Brazil’s 10 millionth flex-fuel vehicle was built last week, ready to be fueled by sugarcane- derived ethanol from an industry that is not government subsidized.
In the U.S. taxpayers are subsidizing inefficient corn-derived ethanol to the tune of almost $4 billion annually ($0.45/gallon federal production subsidy, plus state and local incentives), and the farm lobby and agribusiness are pushing for more taxpayer feed to be put into the trough by way of increasing the amount of ethanol beyond the 10% that is legally required to be blended into fuel.
That might be OK, except that ethanol is roughly 33% less fuel efficient than gasoline; so it’s another cost increase in the middle of the Great Recession. And at current prices the higher blend of U.S. made ethanol, E85, which could really help limit oil imports from terrorist supporting regimes, is not competitive with gasoline.
Worse, protective tariffs effectively stop the importation of ethanol that makes economic sense, but not political sense in pay-for-play Washington. (Click Here)
The production subsidy for ethanol applies to both domestic and imported ethanol, but the United States charges importers of ethanol a tariff of 54 cents per gallon and an ad valorem tariff of 2.5% of the value of the imported ethanol. This means countries such as Brazil that can produce ethanol much more efficiently than the U.S. are effectively blocked from selling it here. This protectionist policy also applies to other global markets.
The Brazilian Sugarcane Industry Association (UNICA) represents the top producers of sugar and ethanol in the country’s South-Central region, especially the state of Sao Paulo, which accounts for about 50% of the country’s sugarcane harvest and 60% of total ethanol production.
In 2008, Brazil produced an estimated 565 million metric tons of sugarcane, which yielded 31.3 million tons of sugar and 25.7 billion liters (6.8 billion gallons) of ethanol, making it the number-one sugarcane grower and sugar producer in the world, and the second-largest ethanol producer on the planet, behind the United States. (more…)