Ethanol tax credit to drop to 45 cents per gallon in Farm Bill compromise

In Washington, the tax credit for ethanol is ready to drop from 51 cents per gallon to 45 cents and a special tax credit will be developed for second-generation biofuels, after a compromise was reached in the long stalled Farm Bill between Senate and House negotiators. The bill contains $900 million for biofuels development, $900 million for nutrition programs aimed to offset higher food prices, while land stewardship programs would received an additional $4 billion, and specialized crops $1.35 billion.

Negotiations over the stalled Farm Bill had put existing ethanol incentives in peril last week, according to House Agriculture Committee chairman Collin Peterson. The chairman said that, in order to offset $9.5 billion in increased spending, Senate negotiators had proposed a $0.05 per gallon cut in the ethanol blender tax credit and reductions in other incentives for a total of $1.226 billion in ethanol support cuts.

Earlier this month, the US House of Representatives voted to extend the existing Farm Bill until April 25 to give lawmakers more time to resolve differences between the House and Senate versions of the new Farm Bill, which includes tax breaks and incentives for biofuels. The current law expires on April 18. President Bush has stated that he will not sign legislation extending the current Farm Bill for another year.

The Farm Bill was passed by the Senate in in the fall, while the House version passed in July. Senate Agriculture Committee chairman Tom Harkin said the bill would earmark $1.3 billion for biofuels over the next five years.

The Senate passed an overall funding measure on October 5, but the Agriculture Committee under committee chairman Tom Harkin had been working on specific program allocations until November, which include ethanol tax credits and next-generation biofuel investments. The Senate finance committee previously proposed cutting the ethanol tax credit to 46 cents per gallon.

President Bush has raised the threat of a Farm Bill veto, the first since 1956, over subsidies. Among those in hot dispute is the Brazilian ethanol tariff, which protects US ethanol producers but creates higher prices in the US and retards US ethanol demand growth.

Free Subscription to the Daily Biofuels Digest e-newsletter

Related Stories

Six US Senators sponsor bill to reduce ethanol tariff, make Brazilian ethanol more affordable

In Washington, six senators from both parties introduced legislation to reduce the ethanol tariff from 54 cents per gallon to 45 cents, to achieve parity with the recent reduction in the ethanol blend...

Iowa biofuels bill to include 30-cent-per-gallon biodiesel tax incentive

In Iowa, the new state biofuels bill will include a provision to add tax incentives for biodiesel retail sales. The bill proposes a 3-cents- per-gallon tax credit for B2-B5 biodiesel blends, 7.5 cents...

Senate Agricultural Committee approves $280 billion Farm Bill

In Washington, the Senate Agriculture Committee on Thursday approved its version of the five-year, $280 billion farm bill. The bill earmarks $1.3 billion for biofuels over the next five years, and ...

2007 Farm Bill to provide $1.3 billion for biofuels

In Washington, Sen. Tom Harkin, D-Iowa, said that the 2007 Farm Bill would appear in two weeks. He said that it would earmark $1.3 billion for biofuels over the next five years. The House Bill pass...

Agricultural Secretary says Farm Bill is dead unless gimmicks, tax credits, tax increases are shelved

In South Dakota, acting Agriculture Secretary Chuck Conner said that he is recommending veto of the Farm Bill unless tax increases and budget gimmicks are removed, as well as credits for farmers makin...

US Senate to take up Farm Bill on October 23; agriculture committee may cut corn ethanol subsidies, increase research spending

The US Farm Bill is taking shape, with the Senate expected to begin debate on October 23. The House Bill passed in July. The Senate passed an overall funding measure on October 5, but the Agriculture ...