In a hearing of the Senate Environment and Public Works Committee this week, Secretary of Agriculture Tom Vilsack testified that policies on ethanol should be revisited by Congress, but warned that simply ending the Volumetric Ethanol Excise Tax Credit (VEETC) would “create a cliff” that would lead to significant job loss.  Vilsack also told the committee that the issues of energy costs are more responsible for the increase in food costs than ethanol production.

However, Scott Faber, vice president of federal affairs for the Grocery Manufacturers Association, pointed out to the committee that the diversion of corn from food to fuel is contributing to increased food prices. “We believe now is the time to revisit and reform these policies to accelerate the development of advanced biofuels and to freeze the amount of food and feed that is being diverted to our fuel supplies,” Faber said.

“My view is we ought to be asking a different question about those incentives–whether or not they can be used for this maturing industry anymore in a more effective way to grow the industry,” Secretary Vilsack said. He stated that the VEETC could be used to create incentives for the purchase of infrastructure needed to sell gasoline with higher ethanol content, such as blends containing 85 percent, known as E85, and the production of “flexfuel” vehicles capable of using such fuel. A spokeswoman for Growth Energy, an ethanol trade group, told the committee that the industry supports proposals to reform the tax credit so that it is redirected toward infrastructure needed to dispense ethanol fuels more widely.

Henry Kelly, acting assistance energy secretary for energy efficiency, testified that the administration is working with the ethanol industry to reform the tax credit.  “These incentives undoubtedly do need to be revisited. A lot has changed since the program was put in place; I think the producers themselves recognize that,” Kelly said.