Ethanol Producers Launch Civil War

Published July 13, 2010

Producers of domestic corn ethanol and makers of imported sugarcane ethanol have launched advertising campaigns against each other, seeking congressional action to promote their own interests at each other’s expense.

Congress Propping Up Ethanol
Growth Energy Inc., which represents U.S. corn ethanol producers, has launched an advertising campaign supporting the Volumetric Ethanol Excise Tax Credit (VEETC). VEETC enables domestic corn ethanol to compete with less-expensive imported sugarcane ethanol by imposing a tariff on ethanol imports.

The Brazilian Sugarcane Industry Association, known as UNICA, is asking Congress to eliminate the current import tariff on ethanol and stop subsidies of domestic corn ethanol.

Sen. Chuck Grassley (R-IA) and Sen. Kent Conrad (D-ND) have introduced legislation to extend the $0.54 tariff per gallon on ethanol imported from foreign countries and continue a tax credit of $0.51 for every gallon of domestic ethanol mixed into gasoline.

Brazilian Producers Cry Foul
The United States is the world’s largest producer of ethanol, at 12 billion gallons of corn ethanol per year. But U.S. ethanol producers depend on government intervention to compete with foreign imports.

“Brazil is the world’s second-largest producer, with about 6 billion gallons, without government subsidies,” said Joel Velasco, UNICA’s chief representative in North America, in a press statement.

“Consumers win when businesses have to compete in an open market, because competition produces higher-quality products at lower costs. The same principle holds true for the renewable fuels market. Competition will create a race to the future and generate better options for American consumers,” said Velasco in his statement.

Costly Fight
The sugarcane ethanol advertising campaign is budgeted at 2.5 million dollars—less than one-tenth the advertising money spent by its corn-ethanol competitors. The plan includes no television ads but instead involves radio sponsorships in the DC area and print ads in inside-the-beltway publications such as Roll Call, National Journal, CQ, and Politico.

“The civil war between Brazilian and American ethanol producers illustrates why government needs to stop interfering in the energy market in the first place,” said James M. Taylor, senior fellow for environment policy at the Heartland Institute. “Instead of fighting over the spoils of government largesse, society is far better served when fuel producers spend their time and resources developing better technologies to compete in an open market.”

Alyssa Carducci ([email protected]) writes from Tampa, Florida.