I know that this sort of thing is getting tiresome, but it’s still very relevant.
The most obvious casualty of that earlier round of threats was US farmers, who stood to lose a enormous portion of their export market. Then Trump declared that the problem had been solved, when a week ago China and the US supposedly reached a broad agreement that would see China buy more instead of less. So much more that, according to Trump, China would buy “practically as much as our Farmers can produce.” However, everything from last week now seems to be out the window, and Trump is once again promising a “final list” of items to face tariffs. Farmers are once again the most likely to immediately suffer from any retaliation.
Also note that Minnesota Senate District 13 is farm country.
Not too long ago, I noted the end of the federal ethanol subsidy, and added that, based on my understanding, it is difficult to predict with confidence, what the effects might be. I’m aggregating a few items with varying perspectives.
First, something positive and upbeat about the ethanol industry.
Corn-based ethanol no longer needs tax breaks to remain a competitive and viable industry. The billions of dollars lost every year to the credit could support research and development in other emerging alternative energy technologies or fund energy efficiency programs right here in Minnesota.
More below the fold.
Here’s a little righteous gloating from the left, and cautionary notes.
Our work, however, is far from over as far as bad biofuels policies go. As MSNBC noted, we still need to tackle additional tax credits that could be manipulated to fund environmentally harmful biofuels, like the cellulosic tax credit. Likewise, there are going to be new Congressional tax fights throughout 2012 during which Friends of the Earth will have to be vigilant to make sure VEETC and other tax subsidies for corn ethanol don’t reappear.
Finally, here’s cold-blooded cynicism.
In other words, the mandates have grown so large that the tax credits barely made a difference anymore. Demand for ethanol is driven by the mandates, not by the tax credit. When you take away the tax credit, nothing happens: Demand stays high because the law says so, corn prices go up accordingly, and corn farmers stay rich. The subsidies were a nice little fillip on top of that, but at this point it’s basically chump change.
So there you have it. The fairy tale version of the story was nice, but it turns out that ethanol subsidies didn’t go away after all. That’s true both literally (most of the subsidy money was redirected to other, smaller-bore ethanol initiatives) and in the bigger picture, where mandates provide the same benefit without being quite so obvious about it. Corn farmers have learned what so many other special interests before them have learned: A nice, quiet subsidy is always better and safer than a garish, noisy one. Now that’s what they have.
Each of the above, has something to be said for it.
It took effect, a couple of days ago.
Call it a holiday miracle. For decades, conservative critics have assailed federal ethanol subsidies of 45 cents per gallon as corporate welfare that came to cost taxpayers as much as $6 billion per year. Liberal critics joined the chorus as they noticed that the Volumetric Ethanol Excise Tax Credit drove up corn and feed prices. Also, studies had begun to show that, contrary to expectations, the corn ethanol industry increased net carbon emissions…
Last month, the unthinkable happened – during the lead-up to the Iowa caucus no less. The do-nothing Congress did nothing in a good way.
It adjourned without extending the 45-cent-per-gallon ethanol subsidy, as well as a 54-cent-per-gallon tariff on imported ethanol.
Anything related to biofuels is complex, economically and politically, and I’m certainly not pretending to do anything comprehensive in one brief post; I’m just marking the occasion. Most of the subsidies were actually paid to oil companies, not farmers, but they did indirectly expand the markets, and therefore help boost the prices, for the latter’s product. If you search something like “Minnesota farmers ethanol subsidies,” as I did, you can find some articles insisting that the end of the subsidies will be disastrous for corn farmers, and others to the effect that it will be meaningless in the short term and ultimately beneficial for them in the long one. So, this is probably about right.
…(Fed economic analyst Joe) Mahon cautioned that the issue of removing ethanol subsidies is complicated, saying it would be “kind of hard to predict how large the impact or the direction of the impact” on the ag economy.
With a growing world population, and that with an increasing appetite for corn-fed meat products, it seems highly unlikely that the demand for Minnesota corn will fall off a cliff. Moreover, continued high oil prices should mean that ethanol will be competitive without the subsidies. We’re presumably going to find out.