Senate Vote to End Ethanol Subsidy Would Have Limited Effect on Consumption

On Thursday, the Senate voted to bring an end to the Volumetric Ethanol Excise Tax Credit (known widely as the “blender’s credit,”) which effectively pays gasoline refiners to include ethanol in the fuel mixes sold at most stations around the country. Ethanol has long come under fire from its many critics for a decades-long reliance on heavy government subsidies, its role in driving up food prices, and questionable environmental benefits.

Steadfast support from Washington has helped to ensure the continuation of billions of dollars per year in ethanol subsidies, but with the political climate leaning heavily in favor of deep cuts in the federal budget, congressional patience for the fuel is waning. Still, supporters of corn-derived fuel seem to have little to fear from the latest attempt to curb government spending.

Higher Prices, Same Demand

The ethanol lobby has long claimed that the $0.45 per gallon tax credit awarded to refiners for selling E10, E15 and E85 blends of gasoline has little to no effect on its revenue or production volume. In fact, industry groups like Growth Energy have even repeatedly offered to accept an end to the VEETC if the government agrees to take steps to increase market access for ethanol.

So why are ethanol producers so eager to abandon a subsidy that was created to stimulate demand for their product? Because the federal Renewable Fuels Standard mandates the amount of ethanol blended into gasoline sold in the United States each year—meaning that demand for E10 and E15 will be largely unaffected regardless of cost.

In fact, the only parties likely to feel the financial impacts of the elimination of the blender’s credit would be consumers and gasoline refiners. According to one industry expert, the elimination of VEETC would cost consumers a roughly $0.22 per gallon increase in the price of blended E10 ethanol at the pump—with the rest of the lost subsidy cutting into refiner profits.

Regardless of the outcome of the current congressional dispute over the VEETC, billions of dollars in other direct federal subsides to the industry itself will remain in place, as will the most crucial element of government support for ethanol: the Renewable Fuels Standard. So as long as the federal government mandates the amount of ethanol that is produced and sold in the United States, the fuel will be a mainstay at gas stations nationwide.


  • Yegor

    That is the right decision!

    1. If fuel is cheap people just buy gas guzzlers and drive more.
    2. If you subsidize E10, E15 again fuel is cheap people just buy gas guzzlers and drive more. But 70% of profit goes to foreign (often not friendly) countries because 70% in E15 and E10 is imported oil.
    3. There are Hybrids and other fuel efficient car – they pay for themselves via fuel savings. When you subsidize fuel people do not buy fuel efficient car but buy gas guzzlers.

    It is just wrong, stupid and evil to subsidize fuel in our days!

  • scott

    You really need to take an economics class!

  • MrEnergyCzar

    Ethanol uses oil to produce (fertilize, diesel tractors, transport) so it’s kind of like a dog eating its own tail to stay alive. Things should get a lot more desperate than this during the ugly downslope of cheap oil….

    MrEnergyCzar

  • shweta007

    Consumption of fuels is definitely on a higher scale and its high time we realized this fact before things start getting any more worse then this.l have heard that the a new breed of cars known as Hybrid cars are fuel efficient and if this is true then these cars could be the face of the future cars.

  • Capt. Concernicus

    Ethanol does nothing but drive up the price of food for us, but mostly for countries more dependent on grain, wheat, corn etc.

    What it did for fuel prices was negligble at the very best of times. I’ve never seen anyone use the ethanol pump at the gas station by me.

    Ethanol for vehicles was just a waste of resources and time that could have been devoted to more promising projects to reduce our dependency on foreign oil.

  • Joe

    Ethanol is getting improperly put in higher concentration at gas stations, ruinning engines and causing small engines for lawn equipment to gunk up from sitting around too long! I have to buy a special gas treatment to keep my small engines to keep the ethanol from turning into sludge or empty there tanks. Ethanol would be better in E-85 vehicles that built withstand it!

  • tapra1

    pays gasoline refiners to include ethanol in the fuel mixes sold at most stations around the country. Ethanol has long come under fire from its many critics for a decades-long reliance on heavy government subsidies,Tech Blog