September 25, 2002 | WebMemo on Energy and Environment
Title VIII of the Senate passed version of H.R. 4 calls for more fuel-ethanol subsidies.
Ethanol is a corn-based additive that serves as a fuel oxygenate. Fuel oxygenates are required in certain areas of the country with excessive carbon monoxide or ozone pollution as mandated by the Clean Air Act.
Ethanol is more expensive to produce than gasoline; yet ethanol currently receives a federal subsidy of 53 cents per gallon by means of the 5.3 cent per gallon exemption from the federal excise tax on motor fuels given to manufacturers of gasohol. Gasohol, also known as E10, is a blend of gasoline with no more than 10 percent ethanol. Gasohol constitutes 99.7 percent of the fuel ethanol consumed in the United States.
Mandating the increased use of ethanol-blended gasoline essentially amounts to a "new gas tax" as well as more taxpayer subsidies for the handful of companies currently producing ethanol.
Title VIII of the Senate passed version of H.R. 4 seeks to almost triple the use of ethanol-blended gasoline by 2012.
A Heritage Backgrounder will be published next week, featuring Hymel's detailed analysis supporting these other findings:
On August 2, 2001, the House passed H.R. 4 (Securing America's Future Energy Act of 2001), and on April 25, 2002, the Senate incorporated S. 517 (Senate Amendment 2917) into H.R. 4, Title VIII (Energy Policy Act of 2002).
 Brent D. Yacobucci and Jasper Womach, "Fuel Ethanol: Background and Public Policy Issues," CRS Report for Congress Order Code RL30369, Congressional Research Service, summary, February 21, 2002.
 Ibid, p. 9.
 Ibid, pp. 1-2.
 Senator Hillary Clinton (D-NY), Senate Congressional Record, p. S2570, April 11, 2002.
 Mark Holt and Carol Glover, "Omnibus Energy Legislation: H.R. 4 Side-by-side Comparison," CRS Report for Congress Order Code RL31427, Congressional Research Service, p. 7, June 7, 2002.