Thursday, December 29, 2011

Ethanol Subsidies Dead?

Who knew?
the short version is that the Senate back in June kicked off opposition to continued ethanol subsidies via a bipartisan amendment: it didn’t pass, but Congress has just let both the ethanol subsidy and a restrictive foreign tariff (on Brazilian sugar-cane ethanol) lapse.

This is a pretty big deal. Hundreds of ethanol refiners will likely go out of business absent the 45 cents/gallon tax break. Gasoline refiners, still required by law to add ethanol to gasoline, will now find cheaper Brazilian ethanol more attractive and U.S. farmers will see a decrease in the price of corn.

The good news: corn will now return to food production and the disastrous rise in meat and cereal prices will ease. Dare we hope drop? American consumers will be the winners here. That, in the end, is all that matters.

[UPDATE:] The ethanol refiners who invested millions of dollars in their businesses are not unlike the solar panel makers (e.g., Solyndra) who relied on government-backed loans to flesh out their business models. An entire ethanol industry was created by government legislation and will now die without it. And, I suppose, the laid-off ethanol refinery workers will be eligible for retraining subsidies because their employment was ended by the re-establishment of free trade.

Get a little, give a little. And so it goes.

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