Many state governments are subsidizing construction of ethanol distilleries and pumps. On top of the federal ethanol mandate, federal law grants a 50-cent tax credit for each gallon of ethanol a blender (typically a gas station or distributor) buys. Both domestic and imported ethanol qualify for these subsidies.
Chinese ethanol, however, benefits from one additional U.S. subsidy. In 2004, the Export-Import Bank of the United States (Ex-Im), a federal agency that finances the exports of U.S. companies, subsidized construction of an “ethanol dehydration facility” in Trinidad and Tobago—exactly the sort of facility through which foreign ethanol passes duty-free into the U.S.
Increased ethanol production was a plank in the PRC’s 10th Five-Year Plan, running from 2001 to 2005. China exported more than 125 million gallons of ethanol in 2005, according to Reuters, more than triple its 2004 rate.
China is currently the largest exporter of ethanol after Brazil and the U.S. The PRC’s chief obstacle to expanded ethanol exports is its current crop shortage. To supply the raw material for its ethanol, the Chicago Tribune reports, the PRC is helping Cuba revitalize its sugar industry.
While state taxpayers are footing the bill for incentives for ethanol plants here at home, the Federal Government is subsidizing the Chinese ethanol industry.
Isn’t the $40 billion per month trade imbalance enough?