WASHINGTON – By stressing energy independence and environmental benefits of federal requirements for a huge upswing in the use of biofuels in motor vehicles, President George W. Bush and congressional leaders are almost ignoring the cost, The Washington Post reports.
Discussions have been few and far between about how to fund the subsidies and other incentives involved with meeting the new biofuels targets. By extending the current tax credits, grants and loan guarantees, U.S. taxpayers would shell out $140 billion more during the next 15 years. And Congress is considering new proposals that could jack that up to $205 billion.
Neither Congress nor the White House has laid out how those costs square with other budget priorities. “We aren’t paying enough attention to the green lost to the Treasury … in stimulating ethanol to make the environment greener,” Robert D. Reischauer, president of the Urban Institute and former director of the Congressional Budget Office, told the newspaper. “Before we leap to extend subsidies for alternative fuels or ethanol, we need to take a hard look at their impact on future deficits.”
The largest particular expense would be continuing the 51-cent-a-gallon ethanol tax credit, which currently expires in 2010. The federal government would pay an additional $131 billion through 2022 under a fuel mandate that recently passed the Senate Energy and Natural Resources Committee.
How to pay for the ethanol tax breaks and incentives has been troubling for the Democrats, who also want to reduce the federal deficit and extend some of the Bush tax cuts that expire in 2010. Meanwhile, the American Meat Institute, along with dairy, poultry and pork organizations, is concerned about the increasing food prices because of rising corn prices.
Many economists say these ethanol tax breaks and incentives are not the way to go about reducing American dependence on foreign oil.
“If the aim is to reduce gasoline consumption, the best way is to raise the gasoline tax,” Ian Parry, economist at Resources for the Future, told the newspaper.
“That exploits all potential options for saving fuel – driving less, increasing vehicle fuel economy over the longer run, and creating more demand for hybrids and alternative fuels like ethanol. Lowering the price of ethanol only exploits the last of these responses, so it is far less cost-effective than raising gasoline taxes,” said Parry.