What’s the Cost of Biofuels? More than you think.

I received an email from Ronald Steenblik, Director of Research at Global Subsidies Initiative (GSI) about the costs of alternative energy subsidies in relation to President Bush’s SOTU speech and his recommendations to reduce gasoline consumption by 20% over the next decade.

The Administration’s proposals for the new Farm Bill include $210 million to support an estimated $2.1 billion in loan guarantees for cellulosic ethanol projects in rural areas, and another $500 million to fund a “Bioenergy and Biobased Product Research Initiative”.

GSI calculates that the real cost is significantly higher:

The subsidy that counts is the volumetric ethanol excise tax credit (VEETC), which pays companies $0.51 (a) gallon for every gallon of pure ethyl alcohol they blend with gasoline for sale as a fuel. Companies that blend “agribiodiesel” get $1.00 per gallon. (emphasis added)

The total ethanol consumed over the next 11 years, GSI estimates, could be 231 billion gallons. Multiplying this by the $0.51 per gallon tax credit (the lower of the ethanol and biodiesel tax credits) yields roughly $118 billion.

Also not counted in our $118 billion figure are state-level incentives, many of which are in the neighborhood of $0.20 per gallon, and some of which range as high as $0.50 per gallon.

When The Oregonian on Tuesday reported on the legislature getting on the biofuel band wagon there was no estimate of the cost just this:

House Bill 2210 is big and complex, delving into state land-use laws, petroleum markets, tax law and agriculture policy. The end result, however, could be a shift away from food production at some farms to take advantage of growing government and consumer interest in alternative fuels.

And this:

A new tax credit for farmers who grow crops for biofuel and for those who refine the raw product into fuel. The amount of credit is yet to be determined and will be discussed when the bill goes before the House Revenue Committee.

Our tax dollars both locally and nationally are going for an enormous boondoggle and our politicians are lying to us or being deliberately vague about the costs.

BTW, I haven’t had a chance to read the article, but Speaking Truth To Power has a lengthy article,
THE DIRTY TRUTH ABOUT BIOFUELS — Another Carolyn Baker.Org Exclusive By Dale Allen Pfeiffer

Ronald Steenblik GSI biofuel Corn Ethanol Mover Mike

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