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US Ends Tariff on Imported Ethanol

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With surprisingly little fanfare, the US has ended the $0.54 per gallon tariff on imported ethanol. This comes at the same time that Congress also allowed the $0.45 per gallon of ethanol tax credit for blenders to expire, potentially opening the door to much more US importation of Brazilian ethanol, as well as cooperation between the two countries on more advanced biofuels. Brazil was the leading producer of renewable fuel until 2005 when US production of ethanol from corn surpassed production of Brazil’s sugarcane ethanol.

The article below is clearly biased, quoting two top officials from UNICA, Brazil’s powerful sugarcane industry association, without presenting views from American officials who have been opposing these measures as they work to protect domestic energy production and agricultural markets.

That said, decreasing government intervention has always been favored by this humble author, and the elimination of these barriers to trade should make for the more efficient functioning of energy and agricultural markets.

Cooperation between the two largest producers of renewable fuels could also lead to faster development of fuels from non-food crop residues such as corn stover, sugarcane bagasse, and other cellulosic feedstocks.

Congressional Recess Means the End of Three Decades of US Tariffs on Imported Ethanol

Time for the world’s top two ethanol producers, the United States and Brazil, to lead a global effort for increased production and free, unobstructed trade for biofuels, says Brazilian Sugarcane Industry Association.

SAO PAULO, Dec. 23, 2011 /PRNewswire/ — For the first time in more than three decades of generous US government subsidies for the domestic ethanol industry, coupled with a steep tariff on imports, the United States market will be open to imported ethanol as of January 1st, 2012, without protectionist measures. The adjournment of the 112th Congress means both the US$0,54 per gallon tax on imported ethanol and a corresponding tax credit of US$0,45 per gallon for blenders, the VEETC (Volumetric Ethanol Excise Tax Credit), will expire as expected on December 31st.

Continue reading this story here.

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.

Growth Energy: Brazil Ethanol Import Tariff Cut No Reason to Reduce U.S. Tariff

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If Growth Energy CEO Tom Buis is advocating corn ethanol as a means to energy independence, I simply cannot agree. Corn production under the status quo is far to dependent on fossil fuels for fertilizer production and at many other points along the production chain to wean us off our dependence on imported energy resources.

This is not to say that we should open our economy to Brazilian ethanol. My jury is still out on that question, and I always lean towards local energy independence, but corn ethanol, currently projected to reach 15 billion gallons in 2015, and to remain there at least for the seven years following, is economically and energetically inefficient, and is a poor use of land.

Mr. Buis is correct to point out that the ethanol industry in Brazil has enjoyed significant government support since its inception in the 1970’s, though that support is all but gone today. The Brazilian government supported an industry with the vision of moving that industry to the free market.

The U.S. corn industry, on the other hand, has not only enjoyed more government subsidies and over a longer period of time, but does not show any signs of moving towards the free market.

Finally, having worked with engineers and many others who are developing cellulosic and other bioenergy technologies, I believe that these show great promise as renewable fuels that do move us towards energy independence while also being environmentally friendly and promoting rural economic development. I have yet to hear, however, a valid argument regarding why there is a need for the continued expansion of corn ethanol production as a bridge to this next generation of bioenergy technologies.

Date Posted: April 6, 2010

Washington, DC—Growth Energy, the coalition of U.S. ethanol supporters, issued April 6 a statement in response to the Brazilian Government’s announcement that it will remove its tariff on imported ethanol.

“We would not support reducing the U.S. import tariff, despite whatever Brazil is temporarily doing, because Brazilian ethanol already enjoys generous subsidies from the Brazilian government and to provide them access to additional subsidies from the U.S. government makes no sense,” said Growth Energy CEO Tom Buis.

Read the entire article here.

Brazil Keeps Import Tariff on Ethanol at Least Until July

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There has been some talk that poor sugarcane harvests amidst increasing demand for ethanol in Brazil would cause the country to lower its tariffs on imported ethanol, allowing the U.S. to export corn ethanol. This is quite an ironic twist since the U.S. is the leading importer of Brazilian ethanol, which is much more efficient in terms of energy ratio and land use. Almost all of the talk on international trade in biofuels, and there has been much talk, has been about trade going the other direction.

It looks like it will continue in that direction for the time being, but it will definitely be interesting to watch how this develops in the coming months.

Brazzil Mag

Trying to understand Brazil since 1989

Friday, 12 February 2010 20:48

As announced by the Brazilian minister of Agriculture, Reinhold Stephanes, the reduction of the import tariff on ethanol has been postponed until July. Upon leaving the meeting of the Foreign Trade Board (Camex), he informed that the tariff reduction has been removed from the guidelines and will only be discussed again in five months.

According to the minister, the beginning of the sugarcane crop, in March, would render an eventual reduction of the import tax ineffective. “If we were to eliminate the tariff now, nothing would change with regard to fuel prices, because the sugarcane crop is going to start and prices would drop anyway.”

[…]

Presently, ethanol pays a 20% import tariff in order to enter Brazil. According to Stephanes, the tariff’s elimination, which should occur in the second half, will have diplomatic objectives.

“We are going to scrap the tax in order to pressure the United States into not taxing our ethanol on their market,” said the minister.

Read the entire article here.

Cooperation on Biofuels Increasing between Brazil and US

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With the US ending both the tariff on imported ethanol and the tax credit for domestic blenders, cooperation between the US and Brazil on biofuel technology is increasing, as well as efforts to trade renewable fuels on global markets. (See my post at the end of last year)

Yes, we need to be ever vigilant on the possible effects of increased biofuel production on food availability and prices as well as on land use, soil and water quality, and related issues. In my doctoral dissertation, however, I examined these issues in depth and contend that increased production can occur along with protection of ecological health.

The cooperation discussed in the article below can lead to greater efficiency of renewable fuel production, using less land and less water to produce more fuel.

Energy is fundamental to economic growth, and as countries in Latin America and Africa increase their ability to produce renewable energy domestically, they create more jobs and better the lives of their people in ways that will improve economic as well as environmental conditions for generations. These are undoubtedly positive.

It is a fascinating time to be alive.

Insight: U.S. and Brazil – At last, friends on ethanol

A gas station worker fills a car's tank with ethanol in Rio de Janeiro April 30, 2008. Brazil is the world's largest producer and exporter of ethanol. REUTERS/Sergio Moraes

By Brian Winter

BRASILIA | Fri Sep 14, 2012 11:21pm IST

(Reuters) – After years at each other’s throats, Brazil and the United States are working together to promote the use of ethanol in a collaboration that could revolutionize global markets and the makeup of the biofuel itself.

The breakthrough came in January when Washington allowed a three-decade-old subsidy for U.S. ethanol producers to expire and ended a steep tariff on foreign biofuels. The tariff, in particular, had poisoned diplomatic relations between the world’s top two ethanol-producing countries for years.

Continue reading this article here.

Imports of Brazilian Ethanol Nearer as US May End Subsidies

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Just as the US Congress debates whether or not to end subsidies to corn ethanol, Royal Dutch Shell invests heavily in preparations to export Brazilian ethanol to the US.

July 10, 2011 4:37 pm

Shell to focus on exporting ethanol to US

Royal Dutch Shell is gearing up to become the biggest exporter of ethanol to the US, investing heavily in its joint venture in Brazil as global oil companies battle for control of the Latin American country’s sugarcane fields.

Under pressure to reduce the US deficit, lawmakers in Washington are preparing to scrap ethanol subsidies and tariffs – a move that would open up the country to cheaper imports while putting the spotlight on Brazil as the world’s only other leading producer of the biofuel.

[…]

Please respect FT.com’s ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email ftsales.support@ft.com to buy additional rights or use this link to reference the article – http://www.ft.com/cms/s/0/4d7109f8-aafd-11e0-b4d8-00144feabdc0.html#ixzz1S3EqaRRu

“The tariffs will be lifted; it’s just a question of when. That’s why we need to increase production of ethanol quickly,” Vasco Dias, Raízen’s chief executive said in an interview with the Financial Times.

“Our main priority now is to supply the internal market but our ambition is to become a big exporter of ethanol to the US when the time comes, and also to Europe.”

Read the entire article here.

Written by Jason

July 13th, 2011 at 10:39 pm

More Solid Challenges to Government Protection of Ethanol, This Time from the Left

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The article below points out that historically there are three forms government intervention in markets: mandating a product’s use, protecting it from foreign competition through measures such as tariffs, and subsidizing its production.

Corn ethanol benefits, at our expense, from all three.

This does not encourage the kind of innovation that will make domestic, clean energy a larger part of our energy matrix. Instead, it binds us to an inefficient and expensive (made artificially cheap by our tax dollars) practice that is environmentally damaging, not beneficial.

Congress, please, let your baby fend for itself on the free market. Even Al Gore agrees with me.=

  • DECEMBER 5, 2010, 7:10 P.M. ET

Ethanol on the Run

A left-right coalition is emerging against this energy boondoggle.

The political class inevitably invokes the moon shot or Manhattan Project as a model for every unrealistic energy goal, but for once maybe that hyperbole is apt: A left-right coalition is emerging to end ethanol subsidies.

Last week, no fewer than 17 Senators signed a letter calling ethanol “fiscally indefensible” and “environmentally unwise.” Led by Democrat Dianne Feinstein and Republican Jon Kyl, the group said Congress shouldn’t extend certain subsidies that expire at the end of the year, including the 45-cent-per-gallon tax credit for blending ethanol into gasoline and tariffs on cheaper imports. Conservatives like Tom Coburn dislike this costly industrial policy, while liberals like Barbara Boxer and Sheldon Whitehouse are turning against the hefty carbon emissions that come with corn fuels.

Read the entire article here.

Citizen Cane: Is biofuels’ future in the fields of Brazil, or the fields of home?

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It’s odd that we didn’t think much of these cane workers for the centuries when we were importing Brazilian sugar, when conditions were undoubtedly much, much worse than they are today. This has been a more common topic in the news of the last few years.

Mr. Lane proposes a series of cogent arguments why the U.S. should be more self-reliant in terms of our energy use, and some rather dubious ones on why we should not rely on Brazil and why we do not yet have a cellulosic biofuels industry here in the U.S.

Maybe it’s simply because of the age of information: now we have immediate access to the stories of people in rural areas on the other end of the globe, and the internet provides the space to tell those stories. Maybe it’s because, unlike the diminutive domestic sugar market, the burgeoning biofuels market and the already powerful corn lobby provide much stronger motivations to investigate the downsides of corn ethanol’s far more efficient competitor.

Having just returned from three months working with the cane industry in Sao Paulo, which produces 60% of their cane and ethanol, I can say that cane cutting is brutally difficult work, but work done by choice in a place where hundreds of thousands of people have no access to anything safer, smoother, or that pays better. They are not slaves; they are poor, without access to education, and without other options.

Perhaps an even more pressing set of questions is what will happen to these workers, and the Brazilian bioenergy market as a whole, as the sector becomes increasingly more mechanized and much more efficient over the next five years. These hundreds of thousands of workers will almost all lose their jobs, with one tractor replacing 80 workers. But it will also create another 15-25 jobs that pay better, require more training, and are much safer.

The increasing access to education for workers, information for cane producers and ethanol refineries, and the capital flowing into the sector from Brazil and abroad will help to streamline cane and ethanol production, shed light on best, and worst, practices, improving the industry and increasing yields per unit of land.

Many producers making the move to mechanization have not yet adopted the changed planting patterns or harvest practices that will increase their yields dramatically. The Sugarcane Technology Center (CTC) a private research firm in Sao Paulo whose associates produce the majority of Brazilian cane, is constantly at work investigating best practices and disseminating them across larger and smaller producers around the country’s center-south region.

This brings us back to why so many people advocate increased importation of Brazilian ethanol, and why we don’t have a cellulosic biofuels industry here in the U.S.:  Brazilian ethanol is much, much more efficient. In the Global Market that Mr. Lane describes, unlike the Global Village, price is king. Unlike U.S. corn, which is the recipient of enormous subsidies and is protected by a $0.54 per gallon tariff, Brazilian cane and ethanol compete on the free market, with drivers of flex fuel vehicles making a choice at the pump based on which is cheaper, ethanol or gasoline.

Our lack of a cellulosic industry is not because of “fear of the unknown,” but simply because of feasibility. Cellulosic ethanol cannot come close to competing with cane ethanol, nor with petroleum, so it does not have a presence in the market.

Yes, we should foster research and development in domestic energy, and biomass-based biofuels will likely play a part in our energy independence, along with nuclear and domestic petroleum and, most important of all, energy efficiency. We need to use less energy if we want any hope of achieving energy independence.

So while I agree with Mr. Lane’s premises, the difference is in the details. Let’s strive to nurture our own domestic energy markets, but let’s be honest about how and why we do it.

by Jim Lane

“Let me tell a story ‘bout a man named Jed /
a poor mountaineer barely kept his fam’ly fed…”

By now, if you are a devotee of vintage TV or over the age of 40, you may well be humming along to the theme song of The Beverly Hillbillies. The song told the story of how these comic hillfolk ended up owning a mansion in a swank part of Los Angeles, because of an oil strike on their land back home. It’s the dream of many of poor landowner for a long time now.

[…]

Cheap fuel! Cheap energy!

That’s what we want — or have wanted for a long, long time. Cheap fuel, and cheap food, and no questions asked.

So much of our cheap sugar comes from the cane fields of Brazil — for the Brazilians drove down the price with an efficiency that virtually extinguished the US sugarcane business. We don’t see the cane worker any more clearly than the Nigerian farmer.

We may tut-tut over reports of slavery in the industry when we see it flash across the Bloomberg Channel, or regret the conditions that every cane worker must experience, wielding a machete at high speed for hours, and days and years. The long years in the hot fields, the high prices in the company stores, the rude shacks used by the cane-workers — we might become agitated if we saw it, but we don’t see it, or rather we avert our minds rather than our eyes. It is the same with chicken farms or cattle feedlots — a 60 Minutes report might arouse our outrage for a day or two, and then we lapse into the old habit of taking the cheap price, and pushing inconvenient thoughts aside.

Read the entire article here.

Circling the wagons, the firing squads and the arguments: ethanol wars explode in print, TV

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Among many interesting topics to be discussed here is that UNICA is targeting more progressive outlets with their ads. While it’s fairly clear why progressives may not fall in line with big business in the corn belt, it’s not clear to me that they’ll be very excited about sugarcane ethanol from Brazil, given the rather negative press it’s sometimes received. This isn’t to say that that negative press is true, I’m just curious what more folks think.

Who's on which side, now?

The US corn ethanol industry has been up against it lately. For one, the meat and dairy industries have abandoned their alliance with corn for a partnership with environmentalists,. A second front opened when Brazilian and US ethanol interests split over the ethanol tariff.

The ethanol cold war developed into a hot one this week when television and print advertising campaigns debuted both from Brazil’s UNICA and the US-based Growth Energy.

The American Enterprise Institute’s Ken Green told the New York Times that there’s no mystery in the timing. “Senator Kerry is now saying that they’re going to have an energy bill in the next three weeks. [The ethanol lobbies] want to turn up the heat on what’s in this new energy bill and how it treats ethanol.”

[…]

The UNICA ads will appear, at least through this month, in Roll Call, National Journal, Congressional Quarterly and the website Politico, and will also feature a sponsorship campaign on public radio and the debut of a new sweeteralternative.com website. Total UNICA ad buys are “less than one-tenth” of the Growth Energy budget, according to UNICA’s estimate as quoted in the Times report.

Read the entire article here.

Iran Seeks Importation of Brazilian Ethanol

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How does Iran have a gasoline shortage? It’s likely that their drive to export petroleum, due to higher prices abroad than are available internally, has led to the domestic shortage. This is similar to what many people in Brazil fear: If the U.S. lowers our tariff on imported ethanol, Brazil will export too much and not have the capacity to meet domestic demand for a vehicle fleet that is currently powered by about 50% ethanol. Interesting.

Ethanol News

Brazzil Magazine reports that the Iranian government may import Brazilian ethanol to circumvent a U.S. trade blockade, as Iran is facing gasoline supply shortages.

The magazine cites Brazil’s minister of Development, Industry and Foreign Trade, Miguel Jorge, who reportedly led a trade delegation to the Middle East.

Jorge and the Iranian minister of Industry and Mines, Ali Akbar Mehrabian reportedly met Tuesday in Tehran, which included a meeting between Brazilian and Iranian executives.

BM reports that the purpose of the mission was to attract Iranian investment in Brazilian ethanol and agriculture.

Read the entire article here.

Written by Jason

April 16th, 2010 at 8:27 am