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1/1/12 - After Three Decades, Tax Credit for Ethanol Expires

Friends of the Earth is a grantee for their work on sustainable energy.

After Three Decades, Tax Credit for Ethanol Expires

By ROBERT PEAR

The New York Times


WASHINGTON — A federal tax credit for ethanol expired on Saturday, ending an era in which the federal government provided more than $20 billion in subsidies for use of the product.

The tax break, created more than 30 years ago, had long seemed untouchable. But in the last year, during which Congress was preoccupied with deficits and debt, it became a symbol of corporate welfare. Fiscal conservatives joined liberal environmentalists to kill it, with help from a diverse coalition of outside groups.
In the United States, most ethanol is produced from corn. The demise of the subsidy is all the more remarkable because it comes at the peak of the political season in Iowa, where corn is king.

“We are in a fairly prosperous period for agriculture,” said Dean C. Taylor, a former president of the Iowa Corn Growers Association. “Agriculture has not been as much of a touchstone for presidential candidates this time around.”

In the United States, most ethanol is produced from corn. The demise of the subsidy is all the more remarkable because it comes at the peak of the political season in Iowa, where corn is king.

“We are in a fairly prosperous period for agriculture,” said Dean C. Taylor, a former president of the Iowa Corn Growers Association. “Agriculture has not been as much of a touchstone for presidential candidates this time around.”

Mr. Taylor, who grows corn and soybeans in Prairie City, Iowa, east of Des Moines, said in an interview that the loss of the tax credit “will reduce the profit margin for a lot of people in the ethanol business.” But, he added, “It won’t be fatal as long as the demand for ethanol and gasoline remains strong.”

Nearly 40 percent of the United States corn crop goes to ethanol and byproducts, including animal feed.

The Government Accountability Office, an investigative arm of Congress, said, “The increasing demand for corn for ethanol production has contributed to higher corn prices.”

The higher prices have “created additional income for corn producers” but also appear to have increased costs to meat and poultry producers, big food companies, grocery shoppers and federal food programs, the Government Accountability Office said.

The tax credit, which cost the government nearly $6 billion in 2011, went to gasoline refiners that mixed ethanol with gasoline. The government has promoted ethanol and other biofuels as a way to reduce dependence on imported oil.

Michal L. Rosenoer, a policy analyst with the environmental group Friends of the Earth, said the end of the tax credit showed that “ethanol is no longer a sacred cow.”






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