Ethanol Makers in Brazil Lambast US for Subsidies and Tariffs on the Fuel

EthanolReacting to newly introduced legislation from American senators Chuck Grassley (Republican from Iowa) and Kent Conrad (Democrat from North Dakota) extending subsidies to corn ethanol and the 54-cents per gallon tariff on imported ethanol – particularly sugarcane ethanol from Brazil – for five more years, the Brazilian Sugarcane Industry Association (UNICA) issued the following statement. 

The statement should be attributed to Joel Velasco, UNICA’s Chief Representative in North America.

Sugarcane ethanol from Brazil is an advanced, low-carbon fuel that could help the United States cut dependence on Middle East oil, save money at the pump and improve the environment as both the U.S. Environmental Protection Agency and the California Air Resources Board have recognized. 

However, Congress has erected an elaborate system of subsides and trade barriers that make sugarcane ethanol more expensive and nearly unavailable in the U.S. As a result, Americans cannot fully benefit from this clean, more affordable alternative. 

It is ironic that Congress allows oil from nations hostile to America into the country tariff-free, but is more than willing to punish clean energy from Brazil, a long-standing democratic ally.

Thanks to generous government incentives and consumption mandates over the last 30 years, the United States has built the world’s largest ethanol industry, producing more than 12 billion gallons of corn ethanol per year. 

Brazil is the world’s second-largest producer with about 6 billion gallons, without government subsidies.  Americans and Brazilians share the same goal to reduce dependency on fossil fuels, and Brazilians are proud to have replaced half of their gasoline needs with sugarcane ethanol.

Unfortunately, the world’s #1 ethanol producers – American producers who comprise what is according to President Obama’s Biofuels Working Group  a “well established” and “mature” industry – appear determined to avoid healthy market-based competition. At a time when U.S. ethanol exports are at a record high, the industry continues to ask for government bailouts, this time to the tune of US$ 30 billion.

Senator Grassley, in his statement introducing the bill, claimed the legislation would help replace oil from countries like Venezuela.  In fact, the loophole for importing duty-free ethanol through the Caribbean Basin Initiative actually encourages those countries to use more of Hugo Chavez’s petroleum to power ethanol dehydration facilities since they are net energy importers.  In this case, protectionism is not helping America’s energy security.

Consumers win when businesses have to compete in an open market, because competition produces higher quality products at lower costs.  The same principle holds true for the renewable fuels market.  Competition will create a race to the future and generate better options for American consumers.

Earlier this month, Brazil took an important first step to build an open and global biofuels marketplace by eliminating its tariff on imported ethanol through the end of 2011. UNICA is asking the Brazilian government to make the tariff elimination permanent if Congress will do the same and drop the U.S. tax on imported ethanol.

After 30 years of subsidies and import taxes, American consumers deserve clean fuels at a market-based price.  Brazilian sugarcane ethanol producers are ready to compete.  What about American corn ethanol producers?

The Brazilian Sugarcane Industry Association (UNICA) represents the top producers of sugar and ethanol in the country’s South-Central region, especially the state of Sao Paulo, which accounts for about 50% of the country’s sugarcane harvest and 60% of total ethanol production.

UNICA develops position papers, statistics and specific research in support of Brazil’s sugar, ethanol and bioelectricity sectors. In 2009, Brazil produced an estimated 605 million metric tons of sugarcane, which yielded 33 million tons of sugar and 26 billion liters (6.9 billion gallons) of ethanol.

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