LegiStorm

Summary:

Biofuels are a major source of renewable energy in the United States. Ethanol produced from corn starch accounts for 90% of the biofuels consumed, but only 5% of all light-duty motor transportation fuel consumption. Ethanol is blended with gasoline to increase octane and reduce emissions, and used as a substitute for gasoline to reduce consumption of petroleum-based fuels. Ethanol has the potential to provide many benefits. As an alternative to gasoline refined from imported oil, its use can improve U.S. national energy security, albeit marginally. Although the exact magnitude is subject to debate, ethanol is thought by many to produce lower greenhouse gas (GHG) emissions compared with gasoline. For this reason, its increased use is seen by many as playing a potential key role in reducing the contribution of the transportation sector to global climate change. U.S.-produced ethanol can also boost demand for U.S.-produced farm products, stimulate rural economies, and provide "green" jobs in rural areas. An ethanol-centric policy does have its critics. For example, ethanol has been implicated as a factor in rising commodity and food prices. As ethanol production increases, corn is diverted from feed and export markets and acreage is diverted from other crops, such as soybeans. The extent to which ethanol is responsible for these impacts has been the subject of debate and wide-ranging estimates. Also, the potential to displace gasoline and increase national energy security is limited by the land available to grow corn. Since the 1970s, ethanol has received support from the U.S. government. Presently, federal support is provided in the form of mandated levels of consumption, financial incentives such as grants and loan guarantees, tax credits, tariffs on ethanol imports, and federally funded research and development efforts. Tax credits made available to blenders of ethanol are expected to total nearly $6 billion in 2009. Incentives were initially provided to get the ethanol industry off the ground—many now argue that the ethanol industry has matured and these resources should be used elsewhere. Federal support for biofuels and ethanol in particular is likely to be an issue facing the 111th Congress. Ethanol has received more federal support than other types of renewable energy. Some argue that the market, rather than the government, should direct investment, whether it be for ethanol, wind, solar, geothermal, or other alternatives. In addition, ethanol is used in internal-combustion engines that mostly use fossil fuels, unlike alternatives such as battery or plug-in-electric vehicles, which do not consume fossil fuels directly. Other issues of congressional interest may include financial support for ethanol during the recession and the extension of the blender's tax credit and the import tariff, both of which expire after 2010. The renewable fuel standard (RFS), which mandates increasing volumes of renewable fuel use through 2022, may become an issue if biofuels production shortfalls occur and the mandate cannot be met. The U.S. Environmental Protection Agency (EPA) is drafting rules on the calculation of lifecycle greenhouse gas emissions that will determine which fuels qualify for the RFS. These rules will likely attract congressional scrutiny if they exclude major stakeholders in the ethanol industry. In addition, continuation of the RFS itself may be the subject of debate.