Op_ed_on_ethanol_tax_credit____mandate - Why new U.S...

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Why new U.S. biofuel legislation is on track to subsidize oil consumption,  wasting billions of tax dollars in the meantime 1   Harry de Gorter and David R. Just Department of Applied Economics and Management Cornell University A convoluted federal policy that mandates renewable fuel use while continuing existing  biofuel subsidies makes about as much sense as bailing out a sinking boat while  simultaneously drilling holes in the hull. The subsidies -- tax credits -- by themselves  encourage ethanol production as a replacement for oil-based gasoline consumption. But  with mandates, the tax credits will instead unintentionally subsidize gasoline  consumption. Obviously, this directly contradicts each of the new energy bill’s stated  objectives of reducing dependency on oil, improving the environment and enhancing  rural prosperity. The boat may be sinking anyway without drilling holes as biofuels are under increased  scrutiny with soaring worldwide food prices and doubts over whether CO 2  emissions are  being mitigated with indirect land use effects. But we take issue with the self-defeating  policy in the new Renewable Fuel Standard in the recently passed Energy Independence  and Security Act. This Act mandates the use of 36 billion gallons of renewable fuel by  2022 but calls for continuing current biofuel subsidies. The existing biofuel subsidies in  the form of federal and state tax credits, totaling about 57 cents per gallon and costing 
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Op_ed_on_ethanol_tax_credit____mandate - Why new U.S...

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