Jason Barton

Professional Information and Energy News

UNICA Continues Pressure on U.S. to Drop Ethanol Tariff

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To listen to UNICA, the powerful voice of Brazil’s sugarcane and ethanol industry, you’d think the U.S. tariff on imported ethanol would be gone by the end of the week. I don’t see that happening, and definitely don’t think an all-at-once elimination would be good for Brazil.

Ethanol accounts for half of their transportation fuel by volume (slightly less on an energy content basis), and if the U.S. tariff were eliminated, Brazilian producers would likely sell a huge portion of their ethanol to U.S. buyers, forcing Brazilian drivers to pay higher prices, or, more likely, revert to far more gasoline. This could jeopardize Brazil’s energy independence and would impact their balance of trade, though probably only slightly.

Additionally, just as UNICA and the studies they cite may sound certain that this tariff of US$0.54 per gallon is terrible for American drivers, its elimination would not hurt corn farmers, and so is soon to be history, U.S. corn farmers and our ethanol industry, led by Growth Energy, the U.S. counterpart to UNICA, are equally sure that government support is necessary and here to stay.

Let me be clear that I am not a fan of corn ethanol. I have become much more encouraged about cellulosic and other technologies on the near horizon, but still believe that corn is produced irresponsibly and at great harm to ecological, human, and even bovine health. I don’t blame farmers for this, as they are working within a system that rewards growing corn without taking into account the negative externalities.

All this said, the best scenario would likely be reducing the tariff on U.S. importation of Brazilian ethanol to meet the “advanced biofuels” mandates laid out in George Bush’s Renewable Fuels Standards, as allowed by the recent EPA findings in the RFS2 decision in February. This would gradually increase Brazilian ethanol’s presence in the U.S., while also encouraging the much needed move to second and third generation biofuels technologies, reducing our dependence on imported oil and increasing our energy independence and security.

Any of this, of course, must be done in concert with vastly increased efforts towards energy efficiency, driving less, more efficient vehicles, etc.

Here are a few of the pieces from UNICA…

Scholars call for phase-out of U.S. ethanol tariff at Wilson Center seminar
07/26/2010

(left to right) Joel Velasco, Alexandros Petersen, Paulo Sotero,
Robbin Johnson and C. Ford Runge

An open and globalized biofuels market is essential to promote greater efficiency and competitiveness, and phasing out the US$0,54 per gallon tariff imposed by the United States on imported ethanol would be a key step in the right direction. The recommendation came from two University of Minnesota scholars during the “Biofuels: Food, Fuel, and the Future?” panel, organized by the Woodrow Wilson Center in Washington, D.C, on Friday, July 23.

Read the entire article here.

And a second piece, citing the study from the University of Iowa:

Universidade americana vê ganhos para consumidores com fim de tarifa sobre etanol importado
26/07/2010

Em meio a um debate aquecido e ganhando cada vez mais visibilidade nos Estados Unidos, um estudo divulgado na terça-feira (20/07) por um renomado economista agrícola do meio-oeste americano está desafiando conclusões catastróficas, geralmente disseminadas por grupos de lobby do etanol de milho, sobre o que poderia acontecer se a atual tarifa de US$0,54 por galão (3,78 litros) imposta ao etanol importado expirar no final deste ano como planejado. O estudo, realizado por Bruce Babcock, chefe do Centro de Agricultura e Desenvolvimento Rural (CARD em inglês) da Universidade do Estado de Iowa, apresenta um cenário bem diferente.

Read the entire article here.

And the University of Iowa study to which they are referring:

CARD Study Shows U.S. Ethanol Production and Corn Demand Will Grow With or Without Subsidy and Tariff

Contacts:
Bruce A. Babcock ; babcock@iastate.edu
Sandy Clarke; sclarke@iastate.edu

July 20, 2010

America’s growing interest in renewable fuels has spurred a robust discussion about the pros and cons of continuing or changing current U.S. federal government ethanol policies, specifically, (1) mandates to increase the use of renewable fuels like ethanol from approximately 13 billion gallons today to 36 billion gallons by 2022, (2) a 45-cent-per-gallon tax credit for “blenders” who add ethanol to gasoline, and (3) a 54-cent-per-gallon tariff, which increases the price of foreign imports.

Read the entire article here.