The Volumetric Ethanol Excise Tax Credit, or VEETC, the largest subsidy to the ethanol industry, is set to expire on December 31st. Last year we were in the same place, and then Congress decided to waste another $6 billion of taxpayer’s money and extend the VEETC through 2011. But this summer, the Senate voted 73-27 to repeal the VEETC and the ethanol tariff once and for all. While that bill failed to make its way through the legislative process, even the corn ethanol industry has stopped trying to defend its extension after this stunning rebuke.

While we are more optimistic this year that the VEETC will finally end, Taxpayers for Common Sense is watching closely that the tax credit and other biofuel subsidies aren’t slipped into any packages at the end of the year. This includes:

• The Volumetric Ethanol Excise Tax Credit: Set to expire at midnight on December 31st, 2011, this subsidy gives companies $0.45 for every gallon of ethanol they blend with gasoline. Ethanol subsidies have been around ever since 1978, and this is iteration was first passed in 2004. Since then, it has cost taxpayers over $30 billion. Proposals to decrease the VEETC or phase it out have circulated and the Administration and lawmaker support for lesser alternatives to the current VEETC remain a threat.
• Changes to the Mandate: The ethanol industry is trying to get the rules around the ethanol mandate changed. The current Renewable Fuels Standard (RFS) mandates the use of a certain amount of ethanol in the nation’s fuel supply. Because standard corn ethanol production has exceeded the mandate for the past few years, the industry wants to expand the amount of ethanol that’s mandated to be purchased.
• Ethanol Wants a New Subsidy: The Alternative Fuel Credit (AFC) is designed to incentivize unusual and alternative fuels. Even though current law specifically prohibits ethanol of any sort from benefiting for the AFC, corn interests are looking to get Congress to change the rules. A new “Coalition for E85” wants fuel made from 15% gasoline and 85% ethanol to qualify as an alternative fuel, even though it doesn’t today. This would put some of the ethanol industry back on the government dole, even though ethanol producers have massively expanded production over the last several years.
• Tapping into existing programs: The Rural Energy for America Program is being diverted from its mission of energy efficiency improvements, energy audits, renewable energy development to providing subsidies for the constructing blender pumps for ethanol. Secretary Vilsack instructed the Department of Agriculture to provide matching funds for 10,000 blender pumps in 2010, and the ethanol industry will keep looking for subsidies through existing programs, including by obtaining loan guarantees for ethanol pipelines.

This time, Congress must let the VEETC and other biofuel tax credits expire and not create new handouts with changes to the mandate or existing subsidies. To end the largest ethanol subsidy once and for all and save taxpayers literally tens of billions of dollars over the next decade, for once all Congress has to do is nothing.