8 December 2010 | Luca Del Buono

 

Tax credits for ethanol and other biofuels were under debate this week in the US as ethanol subsidies are due to expire, said Democratic Senators on Tuesday (December 7).

Max Baucus, Chairman of the Senate's tax-writing committee said: "There are provisions not yet included which I think are important," Questioned further about a possible 36-cent a gallon tax credit for ethanol, Baucus said, "I don't know yet."

Baucus proposed a 36 cent credit last week as part of a one-year extension of biofuel provisions. It would replace the current 45 cent credit. Mark McMinimy of the Washington Research Group said that the most likely outcome was for a one year extension of the tax credit at 36 cents a gallon, down from the current 45 cents.

Talking about Baucus's proposed package, McMinimy warned that lawmakers could reduce the credit below 36 cents, and an agreement on a tax was not a sure thing. Other American business and state leaders are also unclear as to what the agreement would entail, and whether the rate would be reduced.

Ethanol supports cost about USD$6 billion a year. The cost would drop to USD$3.6 billion in 2011 under the Baucus package.

North Dakota Sen Kent Conrad, Chairman of the Budget Committee, said the situation on ethanol supports was unclear. "We'll have to await further details," he said.

Two other senators said it was not clear if the biofuels extension was agreed or the support rate for it. Ethanol trade groups said the issue, and other business taxes, were left to Congress to settle in the wake of accord between President Barack Obama and congressional Republicans on estate and income taxes.

The Renewable Fuels Association (RFA), a trade group, said it believed ethanol supports were on the list of subjects being weighed for inclusion in the omnibus tax bill. It will probably be another day or two before the plan is complete, said RFA spokesman Matt Hartwig.

It remained unclear on Tuesday whether a host of soon-to-expire tax credits designed to boost ethanol fuels, natural gas vehicles and various renewable energy projects will be extended as part of a larger agreement on US tax policy that President Barack Obama has hammered out with Republican lawmakers on Capitol Hill.

Besides reducing US reliance on imported oil, ethanol boosts grain prices and creates jobs in rural America, say industry leaders. There are more than 200 ethanol plants, mostly in the US Midwest, each employing four dozen workers.

The credits set to expire include the Volumetric Ethanol Excise Tax Credit (VEETC), which provides a 45 cents/gal tax credit for blending ethanol into gasoline, and a Treasury Department programme that has provided tens of billions of dollars in up-front cash grants to build wind farms, solar facilities and other renewable-energy projects.

Author: Charity Knight | Climate Action

Image: US government archives | creativecommons

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