Subsidies to ethanol and nukes move forward due to Congressional spine malfunction

Written by dkoplow Posted: 12/9/2010 11:9 PM EST

Spineless subsidies part 1:  Ethanol

Ethanol blenders credit moves forward towards extension at current rates in the Senate.  Even more ludicrous since even without the excise tax credit subsidy we are still forced to buy the stuff at above market prices under the federal Renewable Fuel Standard.

Chuck Grassley makes a good point when he argues that you can't treat ethanol and oil subsidies differently:

The fact is, it's intellectually inconsistent to say that increasing taxes on ethanol is justified, but it’s irresponsible to do so on oil and gas production.

Grassley, a strong supporter of everything corn, uses this logic as a justification for keeping all subsidies.  Of course, the logic is even stronger in the other direction:  get rid of all of the subsidies -- to oil and gas as well as to ethanol.  Large fiscal and environmental benefits.  Such broad-based reform is difficult, to be sure.  But there have been successes.  New Zealand, for example, got rid of a wide swath of sectoral subsidies. 

Domestic producers will see little change in their subsidy capture once the Renewable Fuel Standard mandate premiums rise to offset the decline in excise tax credit subsidies.  Thus, Grassley's arguments about domestic energy security seem a bit hollow.  What then?  Perhaps it is the fact that without VEETC, producers can't export taxpayer subsidized ethanol to other countries.  Robert Rapier did a nice write-up of this issue on his R Squared blog.

Spineless subsidies part 2:  Nukes

In the House, legislation kicking in another $7 billion in loan guarantees for new nuclear reactors has passed.  It's another "opportunity" for taxpayers to participate in building what industry regularly claims to be a low-cost energy resource over the long-term.. Seems like the massive bailouts of the last two years have made people forget that a $7 billion investment into a private firm is hardly the norm throughout the history of the United States.

Think the money is safe?  I don't.  In other nuclear industry news:

  • The Oyster Creek Plant in NJ will close early rather than properly manage its water use (virtually every one of the billions of gallons of water used per day at reactors across the country is free).  
  • The EIA's capital cost estimates for new nuclear plants are up 37% since last year -- despite a recession that has dampened construction costs generally and reduced pressure on the nuclear power supply chain.
  • Westinghouse has provided its Chinese partners with key technical documents on its designs.  They, and all of the other vendors competing for market share in the heavily state-subsidized Chinese nuclear power sector, fully expect their IP to be appropriated and applied by domestic Chinese competitors in short-order.
  • Key nuclear plant owner Exelon acknowledges natural gas will be their first choice to fill new generation needs (page 1) and that not much new generation is needed right now anyway (page 2).  And, despite ignoring many of the embedded subsidies to the nuclear fuel cycle, Exelon's new ghg abatement curve is still placing new build nuclear well behind many other options (page 6).