Renewable Fuels Association (RFA)

112,000 jobs at risk without ethanol tax incentive extension

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Source: Renewable Fuels Association (RFA)

Extending the tax incentives for ethanol, regardless of feedstock, would save 112,000 jobs from being lost. That is nearly 30% of the 400,000 jobs ethanol production helps support today. Failure to extend the Volumetric Ethanol Excise Tax Credit (VEETC) would reduce U.S. ethanol production capacity by 38% and eliminate tens of thousands of jobs in rural communities already hemorrhaging employment opportunities, according to a new report .

“Ethanol has provided an unparalleled, value-added opportunity for agriculture and rural America,” said Renewable Fuels Association President Bob Dinneen. “Supporting nearly 400,000 jobs, America’s ethanol industry is building a strong foundation for a robust renewable fuels industry in this country. Failure to provide the kind of assurance investors require to continue building out this industry by extending the tax incentives would be shortsighted, relegating future generations to a reliance on both foreign oil and foreign renewable fuels.”

The RFA is advocating for a long term extension of VEETC, the Small Producers Tax Credit, the Cellulosic Ethanol Tax Credit, and the offsetting tariff on imports. According to the study “Importance of the VEETC to the U.S. Economy and the Ethanol industry,” failing to extend the tax incentive would idle 4.56 billion gallons of production, in addition to the ~1 billion already idled, based upon the 2010 expectation of 12 billion gallons of domestic ethanol production.

The tax incentives are an important policy complimenting the Renewable Fuels Standard (RFS) and ensuring the fuels used to meet that requirement are sourced domestically.

“The question is not whether ethanol will be used – the Renewable Fuels Standard requires it. The question is, from where will the ethanol come?” asked Dinneen. “Extending the tax incentives ensures that both the grain-based as well as cellulosic sources of ethanol needed to meet the RFS are produced domestically.”

“Without tax incentives to support domestic production, the Renewable Fuels Standard by itself will simply allow increased US dependence on imported biofuels – a result that will undermine the US ethanol industry and contribute to additional job losses,” said Dinneen.

In a climate of economic uncertainty and growing budget deficits, the tax incentives for ethanol are one program that routinely pays for itself. In 2009, the outlay from the Federal Treasury for VEETC and the Small Producer Tax Credit totaled $5 billion. By comparison, the Federal Treasury saw $8.4 billion in increased revenues from the ethanol industry – a net positive return of $3.4 billion. This doesn’t include tens of billions in increased state and local taxes, increases in household income, and savings resulting from fewer imports of oil.

Key consequences that could be avoided by extending tax incentives for ethanol include:

  • Loss of more than 112,000 jobs in all sectors of the economy.
  • Reduction of domestic ethanol production by 38%.
  • Increased reliance on imported motor fuels.
  • Loss of investment in and support for second-generation biofuels.
  • Reduction of household income by $4.2 billion (2009 dollars)

The report, entitled “Importance of the VEETC to the U.S. Economy and the Ethanol Industry,” was prepared by economist John Urbanchuk, Technical Director at ENTRIX, and commissioned by the RFA.

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