US ethanol healthy but higher blends, tax breaks critical – RFA

16 February 2010 16:15  [Source: ICIS news]

Ethanol industry healthy ORLANDO, Florida (ICIS news)--The US ethanol industry is in a healthy state but must tackle some critical challenges in 2010, including raising gasoline blend levels and preserving tax incentives that are due to expire at year-end, the Renewable Fuels Association (RFA) said on Tuesday.

"I can say, with confidence and conviction, that the state of the US ethanol industry is strong. We are rebounding from the recession that has taken such a toll on every industry," said RFA president and chief executive Bob Dinneen.

In a keynote speech to open the RFA's National Ethanol Conference in Orlando, Dinneen called for greater effort by the industry to "tear down the blend wall" that has generally held the ethanol content in US gasoline at the 10% level, known as E10.

US ethanol production has grown to the point that the E10 market is nearing saturation. But the use of higher blends for ordinary cars has been held back by concerns over possible engine damage and the potential voiding of the manufacturers' warranty coverage.

Dinneen called on the government to accelerate its testing of E15 and E20 blends, adding that the RFA's goal is to win endorsement of higher blends for all vehicles not just those manufactured in 2001 and later, as has been suggested by the EPA.

The most important concern for the ethanol industry is securing an extension to the federal tax incentive programme for the biofuel that is due to expire on 31 December, he said.

While ethanol continues to enjoy solid political support, the failure of Congress to extend the tax credit for biodiesel "should be a sobering reminder not to take anything for granted", Dinneen said.

He also said the industry needs to win the continuing debate over the extent of ethanol's environmental benefits.

"Ethanol naysayers have exaggerated the carbon footprint of grain based ethanol," Dinneen said.

He cited the recent finding by the Environmental Protection Agency (EPA) that an ethanol plant running on natural gas would reduce greenhouse gases 21% compared with gasoline, even though the conclusion was "saddled with questionable assumptions" about land use. 

"The analysis is still fundamentally flawed by the slavish devotion to the ill-conceived notion of international land use change," he said.

"Without international indirect effects, corn ethanol’s carbon profile would be 52% better than gasoline,"  Dinneen contended.

The industry official said ethanol's critics including "east coast media elites" with an anti-ethanol bias were losing credibility.

"Look how silly the food versus fuel debate looks today. In 2008, ethanol was the cause of rice shortages, pasta riots, and the increased price of everything from popcorn to tortillas to beer," Dinneen said.

"With the media frenzy dissipated and the benefit of hindsight and data, most economists now acknowledge what we said all along:  the skyrocketing price of oil, speculation in commodity markets and monetary policy were responsible for food price inflation not ethanol," he said.

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