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Brazil Urges US to Reduce Ethanol Tariff
SAO PAULO, BRAZIL - The Brazilian Sugarcane Industry Association (UNICA) has welcomed the U.S. Environmental Protection Agency's decision to maintain the Renewable Fuel Standard (RFS) at its current level, but urges Congress to reduce the imported ethanol tariff that increases the cost of gasoline for American drivers."It is the high price of gasoline -- not the Renewable Fuel Standard -- that is driving ethanol demand. Reducing the blending mandate would have no impact on ethanol demand in the short term and could jeopardize future production of advanced renewable fuels," says Joel Velasco, UNICA's Chief Representative in Washington. "The next step -- and one that Congress has yet to take -- is to reduce the distortive tariff on imported ethanol. This one-of-a-kind tax on a clean energy alternative serves only to punish American drivers by artificially inflating the price of gasoline at the pump," he added.
* "This one-of-a-kind tax on a clean energy alternative serves only to punish American drivers" |
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Joel Velasco, UNICA's Chief Representative in Washington.
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The Ethanol Import Tariff of 1980 imposed a US$ 54-cent per gallon tariff on imported ethanol. 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 6 billion gallons.
The 2008 U.S. Farm Bill reduced subsidies to the ethanol industry from US$ 51-cents per gallon to US$ 45-cents per gallon. However, the tariff on imported ethanol remains unchanged at US$ 54-cents per gallon. Lowering the subsidy without lowering the tariff keeps sugarcane ethanol, a less expensive fuel alternative, out of reach for many U.S. drivers.
The price distortion caused by the U.S. tax on less expensive imported ethanol is outlined in a recent report by the Farm Foundation, which notes:
"The U.S. tariff on imported ethanol introduces a potentially greater distortion than does the subsidy or mandate. Since high oil prices directly lead to higher corn prices, corn ethanol becomes much more expensive. Sugarcane-based ethanol is less expensive to produce than corn ethanol at any oil price, but the gap widens at higher oil prices. So removal of the tariff on imported ethanol would lead to the biofuel coming from the lowest cost source -- sugarcane -- which would reduce some pressure on corn prices and provide the United States with lower cost ethanol. Brazil has the potential to expand ethanol production substantially without increasing world sugar prices substantially, so imports down the road could be quite high."
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