Part III of Q & A with UNICA's Joel Velasco: "Cutting Through the Clutter"

In the final part of my 3-part interview with UNICA's Joel Velasco, we discuss subsidies, trade protection, tariffs, and the future of ethanol.

ROBERT GLUCK:  Your article “Setting the Record Straight”, ends with this statement:

“Cutting through the clutter of the charges and counter charges, let me end with a simple point. I’d like to see sugarcane ethanol available as an alternative and competing in an open market alongside corn ethanol, biodiesel and other renewable fuels. Isn’t expanding the market for clean, renewable fuels and doing it in a way that benefits consumers a goal we can all get behind?” 

Please answer your own question and include reasons why you think some cannot get behind this.

JOEL VELASCO:  I’m not sure why – after 30 years of subsidies and trade protection – there are still some voices who fear an open market with healthy competition for renewable fuels. 

I can only assume it’s because change and competition can be daunting, and it can be easier sometimes to accept the status-quo. But when the status-quo is costing taxpayers US$6 billion each year and hurting consumers at the pump with volatile gas prices, it is clearly time for Congress to remove a 30 year-old band-aid on a healthy and thriving industry. 

Expanding the market for clean, renewable fuels and doing it in a way that benefits consumers is not only the smart thing to do, it’s the responsible thing to do as well.

Earlier this year, Brazil took an important first step by eliminating its own tariff on imported ethanol through the end of 2011. UNICA is urging the Brazilian government to make the tariff elimination permanent if Congress will do the same and drop the U.S. tax on imported ethanol.

RG:  You said: “Let’s end the subsidies, drop the trade protection and compete in an open market.” Assuming you meant subsidies are given to the corn ethanol industry in the United States by the U.S. government, does the Brazilian government provide any subsidies to sugarcane ethanol producers in Brazil? Why or Why not? 

JV:  No.  As mentioned previously, Brazil’s sugarcane ethanol industry has operated without government subsidies and without price, supply, or demand controls for well over a decade. For a more detailed analysis, I recommend reading our post debunking Growth Energy’s claims about the Brazilian industry here.

RG:  Tariffs and trade protection goes way back in American and world history. How do we know which ones are beneficial and which ones are not?

JV:  I’d suggest reading the debate among our Founding Fathers, particularly Alexander Hamilton. As I recently told a blogger (Robert Rapier at the Energy Collective), “People love to criticize subsidies as all bad. That is not necessarily the case. Alexander Hamilton made a compelling case for subsidies for nascent industries in 1790. The problem is when the subsidy spigot is not turned off after its done its job.”

In the case of ethanol, I think it’s pretty clear. The U.S. is the world’s largest – by a factor of two – producer of ethanol. In fact, the U.S. is even exporting ethanol all around the world. Clearly this thirty-year old industry is no longer nascent. As a 36-year-old-taxpayer I’d like to stop footing their bills.

RG:  How is Brazil doing when it comes to sugarcane ethanol? Other renewables?

JV:  Many observers, including supporters of the ethanol import tax here in the U.S., point to Brazil’s success with sugarcane ethanol as a case study for seeking to expand the use of renewable fuels.

Brazil has achieved greater energy security thanks to its focused commitment to developing a competitive sugarcane industry and making ethanol a key part of its energy mix. Here are some examples of how this sweeter alternative has made a positive impact in Brazil:

• More than half of Brazil’s gasoline needs have been replaced with sugarcane ethanol – making gasoline the alternative fuel.        

• Peer-reviewed study estimates the use of sugarcane ethanol in Brazil has reduced that country’s greenhouse gas emissions by some 600 million metric tons of carbon dioxide since 1975.

• Economists estimate that Brazil’s total economic output is 35% higher today than it would have been without the country’s focus on diversified energy production – from offshore oil to sugarcane ethanol production.

Brazilian consumers have a choice at the pump when they fuel their cars and most are choosing sugarcane ethanol for its price and environmental benefits, providing the country with a more secure energy future.

Americans could also benefit from sugarcane ethanol if Congress lets the 54-cents-per-gallon tariff on imported ethanol expire at the end of this year, and instead opts to promote competition and diversify energy sources.

RG:  How do you see this controversy unwinding in the future?

JV:  I’ll defer to my favorite Winston Churchill quote, “The United States invariably does the right thing, after having exhausted every other alternative.”

RG:  What is in the future for UNICA?

JV:   We will continue to work to expand consumer access to clean, affordable, renewable energy, be it sugarcane ethanol, bioelectricity and maybe even other drop-in biofuels that can replace diesel, jetfuel and much more. One thing is for sure: we know that when businesses compete, consumers win. That’s the sweet promise of the Brazilian sugarcane industry.

You can read the previous segments of my interview with Joel Velasco here:

• Part I of Q & A With UNICA's Joel Velasco: "UNICA's Mission and the Fiery Biofuel Industry"

• Part II of Interview With UNICA's Joel Velasco: Corn vs. Sugarcane Ethanol 

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