Thursday, May 11, 2006

The US ethanol tariff

In the US, imported ethanol attracts both a 2.5% tariff and a 54 cent/gallon tariff. If it did not, Brazil could be a substantial exporter to the US since their sugarcane derived ethanol is more efficiently produced than processes using corn. (NY Times, rego may be required). Ethanol is useful as a partial gasoline substitute but also as a replacement for the additive MTBE which contaminates groundwater.

Even President Bush is now talking about dropping the tariff, a sign that he has finally read the 22nd amendment and has realised he doesn't have to suck up to Iowa corn growers before primaries any more. This article claims five million US vehicles are ethanol ready although their manufacturers never publicised it. The Wall Street Journal recently called for the tariff's abolition - the original is now behind the paywall but an excerpt is here.

However, I wonder if hidden in the vastness of the midwestern corn lobby effort is a fear that Cuba, a major cane producer, could get in the ethanol business and somehow make money out of the US ethanol market via third countries, thus enraging the antiCastroites that cling on in Florida in an equally unlikely fashion as does Castro himself.
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