Environmentalists Challenge Ethanol Subsidies

Published July 13, 2010

Environmental activists are stepping up their criticism of ethanol tax breaks, claiming the subsidies provide few if any environmental benefits and needlessly raise energy costs.

With several recent studies showing the life-cycle carbon dioxide emissions of ethanol equal or exceed those from gasoline, environmentalists have stopped championing ethanol and in many cases are seeking a reversal of ethanol subsidies and mandates.

Environmentalists are especially concerned about the impact of ethanol production on water resources, as it requires three gallons of water to produce a single gallon of ethanol.

‘A Huge Waste of Money’
Natural Resources Defense Council environmental policy analyst Nathanael Greene argues ethanol tax subsidies are redundant and misguided.

“Ethanol is a particularly wasteful fuel, and ethanol tax breaks are a weird way to conduct tax policy,” Greene said. “Oil companies are forced by law already to use a certain amount of ethanol every year, but these tax breaks for ethanol are a way to lower the price and bribe the oil companies to use ethanol. So it is kind of like bribing a driver to obey the speed limit; these companies have to use ethanol, so why are we giving them a tax break for it?”

“This all raises questions about why you would want to do this,” Greene added. “There are lots of reasons why we might want to have more renewable energy, but the redundant ethanol tax structure we have right now is effectively giving about $5.5 billion this year alone to oil companies for doing little more than what they must do under the law.… This is a huge waste of money.”

Energy Security Concern
Brian Taylor, professor of urban planning at the Institute for Transportation Studies at the University of California-Los Angeles, argues the notion behind the tax breaks for ethanol is to create better energy security and reduce vehicle pollution.

“It is a tax credit to internalize into the market system a form of energy security so people use less oil,” Taylor said. “I was in New Orleans recently, and the Secretary overseeing the Highway Administration asserted that reducing and decreasing our dependence on oil—foreign oil—was an absolute priority.”

“Also, part of the argument for ethanol tax credits is that it will get Americans to use less environmentally damaging fuels in their cars, reducing America’s pollution,” said Taylor.

‘Not Getting Anything from This’
Greene counters that tax breaks and subsidies for ethanol are causing more environmental harm than good, and money spent on ethanol subsidies could be better spent on tax cuts or on developing better energy technologies.

“We are not getting anything for the environment from this,” said Greene. “What we do get is corn ethanol production, but there are serious environmental concerns there. Subsidizing corn ethanol production is moving us backwards.

“It would be better to remove these ethanol tax breaks and spend the money on better solar power, wind power, or environmental clean-up technology creation—or just give that tax money back to taxpayers.” 

Thomas Cheplick ([email protected]) writes from Cambridge, Massachusetts.