Description of 2011 Biofuels Policy Alternatives

In the US, at the end of 2010 Congress extended the ethanol tax credit (VEETC) of $0.45/gal. for one year with the clear message to the industry and lobby groups that it wanted a long-term solution to be passed and implemented by the end of 2011. Following are some of the policy options that are being considered in 2011: x Continue the 45 cent/gallon subsidy and the import tariff as at present x Shift the subsidy from blender to biofuel producer x Subsidy that varies with the price of crude oil or gasoline x Subsidy based at least in part on performance in reducing GHG x Subsidy based on energy content of the biofuel x Subsidy that is applied only for the quantity of biofuel in excess of the RFS x Eliminate the subsidy and the import tariff, and use funds for other purposes x Combinations of these options We will describe and discuss the pros and cons of each of these options in turn below. However, before the one by one explanation, it is useful to indicate that the Renewable Fuel Standard (RFS2) and the blend wall are the driving forces in in the biofuels marke