Senate Takes Second Shot at Ethanol

Today the Senate voted to repeal the ethanol excise tax credit that it saved earlier this week.   By a vote of 73-27, the Senate approved the amendment offered by Senators Dianne Feinstein (D-CA) and Tom Coburn (R-OK).  As The Hill reports, many Democrats who had voted against the measure on procedural grounds switched to support repeal today.  Corn belt Senators of both parties voted against it.  This does not mean the end of ethanol subsidies, however.  As CNN reports:

The vote does not necessarily mean the subsidy will disappear right away. For one thing, it was adopted as an amendment to an unrelated bill that is unlikely to ever become law. However, because it crossed the coveted 60 vote threshold –the number needed to break a filibuster– it sends a strong signal that the tide has turned against continued taxpayer support for the industry.

Moreover, the Senate today rejected a proposal by Senator John McCain (R-AZ) to cut off subsidies for ethanol blender pumps and storage facilities.

On a brighter note, Senator Lamar Alexander (R-TN), the third ranking Republican in the Senate, has proposed eliminating energy subsidies across the board for all “mature” technologies.

“Permanent subsidies for mature technologies, to me, are inappropriate, so we’re looking over those carefully, and I expect that before long, I’ll have legislation that will look at all energy tax breaks,” Alexander told reporters at a pen-and-pad briefing Wednesday afternoon. . . .

Alexander said that he believes it’s important to “jump start” new technologies and listed examples of several types of short-term subsidies that he would support, including loan guarantees for nuclear power and credits for research and development of clean energy, solar energy and electric cars.

But he argued that after a period of several years, those subsidies outlive their usefulness.

“The wind subsidy came in 1992 for a few years, and that’s 20 years ago,” Alexander said. “It’s a mature technology. It makes no sense for the taxpayer to be on the hook for $26 billion over the next 10 years to subsidize a puny amount of unreliable electricity at a time when we’re borrowing 40 cents of every dollar.”

If Senator Alexander’s real goal is to end subsidies for mature technologies while leaving in place policies that could “jump start” innovation, he should also consider prizes. (See also here.)

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