ITWASSOOTED: What's in the 2005 Energy Bill?

Sunday, April 30, 2006

What's in the 2005 Energy Bill?

On the gasoline front, the big ticket item is subsidies for ethanol—as usual. Archer Daniels Midlands (ADM) owns 7 ethanol plants with a production capacity of 1,103,000,000 gallons per year. The ethanol tax subsidy is 51¢/gallon, so that comes to $562,000,000/year. (Now there's a lobbying effort that paid off.) But we need energy independence, right? Unfortunately, using ethanol costs $7.87 to reduce fossil fuel use by the energy in a gallon of gasoline. And, no, most of that money does not turn into ADM profit, it's just used up making something that's too expensive. But they do turn a good profit while soaking up 1/3 of the ethanol subsidy. (There is hope for better ethanol.)
Now what about those hybrid-car tax breaks of $1700--$3000 per car?
Toyota figures it can get a $2400 subsidy on one of its great new hybrids that get about 50 mpg instead of about 25 mpg like most of us get. Driving 100,000 miles over the life of the car saves 2000 gallons so that's $1.20 per gallon saved. And that savings requires no nitrogen fertilizer. It also helps to jump start one of the best new technologies out there.

How much money will be spent on hybrid tax breaks? There's a limit of 60,000 cars per company; figure 6 companies and $2400 on average, that's $864,000,000. But that's for four years, 2006--2009, not per-year like the ADM subsidy. Why the limited budget on a much better deal? Because no American car companies can sell more than about 60,000 hybrids in that time. If they had expanded the program, Toyota, which will sell 100,000 hybrids in 2006, would not run out of tax breaks in August of the first year. These tax breaks encourage conservation, but like the ethanol subsidy, their purpose seems more to help corporations.