Bipartisan Coalition Introduces Legislation to Slow Rising Food Prices by Eliminating Outdated Subsidies for Ethanol

Jul 16, 2009

(Washington, D.C.) – Led by U.S. Representatives Joseph Crowley (NY-7) and Rep. Mary Bono Mack (CA-45), a bipartisan coalition of members introduced a bill this week to slow rising food prices by redirecting subsidies for gasoline refiners who use corn ethanol to the producers of “second generation” biofuels made from waste products.  The Affordable Food and Fuel for America Act (H.R. 3187) will phase out a $5 billion-a-year subsidy for gasoline refiners who blend corn ethanol into gasoline, eliminate a tariff on imported biofuels, and increase funding for the cellulosic biofuel production tax credit. 

“With the cost of food rising during these tough economic times, Congress needs to prioritize the production of second generation fuels that do not pit our energy security needs against our food security needs,” said Congressman Crowley. “In light of ethanol’s five-fold growth in this decade alone, it no longer makes sense to keep giving gasoline refiners $5 billion-a-year in federal tax dollars to blend corn ethanol.  A surge in ethanol production from corn is one of many factors contributing to volatile commodity prices and a sustained period of food inflation.  Accelerating the development of second generation biofuels at home and abroad will help prevent rising commodity and food prices.  Our bill will help to address rising food prices at home and abroad by investing those incentives in second generation biofuels and increase funding to critical anti-hunger assistance programs across the nation and in New York City.”

“It is time we move beyond corn-based ethanol and invest in promising new technologies that will lead us toward a more sustainable energy future,” said Congresswoman Bono Mack.  “For too long, billions of taxpayer dollars have been used to incentivize corn ethanol, without getting needed results and causing numerous unintended consequences, like rising food prices, that don’t benefit our economy or our environment.  This legislation will direct these incentives to second generation biofuels, taking a strong step toward meeting Americans’ needs for more affordable, more sustainable energy and food supplies.”

The bill has been endorsed by leading organizations including: Grocery Manufacturers Association, Consumer Federation of America, American Bakers Association, American Frozen Food Institute, American Meat Institute, The Hispanic Institute, Hispanic Alliance for Prosperity Institute, International Dairy Foods Association, National Cattlemen’s Beef Association, National Chicken Council, National, Council of Chain Restaurants, National Meat Association, National Milk Producers Federation, National Turkey Federation, and Snack Food Association.

Chris Waldrop, Consumer Federation of America: “Consumer Federation of America supports sustainable energy policies that accelerate the development of “second generation” biofuels that do not pit food needs against energy needs.  CFA strongly supports the Affordable Food and Fuel for America Act as a sensible path to shift us in that direction.  Through a gradual reduction in the Volumetric Ethanol Excise Tax Credit and the import tariff on imported ethanol, this legislation would encourage a steady shift towards the use of second generation biofuels and reduce the pressure to use a basic food stock for fuel. We applaud these efforts.”

Pamela G. Bailey, President and CEO, Grocery Manufacturers Association (GMA): “GMA strongly supports the production of sustainable biofuels.  I applaud Congressman Crowley and Congresswoman Bono Mack, along with their fellow cosponsors, for crafting this good, bipartisan, sensible and responsible piece of legislation.  By gradually shifting subsidies away from conventional biofuels toward second and third generation biofuels, the Affordable Food and Fuel for America Act will help accelerate the development of advanced fuels that simultaneously help to address our food, energy and climate security needs.”

Gus West, President, The Hispanic Institute: “The Hispanic Institute proudly supports the “Affordable Food and Fuel for America Act” and its intent to modernize and advance our country’s biofuels policies.  By shifting subsidies from conventional biofuels to the biofuels of the future, this legislation places us on a path to both food and energy security.”

The National Cattlemen’s Beef Association (NCBA): “The National Cattlemen’s Beef Association (NCBA) commends Representatives Joseph Crowley (D-NY) and Mary Bono Mack (R-CA) for introducing critical legislation to level the playing field for corn supplies.  The Affordable Food and Fuel for America Act will phase out government support for corn-based ethanol over five years and encourage the commercial development of second generation biofuels.  After 30 years of support, corn-based ethanol is still reliant on government support to be commercially viable.  It is time to allow it to compete on a level playing field, and to stop propping up one industry at the expense of another.” 

Joel Brandenberger, President, National Turkey Federation: “We commend the leadership of Reps. Joseph Crowley, D-N.Y., and Mary Bono Mack, R-Calif., for introducing legislation that is absolutely critical to both producers and consumers of food by controlling volatile commodity markets and ensuring all users of feed grains compete on a level playing field.”

Background on the Affordable Food and Fuel for America Act:

The Affordable Food and Fuel for America Act will extend the life of the Volumetric Ethanol Excise Tax Credit (VEETC) until 2013 but will reduce the tax credit for gasoline refiners and the tariff on imported biofuels to 28 cents in 2009, 21 cents in 2010, 16 cents in 2011, 11 cents on 2012, and 7 cents in 2013. Both the 45 cent-per-gallon corn ethanol tax credit and the 54 cent-per-gallon tariff on imported biofuels will expire at the end of the 111th Congress.

The VEETC was established in 2004 to replace a long-standing exemption for corn ethanol from the federal highway tax. Since 1978, federal law has provided $28 billion in tax benefits and subsidies for the corn ethanol industry. The tariff was created in 1980 to protect the corn ethanol industry but now limits imports of less costly biofuels, such as sugar ethanol from Brazil.