One Bad Energy Subsidy Expires

NYT editorial

Now that the most polarized and paralyzed Congress in memory has managed to kill one of its most resilient boondoggles — the three-decade-old, multibillion-dollar subsidy for corn ethanol — we hope it has not exhausted its resolve and will take a hatchet to other harmful energy subsidies, chiefly those it gives to fossil fuels.

The ethanol subsidy was allowed to expire last Saturday, a death blow that was all the more remarkable coming just a few days before the Republican caucuses in the cornfields of Iowa, where the subsidy has long been seen as untouchable.

The 45-cent-per-gallon tax credit for oil companies to blend ethanol into gasoline cost taxpayers $5 billion to $6 billion a year, deepening the budget deficit. It boosted corn prices and increased food prices generally by encouraging farmers to replace other crops with corn. Its environmental virtues were less than advertised. Billed as a lower-carbon replacement for fossil fuels, corn ethanol generated more carbon dioxide than gasoline after taking into account the emissions caused when new land was cleared to replace the food lost to fuel production.

Several factors conspired to kill the tax break (as well as an exorbitant tariff on imports aimed at keeping cheaper Brazilian ethanol out). Conservatives did not like the subsidy’s price tag and liberals saw it as a form of corporate welfare. It was also unnecessary and redundant. Corn ethanol is now commercially viable without the subsidy and is further supported by a Congressional mandate requiring refiners to blend up to 15 billion gallons a year.

(More here.)