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US $6 billion corn ethanol subsidy ends

Written January 4, 2012

Industry focuses on tax credit for ethanol made from non-foodstuffs

The U.S. federal subsidy for corn ethanol, which amounted to roughly $6 billion per year, ended on January 1, causing companies making ethanol to lose a tax credit of 46 cents per gallon. As a result, the industry has shifted greater focus to a separate credit for ethanol made from non-foodstuffs such as switchgrass, wood chips and the leaves and stalks of corn, called cellulosic ethanol.

The tax credit, which is currently set at $1.01 per gallon, is set to expire on December 31, but the industry would like Congress to extend it for another five years. Cellulosic ethanol isn't being sold yet due to its higher R&D and production costs, but the industry has said it hopes to begin sales soon. Environmentalists are also in favor of cellulosic ethanol because it doesn't compete with corn as a foodstuff — one of their arguments against corn-based ethanol.

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