End Ethanol Tariffs and Subsidies, Says Da Governator

Isn’t California Governor Arnold Schwarzenegger expressing the right basic idea about ethanol policy in this report from Reuters…

California Gov. Arnold Schwarzenegger said on Friday he wants markets to set policies on low carbon fuels, and called for eliminating subsidies and tariffs related to ethanol.

"We need to take down the barriers we have created," Schwarzenegger said at a symposium on low carbon fuels at the Lawrence Berkeley National Lab in Berkeley, California.

The United States, he said, subsidizes domestic corn-based ethanol and imposes a 54-cents-per-gallon tariff to limit cheap ethanol imports from Brazil.

"It makes absolutely no sense. It's crazy, and it's definitely not in the best interest of the customers," said Schwarzenegger.

However, Reuters adds this mystifying sentence into its story…

He did not offer specific alternatives to the tariffs and subsidies, but said the market should be allowed to come up with the best solutions after targets are set by governments like California's.

Um, why does there have to be an alternative to removing a tariff and/or ending a subsidy? And couldn't we remove the state-mandated “targets” too, and really let the market set the price?

(Actually, a case can be made that government subsidies which help develop the infrastructure for distributing ethanol-based fuels remove legacy barriers-to-entry into the market and thus serve a legitimate purpose. However, government need not subsidize the production of the ethanol itself ).