Why Eliminating the Ethanol Tariff Will Mean Lower Gas Prices
Ethanol is a key component of gasoline. It accounts for up to 10 percent of gasoline for regular vehicles and 85 percent of gasoline for flex fuel vehicles.
Today, the price of ethanol in the U.S. market is about $1.00/gallon less than gasoline.
The production costs of Brazilian sugarcane ethanol are significantly lower than ethanol produced in the U.S. The U.S. imported about 189 million gallons of Brazilian sugar cane ethanol in 2007.
Unfortunately, consumers don't benefit from the less expensive cane ethanol from Brazil because the U.S. Farm Bill imposes a 54-cent per gallon tariff on imported ethanol, which drives up the price.
Effects of Incentives and Subsidies on Ethanol and Gas Prices
To help increase ethanol production and consumption, both domestic and foreign ethanol producers have received a subsidy, or tax credit, since 1978. Since 2005, the subsidy has been 51-cents per gallon of ethanol.
The Ethanol Import Tariff of 1980 imposed a 54-cents per gallon tariff on imported ethanol to prevent foreign producers from benefiting off the subsidy. Designed as a temporary measure, the tariff was meant to increase the amount of ethanol produced in the U.S. In 2007, domestic production had increased to more than 7 billion gallons.
The 2008 U.S. Farm Bill reduced subsidies to the ethanol industry from 51- cents per gallon to 45-cents per gallon. However, the tariff on imported sugar ethanol remains 54-cents per gallon.
Lowering the subsidy without lowering the tariff keeps sugarcane ethanol, a less expensive fuel alternative, out of the U.S. market.
Contact Your Members of Congress about Eliminating the Tariff Now!
Call (202) 224-3121 and let your Member of Congress know your position on the sugarcane ethanol tariff or send email to your Senator or Representative.
