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Environmental Law

Lawmakers Seek to Reduce Tariffs on Imported Ethanol

By Dennis Pfaff and Kevin Livingston, Editors (all)

Two senators have moved to drop the United States' tariff on imported ethanol as at least one way of reducing skyrocketing gasoline prices.

The legislation, which drew praise from critics of current government policies favoring domestic ethanol, was proposed by U.S. Sens. Dianne Feinstein, D-California, and Judd Gregg, R-New Hampshire (pictured). It would in effect drop the tax on imports of the fuel additive from countries such as Brazil to 45 cents per gallon, the lawmakers said in a statement. Currently, the charge is 54 cents.

As Climate Law Update has reported, there considerable dispute exists over the wisdom of promoting biofuels such as corn-based ethanol as a way of fighting global warming. Biofuel production has also been a hot topic at a world food conference in Rome. 

A provision in the farm bill (along with additional information) that was recently passed over the president's veto by Congress amid much controversy reduces subsidies to the ethanol industry from 51-cents a gallon to 45 cents, the statement said. But the tariff -- which was intended to make sure that foreign producers did not benefit from the subsidies -- was left at 54 cents. In effect, that helped tilt the situation in favor of the heavily subsidized domestic ethanol, which is largely derived from corn.

The statement said the Feinstein-Gregg bill would require that the tariff for products such as those it referred to as "cleaner, greener imported sugar-based ethanol" be set no higher than the subsidy, effectively lowering the tariff to 45 cents per gallon. Brazil's ethanol is derived primarily from sugar cane (pictured). A full text of the legislation was not immediately available.

In the statement, Feinstein said it made no sense to force American refiners to pay the higher tariff at a time of $130-per-barrel crude oil:

"This bill would essentially level the playing field -- and ensure that U.S. refiners are able to purchase cheaper and more climate-friendly ethanol, no matter where it comes from."

The legislation comes not long after the government reported that imports of ethanol had declined significantly, even before the passage of the farm bill. At the same time, the government numbers crunchers from the Energy Information Administration note that production of ethanol in the United States has increased. 

The boost in ethanol has helped gas prices from shooting up even more, according to some reports, such as this one from the Wall Street Journal's Environmental Capital blog. "If ethanol were out of the picture, gas would be more expensive at the pump because refiners would pass on at least part of the higher costs to consumers," wrote reporter Ana Campoy.

Gregg, in announcing his support for the bill, had gas prices on his mind:

“As the United States continues to face record high energy and oil prices, it is important that we find affordable, practical, and bipartisan solutions to our nation’s energy situation to help relieve the stress on consumers at home and at the gas pump. Currently, states outside of the Midwest, like New Hampshire, are at a disadvantage for using ethanol due to domestic shipping challenges. Affordable, plentiful ethanol from Brazil and other friendly nations provides a better alternative."

The statement issued by Feinstein and Gregg also noted that the U.S. Department of Agriculture has estimated that Brazilian production costs for sugar-based ethanol amount to about 81 cents a gallon, compared to United States domestic ethanol costs of more than $2 a gallon. Federal renewable fuel standards will only increase the use of biofuels in the future, the statement noted.

The measure received some support from one of the major critics of the nation's "food to fuel" policy, the Grocery Manufacturers Association, a trade group representing the food and beverage industry. It issued a statement from one of its officials calling the bill "another step in the right direction," but urging Congress to take further action.

Officials of the Renewable Fuels Association, the ethanol industry's trade group, did not return a call seeking comment on the bill. The organization has contended that its product helps lower gasoline prices.   

In addition to Feinstein and Gregg, sponsors of the new legislation include Sens. Maria Cantwell, D-Washington; Susan Collins, R-Maine, and Wayne Allard, R-Colorado.

 (Photo: Wikipedia)

Full post as published by Climate Law Update on June 05, 2008 (boomark / email).