As chairman of Senate Finance’s Subcommittee on Energy, Sen. Bingaman asked the Congressional Budget Office (CBO) to compare various tax incentives for biofuels. Today, CBO released its report.
CBO assessed the cost of various biofuels tax credits against their energy security and environmental benefits, to assist Congress in determining whether to continue these incentives. The Volumetric Ethanol Excise Tax Credit (VEETC) is by far the largest renewable energy tax expenditure and will cost $7.6 billion this year. It expires Dec. 31. Advocates would like to see VEETC extended at 45¢/gal. for five years. Based on CBO’s study, Bingaman believes that Congress should look seriously at this expenditure rather than just reflexively extending it.
(Note to Reporters: Staff familiar with this issue are available to answer technical questions; please don’t hesitate to be in touch. Sen. Bingaman is chairman of the Senate Committee on Energy & Natural Resources. He also is a senior member of the tax-writing Senate Finance Committee, and chairman of its Subcommittee on Energy, Natural Resources and Infrastructure.)
Sen. Jeff Bingaman (D-NM)
On Release of CBO’s Report on Biofuels Tax Policy
“This report by the nonpartisan Congressional Budget Office provides further evidence that our nation’s biofuels tax incentives might not be appropriately calibrated. In particular, CBO’s findings should prompt Congress to critically examine whether it is appropriate to extend the Volumetric Ethanol Excise Tax Credit (VEETC) at its current 45-cents-per-gallon level beyond the credit’s December 31 expiration.
“Corn-based ethanol plays an important role in our nation’s transportation fuel mix. Thanks in part to corn-based ethanol, U.S. oil import dependence peaked in 2007, and is expected to decline further until 2035. But corn-based ethanol is now a mature technology whose market share is protected by an aggressive Renewable Fuel Standard. And ethanol prices are currently well below gasoline prices, making it even harder to justify the existing subsidy.
“According to the Congressional Research Service, the VEETC will cost the American taxpayer $7.6 billion this year alone. That high price tag makes the VEETC by far our Tax Code’s largest subsidy for renewable energy. And this annual price tag comes on top of the $41.2 billion in current dollars that U.S. taxpayers have already spent since 1980 on tax-based subsidies for ethanol.
“In determining whether to extend the VEETC, Congress should weigh all factors, including the credit’s very high cost to taxpayers; environmental and energy security benefits; production mandates; and market prices.”
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