Ethanol Subsidies to Face Elimination

The ethanol amendment discards both the 45-cent-per-gallon tax credit that is provided to ethanol refiners and the 54-cent-per-gallon tax on imported ethanol. These subsidies, which expire at the end of the year, are typically renewed by Congress, along with a number of other business and individual tax breaks. However, the amendment calls for the termination of such subsidies as of July 1st.

Yet, the ultimate fate of the amendment is uncertain. The amendment will now be attached to the Economic Development and Revitalization Act, which is not expected to gain the necessary support to pass through the Senate.

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Furthermore, the White House has expressed opposition to the amendment, thus creating the threat of an eventual veto, if it even makes it to the president's desk. ''We need reforms and a smarter biofuels program, but simply cutting off support for the industry isn't the right approach,'' said Agriculture Secretary Tom Vilsac, who argues that the amendment is likely to lead to job loss.

But Republican Senator Tom Coburn, who co-sponsored the amendment with Democratic Senator Diane Feinstein, disagrees. ''The way we get out of trouble as a nation is a couple of billions of dollars at a time.''

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However, the issue goes beyond the deficit alone. The World Bank, as well as other international organizations, have blamed corn-based ethanol subsidies for the increase in the cost of food. US livestock producers have complained of a surge in feeding costs, which have, in turn, led to higher food prices for shoppers.

Supporters of the ethanol amendment note that while the loss of subsidies may impact the profit that ethanol refiners bring in, the amendment will not lead to a drop in ethanol production. Under the federal Renewables Fuel Standard, fuel companies are still required to blend at least 12.6 billion gallons of ethanol into the gasoline supply this year.