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Senate Bill Extends Ethanol Tax Credit, Tariff

December 16, 2010

The Senate passed a tax policy package yesterday that includes a one-year extension of the Volumetric Ethanol Excise Tax Credit (VEETC) at its current level of $.45 per gallon.

Without congressional action, the tax credit and tariff will expire on Dec. 31. The House and Senate must agree on terms for a bill to become law.

Two ethanol trade groups said they believed the extension would be approved by Congress, according to Reuters.

Biofuels subsidies in the tax bill would cost $7 billion, according to congressional economists. Extension of the ethanol credit would cost nearly $5 billion.

The bill also revives through 2011 the $1 a gallon biodiesel tax credit that expired at the end of 2009. It would cost nearly $2 billion, according to cost estimates for the bill.

Foodmakers, livestock producers and environmentalists say the subsidy should die. Brazilian ethanol producers argue for removal of the tariff.

Ethanol leaders say their renewable fuel, which accounts for nearly 10 percent of gasoline sales, reduces U.S. reliance on imported oil and is a proven job-creator in rural America. The ethanol industry said it would accept lower subsidy rates and other reforms as part of a longer-term plan for biofuels.

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