If Cash for Clunkers Survives, Will Ethanol Funding Suffer?

If you could get it into the dealer, it was Cash for Clunkers material. (Flickr/iboy daniel)

Congress saves the day! It miraculously comes up with $2 billion to save the bankrupt Cash for Clunkers program, which somehow ran through it's meager funding in just four days! But the $2 billion wasn't just lying around--it was effectively hijacked from the stimulus funds intended to provide loan guarantees for renewable fuels. And the ethanol lobbyists aren't too happy.

I predicted here that the $1 billion in funding would not last long. I said June 20: "The problem with CARS (Car Allowance Rebate System) is the limited $1 billion funding and the July 1 to November 1 window to grab a piece of it. If you want fed assistance to buy your next green car, apply now, because it won't last long. President Obama weighed in today as a cheerleader for renewing the program, a speech he undoubtedly didn't realize he'd have to make:

The program was originally funded with $4 billion, but the budget process resulted in drastic cuts. Some observers thought that even $1 billion was too much, and that there would be money left over on October 31, when the program would have ended.

Bob Dinneen, president and CEO of the Renewable Fuels Association (RFA), commented that "One of the advantages of the Cash for Clunkers program is putting more fuel-efficient cars on the road, however these new cars should also be running on renewable fuels like ethanol in order to benefit both the changing climate and the domestic economy. For the U.S. long-term auto and fuel needs, it seems counterproductive to limit the renewable fuels industry."

Sure, but how many of the millions of flexible-fuel vehicles already on the road actually run on ethanol? Not many, unfortunately -- and a lot are big gas-guzzlers such as Chevy Tahoes and Ford Expeditions.

The renewable fuel issue could impact Congress' vote on Cash for Clunkers. The House voted overwhelmingly to approve the additional funding Friday afternoon, but this is among several sticking points in the Senate, which will vote next week. Senator Jeff Bingaman, the Senate Energy Committee chairman, told Reuters, "If Congress decides to extend this initiative, I believe we must not rob from the loan guarantees we provided through the recovery package that, in the long term, will shift our country to home-grown, renewable energy while creating good ‘green collar' jobs."

Bingaman, from New Mexico, is a big proponent of biofuels. He'd better be. His state plays host to Abengoa Bioenergy, which recently expanded to produce 30 million gallons of ethanol annually.

One of the big remaining questions is how long the additional $2 billion in funding will last. Charles Cyrill, spokesman for the National Automobile Dealers Association, told me, "Well, the first billion lasted only a week..."