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Posts Tagged ‘subsidizing agribusiness’

Milestones: Ten Million Flex-Fuel Vehicles in Brazil

U.S. ethanol policy is muddled when compared with Brazil’s.

by on Mar.08, 2010

It's said that using biomass, cheap farm waste, could radically alter the economics of ethanol. The lower cost could end taxpayer subsidies, though the farm lobby holds powerful sway in the "pay to play" Washington scene.

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.

Alternative Views!

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…)

Renewable Fuel Fight Over Agricultural Subsidies and Emissions Continues as EPA Works on Rules

Should taxpayers be subsidizing agribusiness to produce fuels?

by on Aug.07, 2009

EPA Adminstrator Jackson

At stake here, ultimately, is billions of dollars in taxpayer subsidies to agribusiness, and even the future of the whole bio-fuel industry in the U.S.

The EPA made public this morning an independent review of how it should calculate the life-cycle effects of renewable fuels on air pollution.

Normally this would be an arcane economic debate over methodologies, time periods, and at what rate to calculate/discount the value of gains over time. But at stake here, ultimately, is billions of dollars in taxpayer subsidies to agribusiness, and even the future of the whole bio-fuel industry in the U.S.

So a controversy has been growing among various self-interested factions since the EPA, under the Obama Administration, reversed its Bush-directed self and said greenhouse gases are a health problem, which will be addressed.

A contentious rulemaking process is now well underway.

From an automotive point of view there are two central issues. The first is how to decrease emissions and our dependence on imports of foreign oil from terrorist supporting countries. The second is a subset of the first: what if the biofuels we are using —  ethanol, biodiesel, natural gas — really cause more emissions than they save? That’s why how the EPA calculates the life cycle emissions effects is of such concern to subsidized businesses, the agricultural lobby and various clean air special interest groups.

The U.S. is already under Congressional mandate to use increasing amounts of renewable fuels. Under the Energy Independence and Security Act of 2007, EPA is responsible for revising and implementing regulations to ensure that gasoline sold in the United States contains a minimum volume of renewables. The Renewable Fuel Standard program will increase the volume of renewable fuel required to be blended into gasoline from 9 billion gallons in 2008 to 36 billion gallons by 2022. (At one point the goal under President Bush was 35 billion/2017.)

The new RFS program regulations are being developed with what the EPA euphemistically says is a “collaboration with refiners, renewable fuel producers, and many other stakeholders.”

Translation: Big bucks are at stake here, and lobbying will be intense.