Federal ethanol subsidies should be phased out gradually, former Minnesota governor Tim Pawlenty said in announcing his candidacy for the Republican nomination for president at a rally in Des Moines, Iowa, this week. “The truth about federal energy subsidies, including federal subsidies for ethanol, is that they have to be phased out,” Pawlenty said.  “We need to do it gradually.  We need to do it fairly.  But we need to do it.”

Pawlenty’s comment seemed to reflect the possibility that the federal Volumetric Ethanol Excise Tax Credit (VEETC), which will cost the U.S. Treasury about $6 billion this year, will be phased out rather than eliminated at the end of this year, when it is currently scheduled to lapse.  Even ethanol backers, such as Iowa’s Senator Charles Grassley (R), are willing to accept a phase out in exchange for federal subsidies for blender pumps and other ethanol-related equipment.

Meanwhile, Secretary of Agriculture Tom Vilsack, who is a former governor of Iowa, strongly defended ethanol in a speech to the Chicago Council on Global Affairs, which recently urged the U.S. government to end its support for biofuels on the grounds that the use of feedgrains for fuel is driving up the cost of food.

“With respect to food prices,” Vilsack said, “corn-based ethanol does not deserve the scapegoat reputation that folk often attend to assign it,” he said.  “During the great run-up in food and commodity prices in 2007 and 2008, biofuel production played only a minor role–accounting for about 10 percent of the total increase in global prices.”

 

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