Farm Bill Faces Uncertainty, Would Cut Ethanol Subsidies

Posted on April 29, 2008 by Dennis Pfaff

A compromise farm bill that reportedly includes some sharp reductions in subsidies for some forms of ethanol underwent heavy criticism Tuesday from President Bush. At a news conference, he called the overall multi-billion-dollar measure a “massive, bloated” bill that would do little to solve the problem of rising food prices (see White House transcript here).

That cast uncertainty on the legislation, which emerged with some fanfare late last week from behind-the-scenes negotiations between key lawmakers. Among the notable features in the bill, according to news reports (see Reuters story here), was a 6-cent-per-gallon cut in federal tax credits for ethanol. That would take the incentive down from 51 cents to 45 cents. However, Reuters reported the bill would also create a $1.01-a-gallon subsidy for ethanol distilled from cellulose, found in grasses, woody plants and crop residue.

Last week, the bill, which also contains incentives for public nutrition programs, took life with a boost from Senate Agriculture Committee Chairman Tom Harkin, D-Iowa. He said the compromise legislation, among other things, "invests heavily in renewable energy and will help bring the promise of cellulosic biofuels to reality by providing grants and loans to move from corn ethanol to other renewable feedstocks." Access the full text of Harkin's statement here.

 

  

  

Bush, however, on Tuesday ripped the bill for not doing enough to cut subsidies for wealthy farmers:

"The bill Congress is now considering would fail to eliminate subsidy payments to multi-millionaire farmers. America's farm economy is thriving, the value of farmland is skyrocketing, and this is the right time to reform our nation's farm policies by reducing unnecessary subsidies. It's not the time to ask American families who are already paying more in the check-out line to pay more in subsidies for wealthy farmers. Congress can reform our farm programs, and should, by passing a fiscally responsible bill that treats our farmers fairly, and does not impose new burdens on American taxpayers." 

Whether Bush's remarks were enough to derail the bill was a matter of some debate. Mary Kay Thatcher, a lobbyist for the American Farm Bureau Federation told Bloomberg she believed the chances of a presidential veto were about 30 percent (see story here).    

Meanwhile, some critics of subsidies for corn-based ethanol weren't persuaded by the bill's cut in subsidies.

"I guess you could say [it] is a step in the right direction but it certainly does not go far enough," Scott Openshaw, communications director for the Grocery Manufacturers Association, told Climate Law Update Tuesday.  The trade group represents the food, beverage and consumer products industries and has pushed for an elimination of corn-to-ethanol subsidies, believing they contribute to higher commodity prices.

"We kind of feel like it's bad to take your lunch and put it in your car," Openshaw said. However, he praised the legislation's support for cellulosic ethanol, which is made from non-food plant material.

A spokesman for the Renewable Fuels Association, representing the ethanol industry, could not be reached for comment Tuesday. The organization has vocally defended ethanol, including that made from corn, from charges it is contributing to skyrocketing food prices and other global ills(see recent RFA background statement here; see Climate Law Update story here).

(White House photo: President Bush at April 29 news conference)
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Energy Guru Predicts Bright Future for Renewables, 'Clean' Power

Posted on February 25, 2008 by Dennis Pfaff

Daniel Yergin, a widely known energy expert who closely advises  the oil and gas industry, is predicting a rosy future for renewable energy, and other "clean" technologies such as nuclear and hydropower, partly as a result of public concern over global warming and driven by subsidies and government mandates. 

"High energy prices, climate change and energy security are converging as the new engine driving the development of clean energy," Yergin (pictured at left), chairman of Cambrige Energy Associates, told a gathering at the National Governors Association in Washington, D.C. (Feb. 23). "There is a major shift in public opinion towards clean energy, which is being bolstered by the growing conviction that new carbon policies will reshape the competitive landscape of the global energy business."

Yergin cited the results of a new study by CERA, Crossing the Divide: the Future of Clean Energy, in predicting that renewable power and biofuels could be supplying up to 16 percent of the world's electric and transportation demands by 2030. He said that renewable power technologies, led by wind, followed by solar and biomass, would experience substantial growth. That's despite what he described as short-term bottlenecks in wind turbine manufacturing and other potential problems.

Yergin, according to a written statement released at the time of his speech, maintained that government policy constitutes a "key driver" for advancing "clean energy" (which the report defines as biofuels, renewables, carbon capture and storage and nuclear and hydropower):

"Putting a price on [carbon dioxide] emissions, setting mandates and providing subsidies all work to kick-start clean energy technologies by meeting the economic competitiveness and cost advantages of conventional technologies. The challenge in the years ahead is to provide subsidies in a way that ensures that these technologies get off the drawing board and are able to wean themselves from support – allowing for a phase-out rather than an increase in subsidies – as they become commercially viable on their own. It is also important that mandates be set at achievable levels and with care so as not to create unexpected pressures from higher prices."

Among other points, Yergin asserted that nuclear and hydroelectric generation would account for almost half of the clean power additions by 2030.

The position outlined by CERA and Yergin has gotten some attention partly because of the consulting firm's close linkage with the petroleum industry. The report "reflects a view that has been developing within mainstream industry for more than a year," commented The Wall Street Journal online site Environmental Capital. It called CERA "as close as it gets to a proxy for conventional wisdom within Big Oil."

Yergin is the author of the Pulitzer Prize-winning history of the petroleum industry, The Prize: The Epic Quest for Oil, Money and Power. The book was made into a public television documentary series.
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