Ag Policy Blog

Brazilian Ethanol Tariff Postponed

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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The Brazilian government postponed a decision on Wednesday to impose tariffs on ethanol imports from the United States, to allow for a closer examination of the issues by another agency.

As of March, Brazil was the top export target for U.S. ethanol producers who shipped 36.7 million gallons that month, according to government trade data compiled by the Renewable Fuels Association this week. The March numbers, however, represent a 28% drop from February's record exports to Brazil.

U.S. producers exported 146.4 million gallons to Brazil in the first quarter, amounting to about 40% of U.S. exports this year.

The Brazilian Sugarcane Industry Association, or UNICA, has been pressing Brazil's government to place a 16% tariff on imported ethanol while other groups are calling for a tariff as high as 20%.

On Wednesday, the Executive Management Committee of Brazil's Chamber of Foreign Trade, or CAMEX, decided to postpone a decision until June. This will allow another Brazilian technical group to examine the proposal.

The Renewable Fuels Association, Growth Energy and the U.S. Grains Council issued a joint statement on Thursday, expressing hope the Brazilian government may backtrack on the proposal.

"We commend the Executive Committee of CAMEX for deciding to postpone the chamber's proceedings on the recent proposal from Brazilian sugarcane and ethanol producer associations to reinstate an ethanol import tariff in Brazil," the groups said in a statement.

"This is a critically important issue that will impact Brazilian consumers and commodity markets across the globe. It demands very thoughtful consideration. We strongly believe that re-imposing an import tariff on U.S. ethanol would only lead to increased fuel prices, and endanger the positive and hard-won cooperative trade relationship between our two countries concerning the production, use and global trade in ethanol.

"We look forward to continuing our dialogue with government officials and stakeholders in Brazil, in hopes of encouraging our friends from the South to not turn their back on the progress our two countries have made in building a trade relationship that encourages industry growth, expands markets and provides low-cost fuel to consumers in Brazil and the U.S."

RENEWABLE TAX INCENTIVES

Also this week, Sen. Ron Wyden, D-Oregon, re-introduced the "Clean Energy for America Act" designed to extend tax incentives for renewable fuels.

So far the bill has only Democratic co-sponsors including Sens. Chuck Schumer, Debbie Stabenow, Maria Cantwell, Bob Menendez, Tom Carper, Ben Cardin, Michael Bennet, Dick Durbin, Amy Klobuchar, Sheldon Whitehouse, Jeanne Shaheen, Kirsten Gillibrand, Chris Coons, Brian Schatz, Martin Heinrich, Angus King, Tim Kaine, Cory Booker, Tammy Duckworth, Maggie Hassan, and Catherine Cortez Masto.

As an aside, Booker, Wyden, Gillibrand, Menendez and Whitehouse were among the 11 Democratic senators who voted no on the confirmation of Sonny Perdue to head USDA.

According to a one-page summary of the bill, the legislation essentially would consolidate some 44 existing renewable energy credits across a number of industries.

"More than half are too short-term to effectively stimulate investments, while also providing different subsidies to different technologies with no discernable policy rationale," according to the summary.

The new tax incentives, according to the legislation, would longer-term and performance based. Performance would be based on a fuel's greenhouse gas reduction performance.

The incentives would include a "technology-neutral tax credit" for domestic production of clean transportation fuel open to all fuels. It would provide up to a $1 per-gallon tax credit.

Both Growth Energy and the Renewable Fuels Association came out in support of the legislation.

Growth Energy Chief Executive Officer Emily Skor said in a statement that the measure would in particular bring "long-term tax certainty to advanced and cellulosic biofuels" which has faced a number of technological challenges and a need for investment.

RFA President and Chief Executive Officer Bob Dinneen said in a statement there are advantages to creating a technology-neutral tax credit.

"By reforming the existing tax credit into a technology neutral incentive, it will help stimulate investment among a wider range of production technologies and help promote the growth of the second generation biofuels industry," he said.

In recent years the volumetric blenders tax credit for the corn-based ethanol industry was eliminated, as the industry has reached a point of maturity.

Todd Neeley can be reached at todd.neeley@dtn.com

Follow me on Twitter @toddneeleyDTN

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