Hat Tip to the Heritage Foundation for this latest bailout update from the WSJ.
The Renewable Fuels Association, a trade group for the U.S. ethanol industry, has spoken with staff members from Capitol Hill and President-elect Barack Obama’s team and “provided them with some ideas on how to craft the language of” an economic recovery package, said Matt Hartwig, a spokesman for the RFA.
Hartwig said RFA has suggested a number of steps including setting up a $1 billion short-term credit facility so ethanol producers could finance current operations; a $50 billion federal loan guarantee program to finance investment in new renewable fuel production capacity and supporting infrastructure; and a requirement that any auto maker receiving federal aid only produce new vehicles that can run on any blend up to 85% ethanol, beginning with the 2010 model season.
The price of ethanol has dropped with the price of oil, squeezing producers’ profit margins. Critics note that the U.S. ethanol industry already benefits from a number of fairly generous federal subsidies, including a tax credit paid to gasoline producers for blending gasoline with ethanol; a federal renewable-fuel standard that sets a minimum amount of ethanol to be blended into gasoline; and a 54-cents-per-gallon tariff on imported ethanol.
When the legislature is looking for places to cut, ethanol subsidies ought to bear some scrutiny, notwithstanding the inevitable outcry.
Update: Ethanol Industry meets market reality.
