Ethanol Tax Breaks Survive, but Vote May Have “Broken the Dam”

The Nicholas Institute for Environmental Policy Solutions at Duke University

While a bill to slash $6 billion in annual tax breaks for ethanol fuel failed to pass the U.S. Senate, it was still hailed by some lawmakers and analysts as a major break from the past.

It raises a philosophical quandary, says the Christian Science Monitor: “If Congress takes away a tax subsidy, should that count as a tax hike?” Nearly all Republican representatives have signed on to “The Pledge,” an agreement to never vote to raise taxes.

The bill to end ethanol tax breaks attracted votes from both sides of the aisle, with 34 Republicans and 6 Democrats voting for it—but it fell 20 votes short of passing. Nonetheless, some Democrats said the vote broke the dam, opening the way for the repeal of other tax breaks, such as larger ones for the oil industry.

Meanwhile, a bipartisan group of Midwestern senators introduced an alternative to ending ethanol subsidies. Instead of a flat-rate tax credit of 45 cents per gallon of ethanol-gasoline blend, the new bill would introduce a variable subsidy that would increase when oil prices drop, and fall when oil prices climb.

On Thursday, a wide majority in the Senate did vote in favor of another piece of legislation that would end tax breaks for U.S. ethanol as well as tariffs on foreign ethanol. However, the change is unlikely to go into effect immediately, Bloomberg reports, because the repeal of the subsidies and tariffs is attached to another piece of legislation that is unlikely to become law.”

Fuel Woes Cause Ripple Effects

A report by the United Nations Food and Agriculture Organization, the World Bank, the World Trade Organization, and seven other international agencies called for an end to subsidies for biofuels because they are driving up food prices. Prices for both food and fuel have been rising fast in India and China, leading the Chinese government to adjust banking rules to try to quell inflation.

Meanwhile, if oil prices remain high—above the current level of $120 for Brent crude—there is a risk of derailing the economy, into a double-dip recession, said Fatih Birol, chief economist of the International Energy Agency. “We all know what happened in 2008. Are we going to see the same movie?”

U.S. Secretary of Energy Steven Chu also warned high fuel prices are taking their toll. “We’re very cognizant of … the fact that higher gasoline prices so impede the economic recovery,” Chu said. One of the measures the Obama administration considered for bringing down gasoline prices, he said, was to tap the government’s Strategic Petroleum Reserve, intended for emergencies.

More details came in a report from Reuters, with anonymous sources saying that in the weeks before a recent, fractious OPEC meeting, U.S. and Saudi officials met to discuss “an unprecedented arrangement” of oil trades. In the proposed deal, the U.S. would send Europe low-sulfur, “sweet” crude from the strategic reserve, and in return receive more high-sulfur, “sour” crude from Saudi Arabia. The deal fell through, the sources said, because Saudi Arabia was unwilling to sell the oil at a discount.

Another Kind of Military Power

The U.S. military—the world’s single largest user of oil, and responsible for 80 percent of the U.S. government’s energy consumption—has now created an Operational Energy Strategy. “Before, it was assumed energy would be where you needed when you needed it,” a Pentagon official told National Journal. “The new strategy is to say that energy is a strategic good that enables your military force.”

Earlier this month, Gen. David Petraeus, the top U.S. commander in Afghanistan, called on the Army to use fuel more efficiently. In addition to efficiency, renewable energy will be a major priority for investments by the military over the next 20 years, according to a study by clean tech group Pike Research.

Nuclear Risks Still Weigh Heavily

Nuclear plants and nuclear waste disposal have been under increased scrutiny since Japan’s Fukushima disaster, which the government recently confirmed had led to a meltdown of three of the six reactors at the site.

Republicans called for Gregory Jaczko, head of the U.S. Nuclear Regulatory Commission, to step down after it was revealed he had “unilaterally” moved to stop work on the Yucca Mountain nuclear waste dump—a project for a long-term disposal site that has been in the works for decades, but that President Obama vowed in 2009 to end.

An independent review of temporary waste storage sites in the U.S. indicated that the threat of a release of radioactivity dwarfs the risk Japan faced. The report’s lead author, Robert Alvarez, said, “The largest concentrations of radioactivity on the planet will remain in storage at U.S. reactor sites for the indefinite future.”

Meanwhile, China’s nuclear power plants all passed a recent safety review by government inspectors, paving the way for the country to move ahead with its ambitious plans for expanding atomic energy.

Germany’s decision to phase out nuclear power by 2022 has turned the country into “a multibillion-dollar laboratory experiment” on how to roll out alternatives quickly to replace the quarter of Germany’s electricity that came from nuclear prior to Japan’s disaster. To enable renewables to take on a larger share of the load will likely require huge investments in expanding the grid and add a few thousand miles (several thousand kilometers) of additional power lines.

Are We Headed for a New Ice Age?

The Sun may go into hibernation for decades, a few new studies suggest, with a dramatic drop in the number of sunspots. Previous drops in the number of sunspots have been linked to cooler times on our planet, such as the “Little Ice Age” that struck medieval Europe.

Although some newspapers trumpeted that we’re approaching a “second little ice age,” New Scientist says the effect would actually be more like “a slightly less severe heatwave.” In fact, even if sunspots do go quiet, it would lower the Sun’s heating of Earth by at most 0.3 watts per square meter, whereas theman-made greenhouse effect is now about six times larger, at 1.7 watts per square meter.

The Climate Post offers a rundown of the week in climate and energy news. It is produced each Thursday by Duke University’s Nicholas Institute for Environmental Policy Solutions.

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