WM150:  Ethanol Producers Get a Handout from Consumers

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WM150:  Ethanol Producers Get a Handout from Consumers

September 25, 2002 2 min read
Erin Hymel
Senior Policy Analyst

Title VIII of the Senate passed version of H.R. 4 calls for more fuel-ethanol subsidies.[1]

Ethanol is a corn-based additive that serves as a fuel oxygenate.[2] Fuel oxygenates are required in certain areas of the country with excessive carbon monoxide or ozone pollution as mandated by the Clean Air Act.[3]


Ethanol-blended fuels are already highly subsidized by taxpayers. This amendment is nothing but a "new gas tax."

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.[4] 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.[5]


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.[6]


Title VIII of the Senate passed version of H.R. 4 seeks to almost triple the use of ethanol-blended gasoline by 2012.[7]


A Heritage Backgrounder will be published next week, featuring Hymel's detailed analysis supporting these other findings:

  • Even more funds will be diverted from the Highway Trust Fund by the Senate imposed ethanol mandate.
  • Proper infrastructure does not exist to transport ethanol-blended fuels nationwide.
  • Ethanol is not environmentally friendly.
  • The Senate-imposed ethanol mandate amounts to "corporate welfare" for a handful of producers.
  • Ethanol producers also enjoy a "Safe Harbor" provision under the Senate-imposed ethanol mandate.
  • Mandating fuel ethanol makes no contribution to national energy security.


[1]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).

[2] 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.

[3] Ibid.

[4] Ibid, p. 9.

[5] Ibid, pp. 1-2.

[6] Senator Hillary Clinton (D-NY), Senate Congressional Record, p. S2570, April 11, 2002.

[7] 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.



Erin Hymel

Senior Policy Analyst