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US is ending three-decade subsidies on corn ethanol

Wednesday, January 4th 2012 - 06:06 UTC
Full article 2 comments
The subsidy dates back to the administration of Jimmy Carter The subsidy dates back to the administration of Jimmy Carter

The US government is ending a three-decade-old policy of subsidizing corn ethanol, but it appears that the loss of the 6 billion dollars annual benefit will have little impact on farmers.

The tax credit, now 46 cents per gallon, for ethanol made from corn dates from 1979, when President Jimmy Carter’s administration was pushing development of alternative fuels to lessen US dependence on oil from the Middle East.

Though widely criticized, the subsidies came to be seen as politically untouchable, perhaps in part because the quadrennial campaigns for the Republican and Democratic presidential nominations begin in Iowa, home to numerous corn farmers.

Environmentalists have been especially hostile to ethanol subsidies.

“Corn ethanol is extremely dirty,” Michal Rosenoer, bio fuels manager for Friends of the Earth, said this week in a statement. “It leads to more climate pollution than conventional gasoline, and it causes deforestation as well as agricultural runoff that pollute our water.”

Congress has mandated that the United States produce 36 billion gallons (136 billion litres) of renewable fuel by 2022, of which nearly half must be corn-based ethanol.

Many states now require gasoline to contain up to 10% ethanol and analysts see that requirement as sufficient to enable producers to get by without federal subsidies.

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  • GeoffWard2

    (Reuters, 30 Dec. 2011) “For three decades, the U.S. government sought to protect American corn farmers and ethanol makers from a feared flood of Brazilian imports by imposing a tariff that had the South American country crying foul.”
    Now that the Iowa caucus is out of the way, things can change at last.

    But as the contentious US tax has finally expired, American farmers' fears of being swamped by cane-sugar-based Brasilian biofuel seem unfounded.
    With Brazil's ethanol industry struggling to meet booming local demand, it's U.S. producers instead who are shipping millions of gallons to the south.

    Three factors have converged to push Brazil's ethanol distilleries to the limit:
    Sugarcane production fell this year for the first time in a decade, reducing supplies;
    global demand for sugar has remained strong; and
    domestic motor-fuel demand has surged, straining local gasoline and ethanol supply.

    So, we are nett biofuel importers now.

    Jan 04th, 2012 - 12:42 pm 0
  • Fido Dido

    almost correct Geoff, the US farmers aren't only fearfull for being swamped with Brazilian sugar cane ethanol, what mercopruts does't mention is , this is exactly what obongo wants (matter of fact all GOP contenders are for getting rid of subsidies), get rid of the subsidy and make the lives of the farmers in Iowa miserable, and forced State government to raise property tax. Who can't pay it, will loose it's land, will be taken away and sold. Guess who the buyers are in the US of farmland..China and wealthy investors like George Soros. Not only in Iowa but also in Ohio. No wonder many farmers in the US are leaving the US and go somewhere else, Canada, Australia, Russia and Brazil are the main destinations.

    back to the article, getting rid of the subsidies, is a win for Brazilian farmers.

    Jan 04th, 2012 - 06:40 pm 0
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