Ethanol's Agenda Item No.1: Extend the Tax Incentives

By Bob Dinneen | March 16, 2010
On the heels of what I consider to be the best National Ethanol Conference the Renewable Fuels Association has ever hosted, the industry is re-energized, recommitted and refocused on the challenges at hand. The return to modest profitability, the implementation of the renewable fuels standard and the end to the general malaise throughout the economy all contributed to a sense of guarded optimism at the February conference in Orlando, Fla. Still, this optimism did not and cannot tint the glasses through which this industry views the year ahead.

Addressing expanded ethanol blending, growing infrastructure needs, and the methodology by which carbon is counted, will all require the collective efforts of the industry. Important as these issues are, there is no issue of greater importance on Capitol Hill this year for the ethanol industry than a long-term extension of the tax incentives for all sources of ethanol.

The expiration of the Volumetric Ethanol Excise Tax Credit and the corresponding secondary tariff on imports at the end of 2010 must be avoided. To understand the importance of these policies to ethanol, one needs look only to the biodiesel industry. As I stated in the State of the Industry address at the NEC, "This CANNOT be us!"

To be sure, extending the tax incentives for all ethanol will not be easy. Many opponents of ethanol simply don't believe that America should be developing domestic, renewable industries to challenge the monopoly of petroleum. Others question the necessity of tax incentives when a mandate is already in place. Adding confusion and uncertainty is the polarized and dysfunctional climate in Congress, amplified by looming elections in November. Moving appropriate legislation forward will be no small feat as gridlock is likely to be the norm in 2010.

These hurdles are not insurmountable and cannot prevent the industry from aggressively pursuing its goals. Continuing the tax incentive available to oil companies who blend ethanol is a critical policy underpinning of the Obama administration's stated goal to realize America's biofuel potential.

First, as the example of the biodiesel industry demonstrates, tens of thousands of jobs are at stake. It isn't a question of whether ethanol will be usedthe RFS requires it. The real question is from where will the ethanol come? In a time of economic uncertainty, it would seem foolish and shortsighted to put at risk the well-paying jobs of tens of thousands of Americans in favor of imports of ethanol from countries with less stringent worker rights than the U.S., to put it diplomatically.

Second, the tax incentive makes fiscal sense. In a straight dollars in/dollars out comparison, the ethanol industry returned $3.4 billion MORE to the federal treasury than was spent in the VEETC in 2009, not to mention tax revenue generated in states and communities across the country, nor the savings from fewer oil imports.

Third, the renewable fuels standard is a floor, not a ceiling. Making the RFS the be-all end-all for renewable fuel use would handcuff the innovation by Americans seeking renewable energy answers to our fossil fuel addiction. Removing the market-based incentives for increased ethanol use effectively caps the market and discourages the very innovation that the country demands.

This is not the last time my column this year will touch on this issue that is of critical importance to the future of the industry. I encourage all of you to contact the RFA with your questions, reach out to your members of Congress, and continue being the unmitigated and unmatched force unlocking the potential of America's renewable fuel potential.