Volumetric Ethanol Excise Tax Credit

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Biofuels > United States policies > Volumetric Ethanol Excise Tax Credit (VEETC)


The Volumetric Ethanol Excise Tax Credit (VEETC) is a policy to subsidize the production of ethanol in the United States. It was originally created by the American Jobs Creation Act of 2004. (The Renewable Fuels Reinvestment Act, RFRA, introduced in 2010 by Congressman Earl Pomeroy (D-ND) and John Shimkus (R-IL) would extend the tax credits set to expire on 31 December 2010.) The tax breaks include "a 45-cent a gallon tax credit for gasoline blenders, a 54-cent a gallon tariff on imports, a $1.01 a gallon credit to cellulosic ethanol producers, and a 10-cent a gallon small-producer tax credit for ethanol." (Source: House Bill Extends Ethanol Tax Breaks To 2016, 26 March 2010 by Planet Ark)

Opinions on VEETC

There are a variety of opinions both for and against renewing the VEETC tax credit. Some of these opinions have been quoted below.

In favor of the VEETC

  • "Allowing the tax incentives for ethanol to expire is simply not an option," said Renewable Fuels Association President Bob Dinneen. "Failure to extend these incentives would force 112,000 Americans out of their jobs and shutter nearly 2 out of every 5 ethanol plants operating today. Long term extensions of these important incentives are good policy that encourages investment in current and next generation ethanol technologies." Source: Article by sustainablebusiness.com
  • "Without the tariff, American taxpayers will be allowing foreign-subsidized ethanol to subvert American companies and American workers," said Tom Buis, chief executive of Growth Energy, according to the report. Source: Article by CSP

Opposed to the VEETC

  • Joel Velasco, UNICA's chief representative in North America said “It is ironic that Congress allows oil from nations hostile to America into the country tariff-free, but is more than willing to punish clean energy from Brazil, a long-standing democratic ally.” Source: Article by Ethonal Producers Magazine
  • Craig Cox, the senior vice president for agricultural and natural resources at the Environmental Working Group said, "Continuing to use federal subsidies and mandates to expand the corn ethanol industry is a mistake on many levels. If the corn ethanol supporters want to extend the tax credit, they need to cut spending somewhere else. And that potentially puts at risk all kinds of alternatives that we think would be a much better public investment."Source: Article by Solve Climate
  • Autumn Hanna of Taxpayers for Common Sense said the tax credit "does little more than pad the pockets of big oil companies like Shell. The ethanol tax credit has already cost taxpayers more than $20 billion in the last five years and, if extended, taxpayers stand to lose billions more. Since the 1970's, taxpayers have heavily subsidized corn ethanol. It’s time this mature energy industry stand on its own two feet."Source: Article by Solve Climate

News

  • Biofuel Subsidies Need Reform, 27 December 2011 by The Energy Collective: "Americans want the U.S. to lead the world in renewable energy, but these are screwy times in our nation’s capital. Some people are trying to turn clean, renewable energy into something dirty."
    • "That’s the case with the impending expiration of the main corn ethanol tax credit."
    • "Despite Norquist’s initial defense of the subsidy, at the end of the day, not even the millions the corn ethanol industry spent on lobbying could stand up against the evidence: the VEETC was redundant and wasteful, throwing billions in scarce taxpayer dollar towards another dirty fuel."
    • "The first and most important step in moving towards the biofuels we need is to stop funding mature, conventional, and dirty biofuels."
    • "Second, the entrepreneurs and innovators in the advanced biofuels industry all say that the Renewable Fuel Standard is critical to getting their fuels out of the lab and into the market place. But to be effective, the RFS and its implementation need to be strengthened and improved over time."
    • "And finally, we need to reform biofuel tax credits so that American taxpayers get real clean energy for their money."[1]
  • E.U. plans probe of U.S. bioethanol subsidies: diplomats, 15 November 2011 by Reuters: "The European Union's trade authority plans to start an investigation into whether U.S. bioethanol exporters are receiving unfair state subsidies and selling their fuel to Europe at illegally low prices, diplomats said on Tuesday."
    • "The European Commission investigation could result in import tariffs as early as next year on hundreds of millions of litres of the fuel if EU officials unearth evidence of unfair trade practices in the United States."
    • "Specifically, trade officials will investigate EU industry allegations that tax credits in the United States allow its exporters to cut their EU selling price by about 40 percent, the diplomats said."
    • "U.S. producers defend the Volumetric Ethanol Excise Tax Credit, which provides a 45-cent-a-gallon tax credit to ethanol blenders, as essential to propping up a fledgling industry."
    • "The U.S.-based Renewable Fuels Association has dismissed any action that aims to penalise the scheme, saying it is likely to run out anyway by the end of this year."[2]
  • Senate Votes to End Ethanol Blenders Tax Credit, 16 June 2011 by AgWired: "An amendment to end the ethanol blenders tax credit (VEETC) passed the Senate today by 73 to 27, a vote that some agricultural groups applaud while some denounce, while the ethanol industry says it is unlikely to matter."
    • "The Renewable Fuels Association calls the vote disappointing but 'ultimately inconsequential' since the underlying economic development bill to which this amendment is attached is 'unlikely to make it to the president’s desk.'"
    • "U.S. Agriculture Secretary Tom Vilsack says the Obama administration opposes an abrupt end to the VEETC. 'We need reforms and a smarter biofuels program, but simply cutting off support for the industry isn’t the right approach. Therefore, we oppose a straight repeal of the Volumetric Ethanol Excise Tax Credit (VEETC) and efforts to block biofuels infrastructure programs.'"
    • "On the other side of the corn field, National Cattlemens Beef Association (NCBA) President Bill Donald called the vote 'a giant step toward leveling the playing field for a bushel of corn' noting that'...'after 30 years and more than $30 billion in taxpayer support, the day has come to let the mature corn-based ethanol industry stand on its own two feet.'"
    • "A coalition of groups, including food retailers, poultry organizations and environmental interests also applauded the vote as 'the start of a new era for U.S. biofuels policy.'"[3]
  • Senate keeps ethanol subsidies, 14 June 2011 by Politico: "The Senate on Tuesday rejected, 40-59, a symbolic attempt to strike ethanol tax subsidies as Democrats are working on a deal to hold at least one vote on ethanol next week."
    • "The amendment from Sen. Tom Coburn (R-Okla.) fell well short of the necessary 60 votes to invoke cloture and limit debate. Five Democrats supported the amendment and 12 Republican ethanol backers, largely from the Midwest, opposed it."
    • "Coburn’s amendment would have repealed a 45-cent-per-gallon tax credit to blend ethanol in gasoline that is set to expire at the end of the year. It is estimated that the tax credit would be worth upwards of $6 billion if it continues the whole year. The amendment also would have repealed a 54-cent-per-gallon tariff on ethanol imports."
    • "About a dozen senators, led by Thune and Klobuchar, are proposing to immediately — starting July 1 — end the existing blender tax credit and replace it with a variable blender tax credit linked to the price of crude oil through 2014."[4]
  • Tom Coburn forces Tuesday ethanol vote, 9 June 2011 by Politico: (United States) "Sen. Tom Coburn has pulled the trigger and is forcing a long-sought vote on an amendment repealing billions in annual tax incentives for ethanol."
    • "The Senate will vote Tuesday afternoon on Coburn’s motion limiting debate on his amendment that would do away with the 45 cent blender tax credit for ethanol — worth about $6 billion this year — and the 54 cent tariff on imported ethanol."
    • "Regardless of whether the underlining economic development legislation gets through the Senate and House and to the president’s desk, a vote on Coburn’s amendment could be a major symbolic vote."
    • "Ethanol backers have been looking to try to stave off such moves by working behind the scenes on ways to quickly move off of the blender tax credit and transition to federal assistance for blender pumps and other infrastructure to grow the market base for ethanol and other biofuels."[5]
  • Coalition of 90 groups urges Congress to end corn ethanol subsidies, 1 March 2011 by Switchboard.nrdc.org: "Today, a whopping coalition of 90 organizations sent a letter to Congressional leadership calling on Congress to end wasteful corn ethanol subsidies and resist industry pressure to spend more taxpayer dollars supporting this dirty fuel."
    • "This is not the first time that business associations and advocacy groups, lawmakers and major newspaper editorial boards from the left, right and center have all come together to reject more giveaways to old, dirty corn ethanol by allowing the Volumetric Ethanol Excise Tax Credit or “VEETC” to expire at year-end."
    • "As the coalition letter points out, the facts are crystal clear: analysis after analysis has shown the redundancy and wastefulness of the VEETC and concluded that ending it would have little impact on domestic corn ethanol production or jobs."[6]
    • "To see the letter, go to Anti-VEETC Coalition Letter (PDF File)"
  • Ethanol industry watching federal tax credit, 7 February 2011 by KTIV.com: "The 3.5 billion gallons of ethanol pumped out yearly in Iowa makes the Hawkeye State the nation's top producer."
    • "Iowa Ag Secretary Bill Northey says ethanol's success is supplemented by a federal tax credit, amounting to 45-cents per gallon for the ethanol blender. It's worth a total of $9 billion and runs through the end of the year."
    • "Northey feels confident the credit will be renewed for 2012, but maybe not at its current level, though he says that's not all bad."
    • "One good sign for the industry is the recently-approved increase of ethanol allowed to blend into gasoline, from 10 to 15%."
    • "Something else the renewable energy industry has its eye on is the biodiesel tax credit for 2012. After Congress decided to go without it in 2010, Northey says it badly hurt the industry, which is why it was reinstated for this year."[7]
  • Left-Right Coalition Responds to Senate Vote on Ethanol Tax Credit, 6 December 2010 by BeforeItsNews: "On Saturday (December 4, 2010), the Senate defeated a package of tax policy extensions, including a year extension of the Volumetric Ethanol Excise Tax Credit (VEETC) at $.36 per gallon, a 20 percent reduction from current levels. In response, a diverse coalition of organizations issued a joint press release applauding the vote on the VEETC and explaining why the tax credit should not be renewed."
    • "Here’s what the participants said:
    • "'A reduction in the corn ethanol tax credit is a small step in the right direction for animal agriculture and America's taxpayers. Burning a substantial portion of our food and feed as fuel is not a sustainable answer, in the long term, to solving this nation’s fuel needs....' - J. Patrick Boyle, President and CEO, American Meat Institute"
    • "'The blender’s credit and import tariff on foreign ethanol have distorted the corn market, creating needless volatility in the cost of animal feed....' - Joel Brandenberger, president of the National Turkey Federation"[8]
  • Tsunami: Top 10 Impacts for Biofuels from US Elections, 3 November 2010 by Biofuels Digest: "US voters gave control of the House of Representatives to the Republican Party, when Democrats lost at least 57 seats in the House and six Senate seats in the 2012 mid-term elections."
    • "But what does it mean for biofuels? ...[Ten] impacts — ranging from people to policies — can be seen even now."
    • "The bottom line: moderately positive for biofuels. One of the few areas where Republicans and Democrats agree on priorities is the importance of reforming US energy policy, and biofuels enjoy bipartisan support, especially advanced biofuels. Though the Farm Bill may push to 2013, and gridlock may reign, Obama will have to run on something other than health care and the 2009 stimulus, and is likely to reach out on energy."
    • "Among the survivors. The leadership of the House Algae Energy Caucus, Brian Bilbray of California and Jay Inslee of Washington, sailed through this election cycle. Senator Chuck Grassley faced only token opposition, and Senator John Thune of South Dakota was unopposed. Jerry Moran of Kansas moved up successfully from the House to the Senate. Rick Perry, who requested that the EPA waive the Renewable Fuels Standard in 2008, was elected to a third term as Governor of Texas, while Sam Brownback, a staunch friend of bioenergy while in the Senate, becomes the new Governor of Kansas. Leonard Boswell of Iowa survived a challenge to his House seat from Brad Zaun, who had opposed the biodiesel tax credit extension."
    • "Among the new faces. John Hoeven, the incoming Senator from North Dakota, was a strong proponent of E15 ethanol while Governor, and was sharply critical of foot-dragging at EPA on the issue."
    • "Ethanol tax credit. Full-court pressure will now be on to pass the ethanol tax credit before a huge freshman class of spending-wary House members come to Washington. With time pressure, ethanol proponents will take less of a hard line, and look for the ethanol tax credit to drop to 36 cents or lower."[9]
  • The only thing ‘green’ about NASCAR’s switch to corn ethanol is the cash, 29 October 2010 by Donald Carr: "In a move that USA Today says "could be regarded as economically motivated as well as environmentally aware," NASCAR will adopt an ethanol blend of fuel beginning with the 2011 Daytona 500."
    • "This bit of news was welcomed heartily by the corn ethanol lobby, which is facing the prospect of the ethanol tax credit subsidy expiring at the end of the year as well as consumer confusion at fueling stations across the country, as ethanol blends increase only for specific model-year vehicles."
    • "Here at the Environmental Working Group, we are certain that using corn ethanol as an alternative to gasoline is hardly a sustainable solution to our energy needs. We know that between 2005 and 2009, U.S. taxpayers spent $17 billion to subsidize corn ethanol blends in gasoline, an outlay that produced a paltry reduction in overall oil consumption equal to a 1.1 mile-per-gallon increase in fleetwide fuel economy."
    • "We're sure that corn ethanol production pollutes fresh-water sources in the Midwest. We know that there are serious concerns about ethanol plants and their impact on the environment. We know corn production for ethanol expands the dead zone in the Gulf. We also know it has led to obliteration of wildlife habitat."
  • New CBO Report Examines Biofuels Tax Incentives, 16 July 2010 by Mackinnon Lawrence: "CBO releases report this week assessing biofuel incentives. Study finds that biofuel subsidies, costs associated with reducing petroleum use and GHG emissions vary by fuel."
    • "First, after making adjustments for the different energy contents of the various biofuels and the petroleum fuel used to produce them, the report finds that producers of ethanol made from corn receive 73 cents to provide an amount of biofuel with the energy equivalent to that in one gallon of gasoline. On a similar basis, producers of cellulosic ethanol receive $1.62, and producers of biodiesel receive $1.08."
    • "Second, the report finds reducing petroleum use costs taxpayers anywhere from $1.78 – 3.00 per one gallon of gasoline, again, depending on the type of fuel."
    • "Third, the costs to taxpayers of reducing greenhouse gas emissions varies from $275 per metric ton of CO2e for cellulosic, $300 per metric ton for CO2e for biodiesel, and about $750 per metric ton of CO2e for ethanol . NOTE: the CBO estimates do not reflect any emissions associated with land use change (direct or indirect)."
    • "Domestic Fuel reports this week that the Renewable Fuels Association (RFA) asserts the report provides no comparison to other technologies or types of biofuels against the destruction that goes hand in hand with fossil fuel production."[11]
  • Growth Energy proposes shift in fuel policy, 15 July 2010 by Ethanol Producer Magazine: "With the Volumetric Ethanol Excise Tax Credit, set to expire at the end of the year, Growth Energy is calling for a change in the way ethanol tax incentives are used and an eventual phase out of governmental support of ethanol."
    • Growth Energy’s "Fueling Freedom Plan calls for, ideally, a five-year extension to VEETC. However, rather than provide the all incentive money to blenders, the oil industry, Growth Energy is advocating that some of that tax money go to installing 200,000 blender pumps and ethanol pipelines."
    • "Ethanol tax incentives cost the U.S. about $5 to $7 billion a year, said Growth Energy co-chair Ret. Gen. Wesley Clark."
    • "On the same day as Growth Energy’s announcement, RFA [the Renewable Fuels Association] joined with the American Coalition for Ethanol, the National Corn Growers Association and the National Sorghum Producers to lend its support to the current tax incentive legislation" that would "extend ethanol tax incentives through 2015."[12]
  • Klobuchar bill: trojan horse for bad biofuels, 14 July 2010, Nathanael Greene’s Blog/NRDC: "It should come as no surprise that the first copy of the full text of Sen Klobuchar's energy bill was found on a corn ethanol industry association website; the bill reads like the industry's wish list."
    • "Here are some of laundry list of bad biofuel provisions:
  • "5 year extension of the corn ethanol tax credit (which mostly enriches oil companies such as BP)."
  • "Defining mature and mainstream corn ethanol, which has been commercially produced for well over 30 years as an 'advanced biofuel' under the RFS2."
  • "Huge give aways for building corn ethanol pipes to the coast so that we can ship our 'home grown energy' overseas."[13]
  • Meat Producers Oppose Ethanol Tax Incentives, 29 April 2010 by Cindy Zimmerman, DomesticFuel: "Major livestock and poultry trade associations sent a letter to the House Ways and Means Committee this week asking that they allow the blenders’ tax credit and associated tariff for ethanol to expire at the end of this year."
    • "'The blender’s tax credit, coupled with the import tariff on foreign ethanol, has distorted the corn market, increased the cost of feeding animals, and squeezed production margins — resulting in job losses and bankruptcies in rural communities across America,' the groups wrote."
    • "The ethanol industry begs to disagree and contends that the livestock industry just wants cheap feed."
    • The Renewable Fuels Association in a statement responded with, "Ethanol is not the major driving force behind corn prices, whether they are rising or falling. Oil prices, speculation, weather, and a host of other factors have far more to do with the price of corn than ethanol production."[15]
  • Will Extending the Ethanol Tax Credit Slow Progress Toward Advanced Biofuels?, 25 April 2010 by Solve Climate: "The federal tax credit for ethanol is among the most controversial energy- or environment-related policies in the country. The volume on all sides of the issue is increasing, with some shouting down ethanol’s claim to lower greenhouse gas emissions, others touting the tax credit’s job-creation capabilities and still others lamenting the diversion of farmland for fuel."
    • Autumn Hanna of Taxpayers for Common Sense was quoted in the article as saying, the tax credit "does little more than pad the pockets of big oil companies like Shell. The ethanol tax credit has already cost taxpayers more than $20 billion in the last five years and, if extended, taxpayers stand to lose billions more. Since the 1970's, taxpayers have heavily subsidized corn ethanol. It’s time this mature energy industry stand on its own two feet."
    • "Legislators from agricultural states claim that ethanol won’t prosper on its own yet, and that more than 100,000 jobs would be lost if the credit were allowed to lapse."
    • Craig Cox, the senior vice president for agricultural and natural resources at the Environmental Working Group "argues that extending the ethanol tax credits now will only divert resources from much-needed research into those second-generation fuels."[16]
  • Bill To Extend Ethanol Tax Credit Reignites Fuel vs. Food Debate, 25 March 2010 by SustainableBusiness.com: "A bill introduced in the US House last week would extend ethanol tax credits for another five years, to 2015. This tax credit is set to expire on December 31, 2010."
    • "The Renewable Fuels Reinvestment Act (RFRA), introduced by Congressman Earl Pomeroy (D-ND) and and John Shimkus (R-IL), has reignited the fuel versus food debate and intensified scrutiny on the EPA's regulations on the environmental impact of corn-based ethanol."
    • "The bill would extend the $0.45 Volumetric Ethanol Excise Tax Credit (VEETC), commonly called the blenders’ credit, and a secondary tariff on imported ethanol from countries like Brazil. It would also extend the Small Producers Tax Credit and the Cellulosic Ethanol Production Tax Credit to January 1, 2016."[17]

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