I was doing a little research for a upcoming blog article on Ethanol and found this little gem in wikipedia. Honestly, the accounting involved here made my head spin and forced me to try and find the answer to one monstrous mathematical word problem. The article is intended to be about how much Ethanol costs the average person. No one, that we've found anyway, has really explored how much it costs indirectly through repairs to older vehicles, outdoor power equipment and boaters. We're publishing this a little ahead of the article this research is intended - but I thought it was worth sharing. If there's an acountant out there who has the spare time to figure this little bit out, I personally would be grateful!
Since the 1980s, domestic ethanol producers have been protected by a 54 cent tariff on imports mainly intended to curb Brazilian sugarcane ethanol imports. Also, since 2004 blenders of transportation fuel have received a tax credit for each gallon of ethanol they mix with regular gasoline.[60][61] Historically, the tariff has been intended to offset the federal tax credit that is applied to ethanol no matter its country of origin.[62][63] However, several countries in the Caribbean Basin have been importing Brazilian ethanol, but not for domestic consumption, instead these countries reprocess the product, usually converting Brazilian hydrated ethanol into anhydrous ethanol, and then re-export it to the United States, gaining value-added and avoiding the 2.5% duty and the USD 0,54 per gallon tariff, thanks to the trade agreements and benefits granted by Caribbean Basin Initiative (CBI) and free trade agreements. This process is limited by a quota, set at 7% of U.S. ethanol consumption.[64]
Currently, blenders receive a US$0.45 tax credit for each gallon of ethanol that is blended with gasoline, regardless of the feedstock; small producers receive an additional US$0.10 on the first 15 million gallons produced; and producers of cellulosic ethanol receive credits up to US$1.01. Tax credits to promote the production and consumption of biofuels date back to the 1970s, and the current credits are based on the Energy Policy Act of 2005, the Food, Conservation, and Energy Act of 2008, and the Energy Improvement and Extension Act of 2008, and the tax credit is due to expire on December 31, 2011.[28] However, on June 16, 2011, the U.S. Congress approved an amendment to the economic development bill to repeal both the tax credit and the tariff on ethanol, but this bill has an uncertain future.[60][61]
A 2010 study by the Congressional Budget Office (CBO) found that in fiscal year 2009 the biofuel tax credits reduced federal revenues by around US$6 billion, of which corn ethanol accounted for US$5.16 billion and cellulosic ethanol accounted for US$50 million. A 2010 study by the Environmental Working Group estimated that the cumulative ethanol subsidies between 2005 and 2009 were US$17 billion. Considering the levels of ethanol production mandated by the Energy Independence and Security Act of 2007 (EISA), the same study estimates that the total cost to taxpapers will be US$53.59 billion if these tax credits continue to be extended until 2015, when 15 billion gallons are required by EISA.[65]
The CBO estimates that the costs to taxpayers of using a biofuel to reduce gasoline consumption by one gallon are $1.78 for corn ethanol and $3.00 for cellulosic ethanol. In a similar way, and without considering potential indirect land use effects, the costs to taxpayers of reducing greenhouse gas emissions through tax credits are about $750 per metric ton of CO2-equivalent for ethanol and around $275 per metric ton for cellulosic ethanol.[28]
To see the original Wikepedia article please click here.
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Karl Swanson
Owner/Manager
Mystery Bay Marine, LLC
