New Mexico – U.S. Senator Jeff Bingaman said a new Congressional Budget Office (CBO) report suggests that American taxpayers might be over-subsidizing corn-based biofuels, even while failing to provide any tax credit for algae-based fuels, which hold great promise for the nation's environment and energy security, and for Southern New Mexico's economy.
Current law provides a 45-cents-per-gallon credit to producers of corn-based ethanol. This year alone the tax credit - called Volumetric Ethanol Excise Tax Credit or VEETC -- will cost taxpayers $7.6 billion. That high price tag makes the VEETC by far the tax code's largest subsidy for renewable energy. And that is on top of the $41.2 billion in current dollars that U.S. taxpayers have already spent since 1980 on tax-based subsidies for ethanol.
The CBO report, prepared at Bingaman's request, shows that based on carbon emissions avoided, taxpayers are providing a far higher subsidy for corn-based ethanol than for "advanced" biofuels - fuels that are made from renewable biological resources such as plants. Rather than to reflexively extend VEETC when it expires on December 31, Bingaman said the issue should be closely studied as Congress considers changes to energy tax incentives in the coming weeks.
Bingaman said the corn-based ethanol industry is now "mature" - meaning it doesn't need to be advanced by this costly tax incentive. Bingaman said now is the time to consider encouraging the development of other promising biofuels, such as those made from algae and sorghum.
"In determining whether to extend the tax credit for corn-based ethanol, Congress should weigh all factors, including the credit's very high cost to taxpayers, environmental and energy security benefits; production mandates, and market prices," Bingaman said. "I believe we should shift our focus to other cleaner biofuels."
Large areas of New Mexico are considered ideal for developing algae-based biofuels because of flat desert conditions, the high level of sunlight, and the large amount of underground salt water. Drought resistant crops, such as sorghum, are also well-suited for our climate. In addition, state policies have aggressively targeted renewable energy goals and worked to bring clean and green manufacturing to New Mexico.
Congressman Harry Teague is the lead sponsor of a House bill (H.R. 4168) that would extend the cellulosic tax credit to algae-based fuels, such as those in development by Sapphire Energy, Inc., in Las Cruces. In the Senate, Bingaman is a cosponsor of similar legislation (S.1250).
Bingaman is Chairman of the Senate Committee on Energy & Natural Resources. He is also a senior member of the tax-writing Senate Finance Committee, and Chairman of its Subcommittee on Energy, Natural Resources and Infrastructure.