Wednesday, June 15, 2011

Senate votes to keep ethanol subsidies

Senate votes to keep ethanol subsidies

But further votes expected as administration promises to reform controversial tax breaks

By BusinessGreen staff 15 Jun 2011

The US ethanol industry was celebrating last night after the Senate voted to retain controversial tax credits and import tariffs for the sector.

However, the reprieve may prove short lived after Senate leaders signalled that they would stage further votes on reforming the $6bn tax break package in the coming months.

The Senate yesterday voted 59 to 40 to reject an amendment proposed by Republican Tom Coburn that would have axed the 45c a gallon ethanol tax credit and tariff on imports ahead of their scheduled expiry at the end of the year.

The proposal garnered some bi-partisan support, with 34 Republicans and a handful of Democrats voting to repeal the tax breaks.

Efforts to reform ethanol subsidies have brought together a wide coalition. Deficit hawk Republicans have argued that the US cannot afford the $6bn a year package of incentives, while environmental groups have called for an end to subsidies they blame for driving up food prices and delivering limited cuts in carbon emissions.

However, the measure was ultimately blocked by senators from farm states who support the subsidies and Democrats who are waiting for the Obama administration to put forward its own plan for reforming biofuel subsidies.

Speaking ahead of yesterday's vote, Democrat Majority Whip Senator Richard Durbin told reporters that further votes on the issue were likely and a compromise agreement that scales back subsidies for the sector could yet be reached.

Meanwhile, Democrat Majority Leader Harry Reid said that he was planning a second vote on ethanol subsidies as early as next week.

A spokesman for the White House told reporters that the administration remained committed to reforming ethanol subsidies in order to deliver savings, but insisted that it did not want to see an immediate halt to tax breaks that could harm the biofuel sector and lead to job losses.


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Biofuels are a wide range of fuels which are in some way derived from biomass.

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