Wednesday, May 06, 2009

Tax Breaks Over for Ethanol

Rough last couple of weeks for ethanol:

The Obama administration on Tuesday proposed renewable-fuel standards that could reduce the $3 billion a year in federal tax breaks given to producers of corn-based ethanol. The move sets the stage for a major battle between Midwest grain producers and environmentalists who say the gasoline additive actually worsens global warming.

For much of the last decade, federal officials have touted the potential of corn ethanol as a substitute for gasoline and a tool for reducing global warming and foreign oil dependence.

However, environmentalists and others have questioned the wisdom of that support.

A recent Congressional Budget Office study found that increased ethanol production was responsible for 10% to 15% of last year's increased U.S. food costs. And the rush to produce more corn for fuel has had a global environmental impact as forests and other vegetation have been cleared to make way for cropland.

The Environmental Protection Agency's climate-change rules are subject to public comment and revision before they become final. And exactly how big their impact will be on corn producers' tax breaks depends how corn ethanol is determined to affect the environment.

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