US ethanol risks biodiesel calamity if subsidy renewal slow

15 June 2010 17:23  [Source: ICIS news]

ST. LOUIS, Missouri (ICIS news)--Ethanol makers must work tirelessly to push the US Congress to extend subsidies for the biofuel in order to head off the risk of suffering the pain in the biodiesel industry since its subsidy expired earlier this year, the Renewable Fuels Association (RFA) said on Tuesday.

US biodiesel received a $1/gal tax credit that expired in January 2010 after Congress got sidetracked mostly by a debate on health care legislation that got in the way of an extension of the subsidy.

The loss of the subsidy has slashed US production of biodiesel as producers cannot compete with regular diesel without the tax credit. Congress was still considering an extension, and meanwhile the biodiesel industry was operating at around 10% of its capacity.

"If the example of the biodiesel industry taught us anything, it is that we cannot wait," RFA Bob Dinneen told the Fuel Ethanol Workshop in St. Louis, Missouri.

The US ethanol industry was subsidised through a 45 cent/gal tax credit that gasoline blenders receive. That incentive, along with a 54 cent/gal tariff on imported ethanol, was set to expire at the end of 2010.

The RFA along with other ethanol industry groups were asking Congress to extend the tax credit for another five years, warning that its expiration would cost 112,000 jobs and force around two of every five US ethanol plants to close.

An end to government support would also inhibit investment in second-generation ethanol production, which would be needed for the US to meet its renewable fuels targets, the RFA said.

Second-generation technology was on the cusp of commercialisation, Dinneen said.

US ethanol makers claim government support for the industry was justified because the fossil fuel industry receives hundreds of billions of dollars of subsidies all across the globe.

"I will not apologise for it," Dinneen said. "As long as petroleum and every other energy resource in the world benefits from government support, we should not accept unilateral disarmament."

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By: William Lemos
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