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Minnesota State Audit Encourages Corn Ethanol Subsidy Cut

April 23, 2009

Recently, the Minnesota Legislative Auditor’s Office advised the legislature to cut the corn ethanol subsidy originally established in the late 1980s. Auditors reviewed the subsidy’s impact on both the corn ethanol industry and Minnesota’s economy, environment, and carbon emissions, and came out with mixed results. 

State Audit Suggest Cutting Corn Ethanol Subsidy

State Audit Suggest Cutting Corn Ethanol Subsidy

A major issue involved funding distribution and the impact to the economy. The corn ethanol subsidy gave $93 million in the first five years to private ethanol companies with combined profits of $619 million. John Yunker with the Legislative Auditor’s Office stated that corn ethanol producers no longer need a subsidy from the state because producers make enough profit without the government aid. It is undeniable that the corn ethanol subsidy had some positive impacts for those not directly receiving the state aid; the subsidy resulted in higher corn prices for farmers and helped increase rural property values. But it is corn ethanol’s unclear and potentially harmful impact on rising food and gas prices that led auditors to pause before proclaiming the subsidy a success.

Other concerns in the audit focused on environmental issues. The report showed that corn ethanol did reduce fossil fuel and petroleum consumption by consumers, but that it is unlikely to be a viable substitute for fossil fuels. The benefits of corn ethanol also have limits due to competing crop use issues, as corn holds a larger share of planted cropland. Furthermore, corn ethanol, although beneficial in reducing urban air pollution, contributes to rural air pollution from the processing facilities—almost entirely located in rural Minnesota.

With three years left on the corn ethanol subsidy at a cost of approximately $44 million, the Auditor’s Office recommended spending that money on other renewable energy sources with more tangible benefits, and perhaps fewer obvious negative impacts. In the present state deficit, Minnesota Legislators may heed their advice. Click here for further information.

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One Comment leave one →
  1. June 20, 2009 6:41 pm

    Just to let you know: Governor Pawlenty, using his “unallotment” authority, has impacted a number of programs…but he must not have seen the Auditors recommendation since $12,168,000 scheduled for 2010 and 2011 are still in the budget.

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