US Senators reach deal to end ethanol subsidy, tariff

07 July 2011 16:24  [Source: ICIS news]

Senators propose end to ethanol benefitsHOUSTON (ICIS)--US Senators Dianne Feinstein, Amy Klobuchar and John Thune reached an agreement to repeal the nation's ethanol subsidy and to end the tariff on imported ethanol by the end of the month, Feinstein said on Thursday.

Congress needs to enact the proposal before it adjourns for its August recess, said Feinstein (Democrat-California). Otherwise, the three senators cannot commit their support.

The three senators outlined the bipartisan agreement in a letter sent earlier to Senate Majority Leader Harry Reid (Democrat-Nevada) and Minority Leader Mitch McConnell (Republican-Kentucky).

Under the deal, the US will repeal the 45 cent/gal ethanol blender credit, effective on 31 July. This should save $2bn (€1.4bn) through the rest of the year.

The 54 cent/gal ethanol tariff will also end on 31 July.

Two thirds of the money saved by ending the benefits - $1.33bn - will go towards reducing the nation's deficit, the senators said.

Another $668m will go towards new energy technology.

Specifically, the deal will extend the nation's cellulosic biofuel tax credit by three years. The credit, worth $1.01/gal, was set to expire on 31 December 2012.

In addition, the agreement will expand the definition of cellulosic biofuel to include biodiesel made from algae.

Cellulosic blending caps will be set at 50m gal (189m litres) for 2013, 100m gal for 2014 and 155m gal for 2015. Unused gallons would roll into the next year.

The letter does not specify how much of this will be algae-based biodiesel and how much will be cellulosic ethanol.

Altogether, the agreement estimates that these benefits are worth $308m.

The agreement will also expand the nation's alternative fuelling infrastructure tax credit, which is set to expire on 31 December 2011. This credit covers blender pumps, natural gas fuelling stations and electrical charging stations - a key technology for electric automobiles.

The infrastructure tax credits will be extended to 31 December 2014.

Also, the investment tax credits will be reduced to 20% from 30%, effective on 1 January 2012.

Altogether, these benefits for alternative energy infrastructure should total $253m.

The agreement also sets aside $107m for small producer tax credits.

“This agreement is the best chance to repeal the ethanol subsidy, and it’s the best chance to achieve real deficit reduction," Feinstein said.

($1 = €0.70)

For more on ethanol visit ICIS chemical intelligence
Doris de Guzman examines alternative processing, new technology, R&D and other sustainability initiatives in Green Chemicals

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