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Collins: Costly Ethanol Subsidies Should End

By U.S. Senator Susan Collins

(R-Maine)

Ethanol subsidies are fiscally irresponsible, economically indefensible and environmentally unwise. That is why I have cosponsored, and voted for, legislation that would immediately end the corn-based ethanol tax credit and the import tariff.

Historically, our government has promoted the use of a product in one of three ways: subsidize it, protect it from competition or require its use. Right now, ethanol may be the only product receiving all three forms of support.

The ethanol tax break is extraordinarily expensive. The Government Accountability Office has found that the tax credit costs American taxpayers a staggering $6 billion annually. This is quite a sum to prop up a fuel that is causing land conversion for corn production, commodity and food prices to rise, and it is barely putting a dent in our nation’s dangerous dependence on Middle East oil.

Ethanol use is mandated under the Renewable Fuels Standard, which guarantees a market for corn ethanol. The first generation biofuels industry will receive tens of billions of dollars in unnecessary subsidies through the year 2022. If the current subsidy were to continue, the federal treasury would pay oil companies at least $31 billion to use 69 billion gallons of corn-based ethanol over the next five years that the law already requires them to use. We simply cannot afford to pay the oil industry for following the law.

The data overwhelmingly demonstrate that the costs of the current ethanol subsidies and tariffs far outweigh the benefits. Researchers at Iowa State University estimate that a one-year extension of the ethanol subsidy and tariff would lead to only 427 additional direct domestic jobs at a cost of almost $6 billion—roughly $14 million of taxpayer money per job.

While expanding our capacity to generate alternative, domestic fuel sources is an important step toward energy independence, I have serious concerns about the effects of increased ethanol use.

The energy, agricultural and automotive sectors are already struggling to adapt to the existing ethanol mandates. Many residents in Maine have experienced difficulties using E10, gasoline blended with 10 percent ethanol, finding that it causes problems in older cars, boats, lawn mowers, chainsaws and snowmobiles. I heard from a Maine fisherman who discovered that E10 had destroyed his boat’s fuel system—and stranded him two miles out at sea! The repair costs amounted to the thousands of dollars.

Yet now the Environmental Protection Agency is allowing the use of E15, a gasoline with an even higher percentage of ethanol, but only in newer vehicles. This is only going to cause further problems and will add unnecessary confusion at the gas pump for consumers. We simply cannot continue to place so many engines and the safety of so many consumers in jeopardy.

Corn-based ethanol mandates also present environmental concerns as they could result in energy efficiency losses, much higher demand on already stressed water supplies, and increased air pollution because mechanical failures can jeopardize the effectiveness of engine emission controls.

Over recent years, we have also seen food and feed prices rise as crops have been diverted for the production of corn-based ethanol. Senate Homeland Security Committee Chairman Joe Lieberman and I held a series of hearings in 2008 to examine the federal renewable fuel policy, which heavily favors the use of food-based fuels such as ethanol, and found that it has had a negative impact on food prices.

One of our witnesses was the owner of a Maine bakery, who testified that his wheat costs had nearly tripled in six months, driven by the shift of cropland from wheat and other grains to corn. In 1997, only five percent of America’s corn harvest went to ethanol—this year it will be more than 40 percent. In addition to the ripple effects this has for livestock feed, it has negative consequences for global food and energy prices and for the billion people around the world living in poverty.

We can no longer ignore the cost of this policy to our nation and the world. The subsidizing of blending corn ethanol into gasoline is indefensible, particularly at a time when we have soaring deficits that burden our economy and threaten our future prosperity.

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