Tuesday, June 22, 2010

As Government Decisions Loom, Ethanol Fights for its Life

ethanol factory

Congress, the EPA and environmental groups may be on the verge of seriously curtailing corn ethanol adoption in the United States. This week, the EPA again decided to postpone a decision on whether to increase the maximum allowable blend of ethanol in regular gasoline from 10 to 15 percent. Automakers have been fighting the increase for some time, claiming that it could cause engine damage. The EPA says it needs more time to study the issue.

The Renewable Fuels Association�one of several lobbying arms of the ethanol industry�issued a harsh rebuke of the decision, calling the EPA's postponement "shameful" and "a dereliction of duty."

Judgment Day for Ethanol

The EPA isn't the only government body that the ethanol industry is relying on. By the end of 2010, several of the programs and regulations that keep the corn ethanol industry afloat will expire unless Congress acts to extend or replace them.

First, there are the so-called "blender's credits" given out to oil companies for mixing ethanol into their gasoline, which make up the bulk of the subsides for the past five years but are set to expire at the end of 2010. Those credits have helped pump $17 billion into the industry since 2005, but since gasoline producers are already required by law to blend ethanol into their product, the subsidy is largely redundant.

There's also the matter of a $0.60 per gallon tariff on imported ethanol that effectively keeps all of the ethanol sold in the United States domestically produced. Brazil, which is the world's second leading ethanol producer, recently lifted its biofuels tariff in the hopes that the United States would do the same. Unless Congress decides to take action by the end of the year, the tariff is set to expire, opening up the market to imports.

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Read More... [Source: HybridCars.com]

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