Brazilian Sugarcane Industry Urges U.S. Congress To Reduce the Tariff on Ethanol
August 11, 2008On August 7, the Brazilian Sugarcane Industry Association (UNICA) urged the U.S. Congress to reduce the imported ethanol tariff that increases the cost of gasoline for American drivers. Joel Velasco, UNICA’s Chief Representative in Washington, stated that the high cost of gasoline is driving up the demand for ethanol. He wants to see Congress “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.”
The 2008 U.S. Farm Bill reduced subsidies to the ethanol industry from US $0.51 per gallon to US $0.45 per gallon. However, the tariff on imported ethanol remained unchanged at US $0.54 per gallon.
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.”
On June 4, a bipartisan group of U.S. senators introduced the Imported Ethanol Parity Act of 2008 (S. 3080), a measure aimed at reducing the tariff on imported ethanol. The legislation is now in the hands of the Senate Committee on Finance. Rep. Mark Udall (D-Colo.) introduced similar legislation, H.R. 6324, on June 19; that bill has been referred to the House Committee on Ways and Means.
Related story:
Bipartisan Measure Introduced To Reduce Tariff on Imported Ethanol To Help Lower Gas Prices
