Hooray! Congress Is Finally Scaling Back Ethanol Subsidies! Except for Not

The Washington Examiner's Timothy P. Carney, your go-to newsman on the corporatism beat, explains how the alleged congressional attack on ethanol subsidies is actually yet another gift to ethanol producers:

Congressmen of both parties are putting on a show of rolling back federal subsidies for this alcohol fuel, but these proposals have the backing of the ethanol industry because they would actually increase taxpayer support for ethanol. [...]

Last month, South Dakota Sen. John Thune, R., and Minnesota Sen. Amy Klobuchar, D., proposed the Ethanol Reform and Deficit Reduction Act. The bill ends the most famous ethanol subsidy, a handout to ethanol blenders called the "Volumetric Ethanol Excise Tax Incentive." While the government accounting books treat the VEETC as if it were a tax credit against the fuel excise tax, it is really just a transfer payment from the Internal Revenue Service to anyone who blends ethanol with regular gasoline. Blenders simply fill out a form stating how much ethanol they mixed with gasoline last month, send it to the IRS, and then wait for a check amounting to 45 cents per gallon. You can get this credit even if you pay zero excise tax.

Historically, this blender's subsidy boosted ethanol demand by bringing down the effective price of a gallon of ethanol. But the 2005 energy bill created an ethanol mandate, requiring refiners to use a certain amount of ethanol every year. The 2007 energy bill expanded the mandate, and in 2011, refiners are required to use 13 billion gallons of ethanol. This mandate now sets demand, with the tax credit having little or no effect. The Congressional Budget Office recently wrote: "In the future, the scheduled rise in mandated volumes would require the production of biofuels in amounts that are probably beyond what the market would produce even if the effects of the tax credits were included." [...]

Thune and Klobuchar's bill takes the tax revenue gained from ending the VEETC (which, again, doesn't help ethanol producers), and dedicates most of the money to other ethanol subsidies, such as tax credits for small ethanol producers and for ethanol blender pumps to be installed at gas stations. The bill, of course, leaves in place the mandate, which is by far the biggest ethanol subsidy.

Lobbyists for the American Coalition for Ethanol and the Renewable Fuels Association applaud the bill -- which tells you just about all you need to know.

Whole nauseating story here.

Reason hates the government's ethanol policies; read all about it starting from here.

And now, an encore presentation of "Great Moments in Unintended Conseqeuences":

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  • Old Mexican||

    Congressmen of both parties are putting on a show of rolling back federal subsidies for this alcohol fuel, but these proposals have the backing of the ethanol industry because they would actually increase taxpayer support for ethanol.


    "Congressmen of both parties are putting on a show[....]"
    Ain't that the truth!

    Government 101:
    How to get rid of an unpopular program? Call it something else.

  • Old Mexican||

    But the 2005 energy bill created an ethanol mandate, requiring refiners to use a certain amount of ethanol every year. The 2007 energy bill expanded the mandate, and in 2011, refiners are required to use 13 billion gallons of ethanol. This mandate now sets demand, with the tax credit having little or no effect.


    Well, remember that the other mandate being imposed on everybody (the insurance mandate) was justified under Congress' Constitutional power to tax. Why would making refiners purchase an unneeded additive be any different? It is still a tax on everybody to benefit a few producers. In the former case, insurance companies and pharmaceuticals; in the second, Big Agribusiness.

  • Matt Felch||

    Love me some Natalie Dee.

  • R. Cornelius||

    I love Reason, but I wish they would at least have some sort of attribution for the art they use.

    http://www.nataliedee.com/

  • sarcasmic||

    The pick and alt-text are just creepy.

  • Almanian||

    Beat me to it - that's a creepy ear of corn right there.

  • sarcasmic||

    And the alt-text... creep factor is off the scale.

  • Almanian||

    Yep.

    *shudder*

  • Almanian||

    Also, Matt, same to you as I said to Suderman. You're TRYING To raise my blood pressure with these headlines, aren't you? Well, it's not gonna work, CAUSE I'M NOT READING THE ARTICLE!!! HAHAHAHA!

    Same thing I did with the Balko stuff to avoid aching nuts - "Ah, that looks like it's got a nut punch in it. I WON'T READ IT!" Of course, then I get steamed THINKING about what MUST be in the article, which COULD raise my blood pressure...

    NO! I WILL NOT SUCCUMB!

  • ||

    Ethanol is an effective octane booster. If we could utilize it more effectively, fuel economy could improve in certain vehicles. As such, we don't, so we can't.

  • Scruffy Nerfherder||

    It's also corrosive and hydrophilic, so it sucks balls.

  • ||

    Which is easily solved with a relatively cheap change in gasketry and sealing. Otherwise, it will keep a combustion chamber quite clean.

  • Almanian||

    It also provides WORSE gas mileage than petrol, so it does the opposite of "improve" gas mileage.

  • ||

    If you noticed my "if" statement, it relates to optimized utilization of the fuel. To explain further, if one were to take the octane benefits of the ethanol into account, one could downsize an engine dramatically while simultaneously increasing compression ratio significantly. Both of those measures improve thermal efficiency probably close to diesel-like efficiencies.

    As you've correctly pointed out, the heating value (energy content) of ethanol is less than that of gasoline. So on a volumetric basis, ethanol is a clear loser.

    But if we could use ethanol to effectively boost octane to suppress knock for effective increases in compression ratio and downsizing, then we're in business. Current and recent studies show that an ethanol blend on a volumetric basis of 25-40%, is an effective blend to sufficiently boost octane to suppress knock in such a manner. The improvements in engine efficiency would offset the specific fuel consumption increase due to heating value decrease of ethanol. Thus, this mixture (when coupled with direct injection and turbocharging) would likely provide both better efficiency and lower fuel consumption than today's vehicles.

  • Scruffy Nerfherder||

    I hate politicians

  • Mitch Sremac||

    So as usual the anti-ethanol fanatics spew their hatred towards American produced energy. The so-called self anointed anti-government subsidy hawks never question subsidies for foreign oil companies; no we need to drill baby drill!!! Unfortunately, the hawks know little if anything about oil exploration and oil drilling. It takes ten years to get a well operational, are we supposed to just keep importing oil from places like Nigeria, Iran (remember foreign oil companies do business there, they're not U.S.companies) and Venezuela. These are countries that basically want to see America brought down on its knees...

    How long are the hawks going to allow their small minds to be controlled by Big Oil's lobbyists, who do nothing but put out misinformation about alternative energy. I would be doing the same thing that the oil industry is doing, and quite successfully I may add. I would do everything thing I could to kill any possible competition -- So pat yourselves on the back -- Ahmadinejad, and Chavez thank you from the bottom of their oily little hearts..

  • tarran||

    Could people stop sock-puppeting crap like this to make the big-corn rent-seekers look dumb?

    Yes, they are pumping out all sorts of fallacies, but even they aren't *this* stupid.

  • ||

    Yes, they are this stupid. Never forget that.

  • Almanian||

    I took a shit in a cornfield once

  • sevo||

    "I would be doing the same thing that the oil industry is doing,..."

    Uh, you *ARE* doing the same thing.

  • Old Mexican||

    Re: Mitch Sremac,

    So as usual the anti-ethanol fanatics spew their hatred towards American produced energy.


    Actually, it's American consumption of energy, since in order to produce ethanol you have to use more energy than what it delivers. Instead, extracting oil from the ground is a process with a net gain in energy, as oil does not need much more processing to become an energy source.

  • cynical||

    Multiplier effect!!!!

  • Jason||

    All of the studies I have seen making this claim have either David Pimentel or collaborator Tadeusz Patzek as an author.

    Pimentel's studies assume that ethanol completely replace gasoline so that the usable byproducts flood the market and end up mostly discarded.

    Other studies range from very modest energy gains to fantastic (as approaching Keynes's original multiplier).

    A lot of the studies are on small scale — a large scale experiment may radically revise the numbers.

    Of course, to efficiently use ethanol, you have to have an engine tuned to it. Ethanol has an effective octane of 100, so for most efficient use, you need a turbocharger.

    One study indicates that the most efficient use of ethanol may be like using water injection in the old WWII aircraft-engines — as a secondary fuel source to increase power during acceleration.

  • ||

    Actually, coupling ethanol turbocharging and direct injection of fuel, the effective octane of ethanol becomes greater than 130. In fact, you could operate knock free in a spark ignited engine with torque capabilities higher than anything else in the automotive market.

  • GILMORE||

    How long are the hawks going to allow their small minds to be controlled by Big Oil's lobbyists,

    ...because we Ethanol lobbyists want our fair share!!

    We want subsidies!! Taxpayer money!! So what if the energy is more expensive, less efficient!! SUBSIDIZE ME!!!!

  • DanD||

    Shut the fuck up, Mitch Sremac.

  • Jason||

    Mitch, you don't know much about this site, do you?

  • Jason||

    Oh, and bless your little xenophobic heart, Mitch.

  • ||

    fuel economy could improve in certain vehicles.

    How does lower energy content give you improved mileage?

  • sevo||

    The claim usually has to do with raising the compression ratio, which will help fuel economy.
    Unfortunately, not enough to offset that ~30% energy deficit.

  • ||

    If you used ethanol as an octane booster, one could increase compression ratio and downsize simultaneously. This would improve both thermal efficiency and specific fuel consumption. Using too much ethanol in the fuel mixture probably does not provide enough thermal efficiency improvement to offset the energy content differential. E85 allows one to operate in a very large engine operating range knock-free, but its probably overkill. If we were able to utilize somewhere in between E20 and E40, we could suppress knock significantly (when coupled with turbocharging and direct injection) and achieve the thermal efficiency improvements that we strive for while also minimizing the impact of energy content differential.

    Plus you have to take price into account. If ethanol is cheaper than gasoline, then there is even more buffer that does not have to made up for in thermal efficiency improvements as far as the consumer is concerned. But that lower price may be mostly due to subsidies, so that might not be much of an argument.

  • ||

    Also, the fact that most engines (especially downsized ones) run knock limited fairly regularly, the improvements in advanced combustion phasing will help to improve thermal efficiency. Not being knock-limited in ignition timing helps quite a bit to improve efficiency.

    So higher compression ratio is not the only benefit in this case.

  • ||

    So as usual the anti-ethanol fanatics spew their hatred towards American produced energy.

    USA

    USA

    USA

  • Almanian||

    WE'RE #2! WE'RE #2! WE'RE #2!

  • sarcasmic||

    were #1! were #1! were #1!

  • ||

    The claim usually has to do with raising the compression ratio

    That's what I suspected; a 30:1 "gasoline diesel". I'll pass.

  • ||

    A "gasoline diesel" is probably not possible with ethanol as it will not autoignite. I assume that you were referring to controlled autoignition. The maximum realistic compression ratio for a spark-ignited engine is likely close to 15:1 or 16:1. Depends on the bore and stroke.

  • ||

    we hates it!

  • johnl||

    Single use Hit and Run identities are the second to last refuge of a scoundrel. Thanks Mitch Sremac, who works for a company that exists only because of federal mandate, for telling us how great the federal mandate is. Thanks especially for the information on Nigeria wanting to stick it to the USA.

  • ||

    I love me some cob corn. Especially whem it's slathered with more corn and lightly salted.

    In my car, not so much.

  • Frank||

    Well, I have been in you, baby
    You
    Have been in me
    And we
    Have be
    So intimately
    Entwined
    And it sure was fine

    I have been in you, baby
    You
    Have been in me
    And so you see
    We
    Have be so together
    I thought that we would never
    Return from forever
    Return from forever
    Return from forever . . .

  • ||

    But if we could use ethanol to effectively boost octane to suppress knock for effective increases in compression ratio and downsizing, then we're in business. Current and recent studies show that an ethanol blend on a volumetric basis of 25-40%, is an effective blend to sufficiently boost octane to suppress knock in such a manner. The improvements in engine efficiency would offset the specific fuel consumption increase due to heating value decrease of ethanol. Thus, this mixture (when coupled with direct injection and turbocharging) would likely provide both better efficiency and lower fuel consumption than today's vehicles.

    This is completely irrelevant to the topic at hand, which is rent-seekers pushing mandatory ethanol content in pump gas used in current production automobiles.

    More "Hey, look over there!" bullshit. Why didn't you tell us about "free" cellulosic ethanol while you were at it?

    If we had cold fusion, we wouldn't need ethanol. Where's my subsidy?

  • ||

    The comments in that quote are completely positive statements. I'm only suggesting that there are feasible uses of ethanol as a fuel that can make significant improvements in thermal efficiency, drive cycle fuel consumption, and operating costs for consumers. Its likely that increasing the mandatory ethanol content in spark-ignited gasoline fuel could lead to serious benefits for consumers. That's pretty relevant to the article.

    There's been no statement of what we ought to do to achieve that, or whether we even should. Just the facts.

    The octane boosting benefits of ethanol are not anywhere near the unrealized promise of cellulosic ethanol or cold fusion...it's an undisputable fact. Taking advantage of those properties has been the subject of a lot of recent research.

  • ||

  • scarpe Nike Store||

    is good

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