Center for Advanced BioEnergy Research, University of Illinois at Urbana-Champaign

Monday, September 12, 2011

U.S. Biofuel Industry Prepares for Life Without Subsidies
By Tildy Bayar, Associate Editor, Renewable Energy World
September 9, 2011

Government backing fades for corn ethanol but next-generation biofuels gets a $510 million boost.
LONDON -- A recent feature story in UK newspaper The Guardian reported that the financial crisis in the U.S. and the country's pressing need to cut its federal budget by $1.3 trillion had combined to spur lawmakers to reevaluate three decades of corn ethanol subsidies.

A significant factor in this equation was the global food crisis, which has illuminated the consequences of biofuel production – rising food prices as farmland is converted to produce biofuels – and created a public backlash against it.

The Senate had already voted overwhelmingly in June to end the tax credits and trade protection that benefit the ethanol industry. In its story, The Guardian reported that Congress was also expected to end $6 billion in subsidies to the ethanol industry as part of its recent debt ceiling negotiations.

Federal pro-ethanol policies, including subsidies, helped to grow U.S. ethanol production to 13.3 billion U.S. gallons in 2010, up from 1.6 billion gallons 10 years before. These subsidies had flowed to oil companies whose products are partly constituted from ethanol. The industry had planned to redirect parts of the funds toward petrol station refits, enabling the stations to use more ethanol under a Senate deal made last July. But the drastic budget cuts required by the debt deal resulted in a Senate vote blocking federal money from paying for special ethanol-blending pumps.

Read more