on board are “just protecting a parochial interest ahead of the national interest.”

Though McMahon said she is encouraged by these reinforcements, she and other coalition members still fear that Congress will extend the ethanol tax credit by sliding it into another package of bills during the current lame-duck session.

“It will be a test for those who say they want to reduce spending,” she told SolveClimate News in an interview. “I would question how genuine their call to reduce spending is if they are unwilling to act on this.”

Gale Lush, chairman of the Nebraska-based American Corn Growers Foundation, is incredulous that anybody is bashing a domestic fuel source he refers to as a “U.S. economic security superstar.”

“We need more members of Congress like U.S. Senator Chuck Grassley of Iowa who recently took on those who are attacking ethanol credits and incentives and we applaud him for standing strong,” Lush said in a statement.

He argues that ethanol-gasoline-equivalent production amounts to more than U.S. oil imports individually from Algeria, Brazil, Nigeria, Iraq, Angola, Venezuela, Saudi Arabia and Mexico.


I am not convinced that I should oppose ethanol subsidies.  Corporate America runs on subsidies.  Remove them all and I will go along with it. Why is this particular subsidy so important to fight?

 Before oil companies added ethanol to the gasoline they put MTBE in it. (a dangerous petroleum product). For 60 years before that they put lead in the gasoline at a time when they knew that the only clean additive was ethanol.  If the oil industry can't get their cheap ethanol, what will they add to the gasoline to make it usable?  

I am not in favor of fighting the removal of a subsidy on an American farm product while keeping subsidies on products made off shore, or on guns and bombs or on coal and gas.

Something doesn't sound right.


Thank you for the ethanol article. It is amazing to me that more national newspapers and NPR are not reporting on the ethanol story at this critical time. News organizations ignoring ethanol has been a problem for years, but I thought Al Gore’s recent admission and the new and odd anti-ethanol coalition ( would have brought on a change.

A handful of us have fought to keep two successive corn ethanol plants from being built on farmland on the banks of the Susquehanna River in Lancaster County, Pennsylvania. As scientific study after scientific study was coming to the conclusion that corn ethanol was causing all sorts of problems from creating ‘dead zones’ in our nation’s waterways, to global food shortages, to destructive land use decisions, ethanol investors (fueled by government subsidies) pushed on. Getting press on the ethanol wars has been extremely frustrating. Even when we had juicy details, like the Alexander Strategy Group contacting us in a dark alley and offering to help fight off the first ethanol plant, (which was being pushed by Pennsylvania Governor Ed Rendell) we got no coverage. The second plant (also pushed by Rendell) we battled was being funded by Cilion (Vinod Khosla, Jeff Skoll (ebay), Yucaipa Companies-Ron Burkle, Steve Bing the Ruler of Dubai, and a Chinese Media Company and Richard Branson/Virgin) Ron Burkle, of course, raised lots of money for Hilary Clinton, who Governor Ed Rendell supported. And at the time the Clintons, via Yucaipa, were invested in a Brazilian ethanol plant that was accused of slave labor by the Brazilian Labor Ministry.

It seems that a new approach is needed to stopping the proliferation of ethanol, a wasteful and environmentally damaging false solution. Most national news organizations have fallen down on the job of reporting on ethanol. I really think many people have been environmental sheep, just following the herd and supporting ethanol because it sounds green.

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