Should the Ethanol Mandate, Tariffs and Subsidies Be Allowed to Continue

The US Government boosts 

ethanol production through

tariffs and subsidies

Photo Credit: bits4beats / pixabay.com

Talks on the allocation for ethanol tariffs and subsidies will heat up once more as they are due to expire this year. With the current high prices of food products as a result of the nearly 40% allocation of corn for producing ethanol, will it be wise to remove the mandate to reduce this? With policy makers and concerned groups lobbying for the removal of the tariffs and subsidies on ethanol, what would happen if they are allowed to continue?

Allowing tariffs and subsidies to go on may hasten the development of a cheaper and viable ethanol. There might be major advances in the production of cellulosic ethanol that may eventually lead to a wide scale production without it competing with food production. Furthermore, the country’s future dependence on imported ethanol will be alleviated.

However, although ethanol production and development currently create jobs, the agriculture industry especially the meat sector is being affected. Because corn, a major source of animal feeds, increase in price because of high demand in ethanol production, the price of meat also increases. As a result, some poultries cut down jobs and eventually close down. Eventually, other commodities also increase in prices because of the high prices of food.

What if the subsidies, tariffs or even the mandate is discontinued?

Stopping the implementation of tariffs and subsidies on ethanol may prove to be a setback for the ethanol industry. Young firms geared for ethanol development and production will have a hard time. In effect, there may be a slow down or, even worse, a cessation in ethanol development and production and those working in this sector will lose their jobs.

When this happens, imported ethanol will now be able to penetrate the economy easier. Gas prices may be slightly lower. However, this might create a dependence on imported ethanol in the future making the country susceptible to global ethanol price changes.

On the other hand, the allocation for ethanol tariffs and subsidies can now be focused on other things. Corn prices will go down and, as a result, food prices will also go down. Much more, the government will not spend as much - at least not until a new and more viable alternative fuel comes up.

The debate on whether to stop allocating funds on ethanol tariffs and subsidies is complex. Further studies and debates should be made in order to determine which will be more beneficial. The question here is whether we should invest more in the future although it relies on developing the alternative fuel industry way further. Or should we stop investing in it and focus more on the pertinent problems at present.