Tampa Bay Online reported yesterday that Republican Senators Jim DeMint and Tom Coburn are planning to let ethanol subsidies expire at the end of this year.
On July 10th of this year, the Director’s Blog at the Congressional Budget Office posted the following:
“The costs to taxpayers of reducing consumption of petroleum fuels differ by biofuel. Such costs depend on the size of the tax credit for each fuel, the changes in federal revenues that result from the difference in the excise taxes collected on sales of gasoline and sales of biofuels, and the amount of biofuels that would have been produced if the credits had not been available. The costs to taxpayers of using a biofuel to reduce gasoline consumption by one gallon are $1.78 for ethanol and $3.00 for cellulosic ethanol. The cost of reducing an equivalent amount of diesel fuel (that is, a quantity having the same amount of energy as a gallon of gasoline) using biodiesel is $2.55, based on the tax policy in place through last year.”
The bottom line here is that ethanol has cost us a tremendous amount of money as both taxpayers and consumers and has not worked. Ethanol has also increased the cost of corn and thus the cost of food around the world.
The bottom line of the Congressional Budget Office report:
“In the future, the scheduled rise in mandated volumes would require the production of biofuels in amounts that are probably beyond what the market would produce even if the effects of the tax credits were included.”
The bottom line here is simple–we tried, we failed, let’s move on. The free market has always been the best way to develop new technology. Profit is a powerful motive. We have wasted years funding a program that would have died a natural death had the government not funded it. It is time to let the program die and for the government to stop meddling in free markets!