Farmers, ethanol makers likely OK with no subsidy

June 21, 2011 - 3:45 PM
Ethanol Subsidy

In this photo taken March 2008, a grain transport truck is loaded up with corn in Curran, Ill. While a Senate vote to end a tax credit that's helped build the ethanol industry in the United States signals that the subsidy's days may be numbered, corn farmers and ethanol makers hope they can convince Congress to compromise and agree to preserve but reduce subsidies. But agricultural economists say the ethanol industry has grown up over the last few years and doesn't need the help, and they doubt farmers or their customers in the ethanol industry would be hurt much if the subsidy dies. (AP Photo/Seth Perlman)

CHAMPAIGN, Ill. (AP) — A tax credit that's helped build up the ethanol industry is set to expire at the end of the year and may go away sooner — but experts say the industry can get by without it.

The 45-cent-a-gallon credit goes to oil companies that blend ethanol into gasoline. The Senate voted to do away with it. That vote may be symbolic, but it's significant that lawmakers appear ready to let the credit expire rather than renew it.

Iowa State University economist Bruce Babcock says the industry will be fine because it relies mainly on a federal mandate to use alternative fuels like ethanol.

Industry groups hope for a smaller credit that would kick in occasionally. They also want some of the $5 billion saved directed toward industry infrastructure.