Well, it feels like a horror flick, and fittingly, it’s Friday the 13^th. For the first time in history, the sitting House Speaker was ousted in a vote last week after escaping the dagger of a government shutdown by 32 minutes. Now in a little over a month, the U.S. faces another potential shutdown absent an agreement on spending bills or a continuing resolution. But on this particular Friday the 13^th, and with Halloween fast approaching, we turn to another frightening example of policymakers refusing to let government waste die—proposals to reanimate the wasteful ethanol tax credit (VEETC) from the dead.

Paging Dr. Frankenstein.

As we discussed in a recent Wastebasket, what Congress and the Administration need now more than ever is the courage to stand up to special interests and wake our nation from its fiscal nightmare. The ethanol tax credit is a textbook case.

Under the federal Renewable Fuel Standard (RFS), which went into full effect in 2007, the Environmental Protection Agency requires that specific amounts of biofuels be blended into the nation’s fuel supply annually to partially replace traditional petroleum-derived fuels. To meet this edict, ethanol, primarily derived from corn (itself a heavily subsidized crop), is typically blended into gasoline at a 10% concentration, known as E10. Starting in 1978, federal lawmakers also provided the VEETC ethanol tax credit, which grew to $6 billion/year, ostensibly to promote the growth of the U.S. ethanol industry. After years of both conjuring a market for ethanol AND stimulating the industry with tax credits, the U.S. Senate, on an overwhelming bipartisan basis (73-27), voted to end VEETC in June 2011. Even then that was a striking bipartisan stake in the heart of VEETC.

Lawmakers chose fiscal sanity over pandering to special interests.

Fast forward a dozen years, and special interests are back, trying to resurrect the VEETC zombie.

Specifically in the spotlight are two new provisions in last year’s Inflation Reduction Act (IRA) – sections 13203 and 13704. The first is a new tax credit of $1.25/gallon or more for so-called sustainable aviation fuel. The second is a new Clean Fuel Production Tax Credit of $0.20/gallon or more for fuels with an emissions factor of 50 kg of CO2e per mmBTU or less. In more simple terms, tax credits not for first-generation, high-carbon biofuels like corn ethanol.

But the corn ethanol industry is attempting, in vampire fashion, to find a way to suck up the benefits. In a new report released by the ethanol lobby group Growth Energy, potential new “clean fuel” tax credits for corn ethanol are estimated at $0.45-0.55/gallon. If realized, $0.45/gallon would be the exact level of credit the U.S. Senate laid to rest 12 years ago.

The ethanol lobby has also requested that the Department of Treasury use more favorable greenhouse gas (GHG) emission calculations for corn ethanol-based jet fuel as it finalizes which fuels may qualify for sustainable aviation fuel credits later this year.

If the Treasury agrees, it may cost taxpayers dearly. Not only was the ethanol tax credit duplicative of the existing U.S. Renewable Fuel Standard, but the IRA added a web of other industry subsidies. The ethanol industry has prospered for the last 12 years without duplicative tax breaks. Bringing VEETC back from the dead would not only be wasteful and market-distorting but also add to the nation’s growing climate tab. With a $33 trillion national debt and trillion-dollar annual deficits, taxpayers can’t afford to reopen this wound.

The reason the ethanol industry is lobbying the Biden Administration so hard is because corn ethanol converted to jet fuel would fail to meet the GHG emission reduction thresholds set in law, thereby disqualifying the industry from receiving IRA tax breaks. The International Civil Aviation Organization (ICAO) found that corn ethanol-based jet fuel would be worse for the climate than regular jet fuel. Let’s say that again—worse for the climate than today’s jet fuel.

Groups like Growth Energy are attempting to convince the Administration to allow mature biofuel to once again qualify for federal tax credits. When a similar proposal surfaced in 2014, we called it out. In December 2022, alongside Environment America, Friends of the Earth, R Street Institute, and U.S. PIRG, we told Treasury to avoid allowing high-carbon biofuels to masquerade as low-carbon ones for the sake of tax credits.

Indeed, one of the IRA’s primary goals was to deliver climate solutions. The bill contains several initiatives aimed at achieving emissions reductions.

Allowing VEETC to rise from the dead, however, would thwart this objective. Corn ethanol was originally intended to serve as a stepping stone to more advanced biofuels. Former President Bush’s 2006 State of the Union touted the potential for non-food-based switchgrass and cellulosic-based biofuels. Instead of being back on the menu, tax breaks for ethanol must be on the chopping block.

Congress and the Administration must heed the 2011 Senate vote and prioritize fiscal sanity over special interests. VEETC resurrection rumors should be silenced so we can get back to work funding the government, fashioning a fiscally responsible farm bill, and the list goes on. Like Jason in the movies, VEETC has had too many sequels. We don’t need another.