Editorial: Energy Subsidies — Good and Bad

Editorial: Energy Subsidies — Good and Bad
Copyright by The New York Times
Published: July 28, 2010
http://www.nytimes.com/2010/07/29/opinion/29thu3.html?th&emc=th

Congress must soon decide whether to extend federal tax subsidies for renewable energy that expire at the end of the year. The subsidies for wind, solar and geothermal energy are necessary to give these energy sources the help they need to compete with oil, coal and natural gas. While it renews those subsidies, Congress should end tax breaks for corn ethanol, which can stand on its own and is of dubious environmental benefit.

Tax credits for wind, solar and geothermal power have been around for decades. When the economy tanked and tax credits became less desirable to investors, the Obama administration converted them to a direct federal grant as part of the 2009 stimulus program. About $4.5 billion has since helped jump-start hundreds of projects — mostly wind and solar — and created thousands of new jobs.

Senator Maria Cantwell, Democrat of Washington, has drafted an amendment to extend the grant program for two years. The Senate should approve it. To move forward, these industries need to be able to depend on continued investment.

Ethanol, which in this country is made almost exclusively from corn, has been subsidized since the early 1970s, partly because it increases octane levels while helping to reduce certain pollutants, most notably carbon monoxide. Refineries that blend the ethanol with gasoline now get a 45 cent tax break for every gallon they produce. That break is no longer needed.

A 2007 energy law requires the country to produce steadily increasing volumes of corn ethanol — 11 billion gallons last year, rising to 15 billion gallons in 2014 — which guarantees a robust market for farmers and producers of ethanol. According to the Congressional Budget Office, the price tag last year for the ethanol tax break was about $6 billion.

This money mainly benefits refiners and big farmers, and could be better spent elsewhere — perhaps in developing more advanced forms of ethanol from grasses, scrub trees and plant wastes. Corn ethanol can actually increase greenhouse gases if grasslands or forests are ploughed for crop production.

A bipartisan group of senators, have rightly begun to question the subsidy. So have many members of the House Ways and Means Committee. Even the powerful ethanol lobby is showing signs of cracking, with Growth Energy, an ethanol trade group, suggesting a four-year phaseout. It would be far better to end it now. There are many more useful ways to spend taxpayer dollars.