Reducing ethanol protections won't hurt industry, report finds

A new study by the Center for Agricultural and Rural Development shows a reduction in the ethanol tax credit proposed by the House Ways and Means Committee and removing tariffs on the fuel will have a negligible affect on domestic production because mandates require increased use of renewable fuels. 

"Allowing the blender credit and tariff to expire would have neither the dramatic, adverse effect U.S. ethanol producers claim nor create the export bonanza foreign producers hope for," states a release about the report. 

The report predicts that because of mandates to increase renewable fuels, U.S. ethanol production will increase to approximately 14.5 billion gallons by 2014 without the tax credit and import tariff. It also states that roughly 300 jobs would be lost in the ethanol industry by 2014 if the tax break and trade protection were reduced.

The report also projects that taxpayers would benefit if the tax relief and protections were allowed to expire. 

"The Renewable Fuel Standard is the primary driver of ethanol demand," the report states. "The tax credit prompts blenders to use about 900 million gallons of ethanol each year above mandated levels. This costs taxpayers some $6 billion annually (or almost $7 per gallon). Ending the subsidy would save that amount." 

Ways and Means Chairman Sandy Levin (D-Mich.) looks reduce ethanol tax relief in a green energy jobs bill he hopes to move through his chamber after the August recess. The Senate also seeks to move an energy bill later this year.