De Armas, Marcel

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Sustainable Development Law & PolicyVolume 7Issue 3 Spring 2007: Sustainable Energy Article 9Misleadingly Green: Time to Repeal the EthanolTariff and Subsidy for CornMarcel De ArmasFollow this and additional works at: http://digitalcommons.wcl.american.edu/sdlpPart of the Energy and Utilities Law Commons, Environmental Law Commons, and the Tax LawCommonsThis Feature is brought to you for free and open access by the Washington College of Law Journals & Law Reviews at Digital Commons @ AmericanUniversity Washington College of Law. It has been accepted for inclusion in Sustainable Development Law & Policy by an authorized administrator ofDigital Commons @ American University Washington College of Law. For more information, please contact fbrown@wcl.american.edu.Recommended CitationDe Armas, Marcel. "Misleadingly Green: Time to Repeal the Ethanol Tariff and Subsidy for Corn." Sustainable Development Law &Policy, Spring 2007, 25, 74.25 SUSTAINABLE DEVELOPMENT LAW & POLICYThe United States is recognizing the value and importanceof energy diversification, but it may also be creatinggreater environmental harm in the process.1 If Americadecreases its dependence on foreign oil it will create greater eco-nomic security for itself, reduce its current account deficit, pro-vide less financing for tyrannical leaders and terrorists withAmerican petro-dollars, and improve its environmental creden-tials.2 To reduce America’s craving for oil, the governmentencourages domestic ethanol production; the United States isbehind only Brazil, the world’s largest producer of ethanol, andcombined the two produce over 70 percent of the world’sethanol.3 Currently the U.S. domestic ethanol industry is grow-ing as a result of alternative fuels becoming politically popular,and the addition of a subsidy and tariff applied to ethanol.4 How-ever, arguably the ethanol tariff and subsidy do not provide anysubstantial environmental benefits for the United States or theworld.5The United States grants a 54 cent tax credit for each gallonof ethanol in a qualified mixture, which is a mixture of alcoholand gasoline.6 Additionally, the government provides extra pro-tection to the ethanol industry from foreign competition byimposing a 2.5 percent ad valorem tax and 14.27 cents per litertax on imported ethanol from countries with normal trade rela-tions.7 Proponents of the tariff argue that it protects and pro-motes a domestic industry, prevents the government fromsubsidizing foreign ethanol production, and encourages thedevelopment of cleaner technology.8On closer inspection, ethanol produced from corn may gen-erate as much pollution as the fossil fuels it replaces and maycreate new environmental problems.9 Due to the growingdemand for ethanol, farmers intend to plant an estimated 88 mil-lion acres of corn this year, the equivalent of covering Florida,Georgia, and South Carolina in corn.10 In addition, farmers willlikely reduce crop rotation and replant fallow fields, which willincrease the use of fertilizers and insecticides and result ingreater pollution run-off into our water system.11 To replace theUnited States’ current dependence on gasoline (140 billion gal-lons per year) would take approximately 350 million acres ofcorn (assuming 400 gallons per acre per year of ethanol).12 Sincegreater ethanol production results from plants with higher cellu-lose content, switchgrass or sugar cane should be used to pro-duce ethanol, and thus, minimize the amount of landcultivated.13Besides having a higher cellulose content, sugar cane offersseveral advantages over corn in the production of ethanol. First,unlike corn, farmers plant sugar cane once every four to sevenyears but harvest it yearly resulting in less soil erosion. Second,sugar cane requires less fertilizers since it can obtain some of itsnitrogen from the air. Third, the energy to power the transforma-tion from sugar cane to ethanol comes from burning the sugarcane’s waste product and not from oil, gas, or the electrical gridas with corn.14 Unfortunately with our current technology, evenif the United States produced most of its ethanol from sugar caneor other crops with higher cellulose content it still would requireexcessive amounts of land for cultivation.15To protect its environment the United States should elimi-nate the current ethanol tariff and subsidy, or at least focus thesubsidy on crops with high cellulose contents. In particular,eliminating the tariff on ethanol will promote the growth of anethanol distribution system because more imports would enterthe country increasing the market for ethanol.16 In addition,eliminating the ethanol tariff would increase the demand forsugar cane, and thus, reduce third world countries’ excess sup-ply. As a result, the price of sugar cane would increase providingadditional revenue to the third world sugar cane producers.17 Theadditional sugar cane revenue entering these third world coun-tries could foster the development of a middle class interested inprotecting their own environment and promoting sustainabledevelopment.18 Finally, the elimination of the tariff and subsidycould rekindle the trade negotiations for a Free Trade Area of theAmericas that stalled over agriculture and service industry dif-ferences between Brazil and the United States.19Even if America could end its thirst for foreign oil by usingcrops with higher cellulose content and allowing greater importsof ethanol from abroad, it still should encourage the develop-ment of alternative renewable energies to ensure its economic,national, and environmental security by ending its addiction toforeign oil.20 The United States needs to seek alternative renew-able energies, in addition to raising mileage standards for vehi-cles, creating a carbon tax or tradable carbon market todiscourage the burning of fossil fuels in the development ofethanol and other energy intensive industries, and end or refocusits subsidy to more efficient crops.21 These steps would allow forAmerican oil dollars to end up in the pockets of Americans andits neighbors to the North and South rather than in the pockets ofpotentially tyrannical regimes or hostile terrorists.22MISLEADINGLY GREEN: TIME TO REPEAL THE ETHANOL TARIFF AND SUBSIDY FOR CORNBy Marcel De Armas** Marcel De Armas is a JD candidate, May 2008, at American University Wash-ington College of Law.Endnotes: Misleadingly Green on page 7474SPRING 2007ENDNOTES: MISLEADINGLY GREEN continued from page 251 See 42 U.S.C. § 8801; Leaders, The Greening of America, ECONOMIST, Jan.27-Feb. 2, 2007, at 9 [hereinafter Greening America]; see also Brian R. Farrell,Fill ‘Er Up With Corn: The Future of Ethanol Legislation in America, 23 J.CORP. L. 373, 377 (1998). 2 See C. Boyden Gray & Andrew R. Varoce, Octane, Clean Air, and RenewableFuels: A Modest Step Toward Energy Independence, 10 TEX. REV. L. & POL. 9,10-11 (2005). 3 See RENEWABLE FUEL ASSOCIATION, RENEWABLE ENERGY SERVICES: AN EXAMI-NATION OF U.S. AND FOREIGN MARKETS, UNDER SECTION 332(G) OF THE TARIFFACT OF 1990 7 (2005) (submitted testimony of Larry Schafer), http://www.ethanolrfa.org/objects/documents/66/itctestimony041905.pdf (last visited Apr.5, 2007) [hereinafter RFA]. 4 See 26 U.S.C. § 40; HTSUS § XXII Ch. 99 (2007); HTSUS § IV Ch. 22(2007); Briefing Green America: Waking up and Catching up, ECONOMIST, Jan.27-Feb. 2, 2007, at 22-23; RFA, supra note 3, 1-3.5 See Greening America; supra note 1, at 9. 6 See 26 U.S.C. § 40(b). 7 See HTSUS § XXII Ch. 99 (2007); HTSUS § IV Ch. 22 (2007).8 See National Corn Growers Association v. Baker, 840 F.2d 1547, 1549 (Fed.Cir. 1988). 9 Cf. Europe, Burned by the Sun, ECONOMIST, Feb. 24-Mar. 2, 2007, at 64.  10 See Marianne Lavelle & Bret Schulte, Is Ethanol the Answer?, US NEWS,Feb. 4, 2007.11 Cf. Marcel De Armas, Changing Tides: The Need for New Legislation to Pre-vent Algae Blooms, 7 SUSTAINABLE DEV. L. & POL’Y 44, 44 (Fall 2006).  12 See Milton Maciel, Ethanol from Brazil and the USA, ASPO-USA/ENERGYBULLETIN (Oct. 2, 2006), available at http://www.energybulletin.net/21064.html(last visited Feb. 22, 2007).13 See Christopher Joyce, Study Backs Ethanol as Gasoline Substitute, NPR(Jan. 26, 2006), available at http://www.npr.org/templates/story/story.php?storyId=5173420 (last visited Feb. 20, 2007).14 See Maciel, supra note 12.15 See Lavelle & Schulte, supra note 10; Maciel, supra note 12. 16 See Lavelle & Schulte, supra, note 10; Cf. Rick Newman, The EthanolMirage: What is GM Talking About?, U.S. NEWS, Apr. 25, 2006, available athttp://www.usnews.com/usnews/general_ssi/content/money_business/MT/060425/the_ethanol_mirage_what_is_gm.htm (last visited Apr. 15, 2007). 17 See Gray & Varcoe, supra note 2, at 12. 18 See The Americas, Fuel for Friendship, ECONOMIST Mar. 3-Mar. 9, 2007, at44 [hereinafter Fuel for Friendship].  19 See Kevin C. Kennedy, The FTAA Negotiations: A Melodrama in Five Acts, 1LOY. INT’L L. REV. 121, 130-31 (2004). 20 See Greening America, supra note 1, at 9; Lavelle & Schulte, supra note 10.21 Lavelle & Schulte, supra note 10. 22 See Fuel for Friendship, supra note 18, at 43-44; Gray & Varcoe, supra note2, at 10.13 KOPLOW, supra note 8, at 24.14 KOPLOW, supra note 8, at 24.15 KOPLOW, supra note 8, at 24.16 KOPLOW, supra note 8, at 24.17 KOPLOW, supra note 8, at 24.18 KOPLOW, supra note 8, at 24.19 KOPLOW, supra note 8, at 24.20 U.S. Energy Info. Admin., U.S. Ethanol Fuel Consumption in Three PriceCases, 1995-2030, in ANNUAL ENERGY OUTLOOK 2006 (2005).21 KOPLOW, supra note 8, at 25.22 KOPLOW, supra note 8, at 25.23 KOPLOW, supra note 8, at 25.24 U.S. Internal Revenue Service, Fuel Tax Guidance; Request for Public Com-ments, Notice 2005-4, Jan. 10, 2005, available at http://www.biodiesel.org/news/taxincentive/IRS%20Guidance%20Notice%202005-04.pdf (last visitedApr. 6, 2007).25 See KOPLOW, supra note 8, at 25. 26 Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594 [hereinafterEnergy Policy Act].27 Energy Policy Act, id.28 SHIRLEY NEFF, REVIEW OF THE ENERGY POLICY ACT OF 2005 2 (2005), availableat http://www.cemtpp.org/PDFs/EnergyBillHighlights.pdf (last visited Apr. 6, 2007).29 Jason Grumet, Executive Director, National Commission on Energy Policy,Address to the U.S. Senate Committee on Commerce, Science and Transporta-tion (Nov. 15, 2005), available at http://www.energycommission.org/site/page.php?testimony=11 (last visited Apr. 7, 2007).30 See President George Bush, State of the Union Address (Jan. 23, 2007),available at http://www.whitehouse.gov/stateoftheunion/2007/index.html. 31 KOPLOW, supra note 8, at 22.32 KOPLOW, supra note 8, at 22.33 KOPLOW, supra note 8, at 22.34 KOPLOW, supra note 8, at 22.35 KOPLOW, supra note 8, at 22.36 KOPLOW, supra note 8, at 22.37 KOPLOW, supra note 8, at 22.ENDNOTES: CONSTRUCTION OF A FOOL’S PARADISE continued from page 2938 KOPLOW, supra note 8, at 22.39 KOPLOW, supra note 8, at 23 (citing David Hirschfeld, Math Pro, Inc. Tele-phone conversation with Doug Koplow, Aug. 14, 2006). 40 Ted Williams, Drunk on Ethanol, AUDUBON MAG., July-Aug. 2004, availableat http://magazine.audubon.org/incite/incite0408.html (last visited Apr. 6, 2007).41 Lawrence Reed, Running on Empty: The Failure of Ethanol, MIRS NEWSL.(News and Info. about Mich. Gov., MI), Aug. 10, 2001.42 Williams, supra note 40.43 DAN LOOKER, CHOICES FOR ETHANOL: A SUCCESSFUL FARMING SPECIALREPORT (2006), available at http://www.agriculture.com/ag/pdf/ChoicesForEthanol.pdf (last visited Apr. 7, 2007).44 Minnesota Department of Agriculture, Economic Impact of the EthanolIndustry in Minnesota, available at http://www.mda.state.mn.us/ethanol/plantsreport.pdf (last visited Apr. 6, 2007) [hereinafter Economic Impact].45 Economic Impact, id.46 Economic Impact, id.47 Minn. Pollution Control Agency, Ethanol in Minnesota, available athttp://www.pca.state.mn.us/programs/ethanol.html (last visited Apr. 6, 2007). 48 The Great Corn Rush: The Future of Ethanol, STAR TRIBUNE, Oct. 5, 2006, at 10.49 Daniel J. Vance, Minnesota Moonshine, CONNECT BUS. MAG. (2005), avail-able at http://www.connectbiz.com/stories.moonshine.html (last visited Apr. 11,2007).50 Cf. The Great Corn Rush, STAR TRIBUNE , Sept. 24, 2006, at A1 (chroniclingMinnesota’s increasing commitment to corn-based fuels).51 Vance, supra, note 49.52 Vance, supra, note 49.53 Vance, supra, note 49.54 Vance, supra, note 49.55 The New Rules Project, Ethanol Production - The Minnesota Model, avail-able at http://www.newrules.org/agri/ethanol.html (last visited Apr. 6, 2007)[hereinafter New Rules Project].56 New Rules Project, id.57 New Rules Project, id.58 American Fuels Act of 2007, S. 133, 110th Cong. (2007), available athttp://thomas.loc.gov/cgi-bin/query/z?c110:s.133: (last visited Apr. 11, 2007)[hereinafter American Fuels Act].

Misleadingly Green: Time to Repeal the Ethanol Tariff and Subsidy for Corn

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Misleadingly Green: Time to Repeal the Ethanol Tariff and Subsidy for Corn

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