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Will the Real Ethanol Beneficiaries Please Stand Up?

For Immediate Release: 
Tuesday, November 16, 2010

Washington, D.C. – This month’s election is being called a referendum on taxpayer-funded bailouts and wasteful federal spending, but Congress may not have gotten the message. It’s poised to approve billions in additional federal subsidies to the corn ethanol industry in the lame duck session that began this week.

The subsidies that flow to the ethanol producers come through a tax credit known as the Volumetric Ethanol Excise Tax Credit, or VEETC. It will expire at year’s end unless Congress acts.

An Environmental Working Group (EWG) analysis of data compiled by the industry’s own trade association, the Renewable Fuels Association (RFA), revealed some interesting facts about the state of the corn ethanol industry and just who’s getting the taxpayer-funded subsidy dollars.

Eight years ago, there were 61 plants producing ethanol to blend with gasoline in the United States; today there are about 200.  And eight years ago, 13 percent of those plants used a feedstock other than corn; today, just 5 percent rely primarily on alternatives like wood waste and sugar cane.

Back in 2002, a bushel of corn cost $2.37; today the price has almost tripled to $5.86. And over that same period, farmers went from owning about half of all ethanol plants to just 19 percent today.  So who is collecting the lion’s share of the tax-dollar subsidies if it’s not the family farmer? The oil companies.

Designed to make the fuel more cost competitive, the tax credit pays refiners, including BP, Shell and Exxon, 45 cents a gallon to blend ethanol with gasoline. Oil and gas companies get this tax subsidy regardless of the price of ethanol or how large their profits are.

“While millions of Americans continue to struggle in the economic downturn, multinational oil companies could continue to get billions in taxpayer dollars if Congress caves,” said Sheila Korth, a legislative and policy analyst for EWG.

How times have changed! Eight years ago, the ethanol industry was keeping up the pretence that corn ethanol was a “bridge” to advanced biofuels. But figures like these, derived from the Renewable Fuels Association’s Annual own Industry Outlook, tell a different story.

Subsidized corn growers and corn ethanol producers and blenders are reaping big profits, but the corn ethanol “bridge” will become a “destination” if the industry gets its wish from Congress.

The full analysis by EWG’s Korth can be found here:

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EWG is a nonprofit research organization based in Washington, DC that uses the power of information to protect human health and the environment.

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