Jun 04 2008

Senators Feinstein and Gregg Introduce Measure to Reduce Tariff on Imported Ethanol in Effort to Help Lower Gas Prices

- Measure would help provide U.S. refineries with increased access to cheaper and more climate-friendly ethanol -

Washington, DC – U.S. Senators Dianne Feinstein (D-Calif.) and Judd Gregg (R-N.H.), today introduced a measure to reduce the tariff on imported ethanol.

If passed, the legislation would allow U.S. refiners to purchase cheaper and more climate-friendly ethanol from foreign sources, which could then help lower gas prices at the pump.

“The price of oil has hit $130 per barrel and prices are going higher every day. This means that the need for inexpensive and cleaner-burning fuels continues to grow. And yet U.S. refiners are forced to pay a 54-cent tariff on ethanol imported from Brazil and other foreign sources. This makes no sense, given the record oil prices and the limited supplies of domestic ethanol,” Senator Feinstein said. “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.”

Senator Gregg stated, “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. This legislation introduced today on a bipartisan basis offers a reasonable solution that lowers the tariff on ethanol, keeping prices more competitive for American consumers and steering us in the direction of more affordable energy alternatives.”

The measure is also cosponsored by Senators Maria Cantwell (D-Wash.), Susan Collins (R-Maine), and Wayne Allard (R-Colo.)

The Ethanol Subsidy and Import Tariff

  • The ethanol industry currently receives a 51-cent per gallon subsidy to help increase production and consumption of ethanol. 
  • This subsidy is applied to both domestic and foreign ethanol. 
  • In order to prevent foreign ethanol producers from benefiting from the subsidy, an import tariff of 54-cents per gallon was established to essentially offset the subsidy. 

Ethanol Subsidies in the Farm Bill 

  • The Farm Bill reduces subsidies to the ethanol industry from 51-cents per gallon to 45-cents per gallon.  
  • Yet, it leaves tariff on the importation of cleaner, greener imported sugar-based ethanol at 54-cents per gallon.
  • So this tilts the playing field in favor of the heavily subsided domestic corn-based ethanol.   

What does the Feinstein-Gregg bill do?

  • Mandate that that the tariff on imported ethanol could not be set higher than the subsidy. 
  • So in effect, the legislation would lower the tariff on imported sugar-based ethanol from Brazil to 45-cents per gallon – the same as the ethanol subsidy.
  • This would ensure that foreign ethanol neither benefits from the ethanol subsidy, nor is penalized by a 9-cent barrier to trade.  

What would this accomplish?

  • This would help make it more affordable for U.S. refiners to purchase imported ethanol – and in turn help lower prices at the pump. 

Background on the Renewable Fuels Standard

This year, refineries will be required to use 9 billion gallons of ethanol under the Renewable Fuels Standard (RFS).  

This requirement will only increase in the years ahead, climbing to 36 billion gallons in 2022. Additionally, by 2022, 58 percent of the renewable fuel will be required to be “advanced biofuels,” which are not made from corn and produce at least 50 percent less emissions during the production, transportation, and end-use (or the lifecycle of a fuel) than gasoline. 

According to the United States Department of Agriculture, Brazilian production costs for sugar-based ethanol are only 81-cents per gallon, while domestic ethanol production costs are currently above $2 per gallon.

The California Energy Commission recently estimated that the emissions from Brazilian sugar-based ethanol were 68 percent lower than traditional gasoline – which makes it cleaner than domestic corn-based ethanol, which produces about 15 to 28 percent fewer emissions than traditional gasoline.   

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