Biofuels Incentives: A Summary of
Federal Programs
Brent D. Yacobucci
Specialist in Energy and Environmental Policy
September 15, 2010
Congressional Research Service
7-5700
www.crs.gov
R40110
CRS Report for Congress
P
repared for Members and Committees of Congress

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Biofuels Incentives: A Summary of Federal Programs

Summary
With recent high energy prices, the passage of major energy legislation in 2005 (P.L. 109-58) and
2007 (P.L. 110-140), and the passage of a new farm bill in 2008 (P.L. 110-246), there is ongoing
congressional interest in promoting alternatives to petroleum fuels. Biofuels—transportation fuels
produced from plants and other organic materials—are of particular interest.
Ethanol and biodiesel, the two most widely used biofuels, receive significant government support
under federal law in the form of mandated fuel use, tax incentives, loan and grant programs, and
certain regulatory requirements. The 22 programs and provisions listed in this report have been
established over the past three decades, and are administered by five separate agencies and
departments: Environmental Protection Agency, U.S. Department of Agriculture, Department of
Energy, Internal Revenue Service, and Customs and Border Protection. These programs target a
variety of beneficiaries, including farmers and rural small businesses, biofuel producers,
petroleum suppliers, and fuel marketers. Arguably, in prior years the most significant federal
programs for biofuels have been tax credits for the production or sale of ethanol and biodiesel.
However, with the establishment of the renewable fuel standard (RFS) under P.L. 109-58,
Congress has mandated biofuels use; P.L. 110-140 significantly expanded that mandate. In the
long term, the mandate may prove even more significant than tax incentives in promoting the use
of these fuels.
The 2008 farm bill—The Food, Conservation, and Energy Act of 2008—amended or established
various biofuels incentives, including lowering the value of the ethanol excise tax credit,
establishing a tax credit for cellulosic biofuel production, extending import duties on fuel ethanol,
and establishing several new grant and loan programs.
Some key biofuels incentives have expired or are set to expire (e.g., tax credits for biodiesel,
renewable diesel, and ethanol), and there is congressional interest in extending these credits.
This report outlines federal programs that provide direct or indirect incentives for biofuels. For
each program described, the report provides details including administering agency, authorizing
statute(s), annual funding, and expiration date. The Appendix provides summary information in a
table format.

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Biofuels Incentives: A Summary of Federal Programs

Contents
Introduction ................................................................................................................................ 1
Environmental Protection Agency (EPA)—Renewable Fuel Standard.......................................... 1
Internal Revenue Service (IRS) ................................................................................................... 2
Volumetric Ethanol Excise Tax Credit ................................................................................... 2
Small Ethanol Producer Credit .............................................................................................. 2
Biodiesel Tax Credit.............................................................................................................. 3
Small Agri-Biodiesel Producer Credit.................................................................................... 3
Renewable Diesel Tax Credit ................................................................................................ 3
Credit for Production of Cellulosic Biofuel ........................................................................... 4
Special Depreciation Allowance for Cellulosic Biofuel Plant Property................................... 4
Alternative Fuel Station Credit .............................................................................................. 5
Department of Agriculture (USDA)............................................................................................. 5
Biorefinery Assistance .......................................................................................................... 5
Repowering Assistance ......................................................................................................... 6
Bioenergy Program for Advanced Biofuels............................................................................ 6
Feedstock Flexibility Program for Producers of Biofuels (Sugar)........................................... 7
Biomass Crop Assistance Program (BCAP)........................................................................... 7
Rural Energy for America Program (REAP) .......................................................................... 7
Biomass Research and Development ..................................................................................... 8
Other USDA Programs.......................................................................................................... 8
Department of Energy (DOE)...................................................................................................... 9
Biorefinery Project Grants.....................................................................................................9
Loan Guarantees for Ethanol and Commercial Byproducts from Cellulose, Municipal
Solid Waste, and Sugar Cane.............................................................................................. 9
DOE Loan Guarantee Program............................................................................................ 10
Cellulosic Ethanol Reserve Auction..................................................................................... 10
U.S. Customs and Border Protection—Import Duty for Fuel Ethanol......................................... 11
Department of Transportation—Manufacturing Incentive for Flexible Fuel Vehicles.................. 11

Tables
Table A-1. Federal Biofuels Incentives by Agency..................................................................... 12

Appendixes
Appendix. Summary of Federal Incentives Promoting Biofuels ................................................. 12

Contacts
Author Contact Information ...................................................................................................... 15

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Biofuels Incentives: A Summary of Federal Programs

Introduction
With recent high energy prices, the passage of the Energy Policy Act of 2005 (P.L. 109-58) and
the Energy Independence and Security Act of 2007 (P.L. 110-140), and the passage of the 2008
farm bill (P.L. 110-246), there is ongoing congressional interest in promoting greater use of
alternatives to petroleum fuels. Biofuels—transportation fuels produced from plants and other
organic materials—are of particular interest. Ethanol and biodiesel, the two most widely used
biofuels, receive significant federal support in the form of tax incentives, loan and grant
programs, and regulatory programs. The 2008 farm bill also modified existing incentives—
including ethanol tax credits and import duties—and established a new tax credit for cellulosic
biofuels. The farm bill also authorized new biofuels loan and grant programs, some of which
were funded in the FY2010 appropriations cycle.
This report outlines 22 current, expired, or pending federal programs that provide direct or
indirect incentives for biofuels. The programs are grouped below by administering agency. The
incentives for biofuels are summarized in the Appendix. This information is compiled from
authorizing statutes, committee reports, and Administration budget request documents.
Environmental Protection Agency (EPA)—
Renewable Fuel Standard
• Administered by: EPA
• Established: 2005 by the Energy Policy Act of 2005, §1501 (P.L. 109-58);
expanded by the Energy Independence and Security Act of 2007, §202 (P.L. 110-
140)
• Scheduled termination: None
• Description: The Energy Policy Act of 2005 established a renewable fuel
standard (RFS) for automotive fuels. The RFS was expanded by the Energy
Independence and Security Act of 2007. The RFS requires the blending of
renewable fuels (including ethanol and biodiesel) in transportation fuel. In 2008,
fuel suppliers were required to blend 9.0 billion gallons of renewable fuel into
gasoline and diesel fuel; this requirement increases annually to 36 billion gallons
in 2022. The expanded RFS also specifically mandates the use of “advanced
biofuels”—fuels produced from non-corn feedstocks and with 50% lower
lifecycle greenhouse gas emissions than petroleum fuel—starting in 2009. Of the
36 billion gallons required in 2022, at least 21 billion gallons must be advanced
biofuel. There are also specific quotas for cellulosic biofuels and for biomass-
based diesel fuel. On May 1, 2007, EPA issued a final rule on the original RFS
program detailing compliance standards for fuel suppliers, as well as a system to
trade renewable fuel credits between suppliers. On March 26, 2010, EPA issued
final rules for the expanded program (RFS2), including lifecycle analysis
methods necessary to categorize fuels as advanced biofuels, and new rules for
credit verification and trading. While this program is not a direct subsidy for the
construction of biofuels plants, the guaranteed market created by the renewable
fuel standard is expected to stimulate growth of the biofuels industry.
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• For more information: EPA Website, Renewable Fuel Standard (RFS)
http://www.epa.gov/otaq/fuels/renewablefuels/index.htm
Internal Revenue Service (IRS)
Various tax credits and other incentives are available for the production, blending, and/or sale of
biofuels and biofuel blends. Tax credits vary by the type of fuel and the size of the producer.
Before the enactment of the Energy Improvement and Extension Act of 2008 (P.L. 110-343,
Division B), some of the credits allowed taxpayers to blend biofuels produced outside the United
States with conventional fuels, export the blended fuel, and claim the tax credit. Section 203 of
P.L. 110-343 effectively eliminated this so-called “splash-and-dash” practice by requiring that any
fuel eligible for the credit must be produced and/or used within the United States.
Volumetric Ethanol Excise Tax Credit
• Administered by: Internal Revenue Service
• Established: 2005 by the American Jobs Creation Act of 2004, §301 (P.L. 108-
357); modified by the Food, Conservation, and Energy Act of 2008, §15331 (P.L.
110-246); further amended by the Energy Improvement and Extension Act of
2008 (P.L. 110-343, Division B), §203
• Scheduled termination: December 31, 2010
• Description: Gasoline suppliers who blend ethanol with gasoline are eligible for a
tax credit of 45 cents per gallon of ethanol.
• Qualified applicant: Blenders of gasohol (i.e., gasoline suppliers and marketers)
• For more information: IRS Publication 510, Chapter 2: Fuel Tax Credits and
Refunds http://www.irs.gov/publications/p510/ch02.html
Small Ethanol Producer Credit
• Administered by: Internal Revenue Service
• Established:1990 by the Omnibus Budget Reconciliation Act of 1990, §11502
(P.L. 101-508); extended by the American Jobs Creation Act of 2004, §301 (P.L.
108-357); expanded by the Energy Policy Act of 2005, §1347 (P.L. 109-58);
amended by the Energy Improvement and Extension Act of 2008 (P.L. 110-343,
Division B), §203
• Scheduled termination: December 31, 2010
• Description: The small ethanol producer credit is valued at 10 cents per gallon of
ethanol produced. The credit may be claimed on the first 15 million gallons of
ethanol produced by a small producer in a given year.
• Qualified applicant: Any ethanol producer with production capacity below 60
million gallons per year
• For more information: IRS Publication 510, Chapter 2: Fuel Tax Credits and
Refunds http://www.irs.gov/publications/p510/ch02.html
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Biofuels Incentives: A Summary of Federal Programs

Biodiesel Tax Credit
• Administered by: Internal Revenue Service
• Established: 2005 by the American Jobs Creation Act of 2004, §302 (P.L. 108-
357); extended by the Energy Policy Act of 2005, §1344 (P.L. 109-58); amended
by the Energy Improvement and Extension Act of 2008 (P.L. 110-343, Division
B), §202-203
• Scheduled termination: December 31, 2009—Expired
• Description: Biodiesel producers (or producers of diesel/biodiesel blends) can
claim a per-gallon tax credit. The credit is valued at $1.00 per gallon. Before
amendment by P.L. 110-343, the credit was valued at $1.00 per gallon of “agri-
biodiesel” (biodiesel produced from virgin agricultural products such as soybean
oil or animal fats), or 50 cents per gallon of biodiesel produced from previously
used agricultural products (e.g., recycled fryer grease).
• Qualified applicant: Biodiesel producers and blenders
• For more information: IRS Publication 510, Chapter 2: Fuel Tax Credits and
Refunds http://www.irs.gov/publications/p510/ch02.html
Small Agri-Biodiesel Producer Credit
• Administered by: Internal Revenue Service
• Established: 2005 by the Energy Policy Act of 2005, §1345 (P.L. 109-58);
amended by the Energy Improvement and Extension Act of 2008 (P.L. 110-343,
Division B), §202-203
• Scheduled termination: December 31, 2009—Expired
• Description: The small agri-biodiesel producer credit is valued at 10 cents per
gallon of “agri-biodiesel” (see Biodiesel Tax Credit, above) produced. The credit
may be claimed on the first 15 million gallons of ethanol produced by a small
producer in a given year.
• Qualified applicant: Any agri-biodiesel producer with production capacity below
60 million gallons per year
• For more information: IRS Publication 510, Chapter 2: Fuel Tax Credits and
Refunds http://www.irs.gov/publications/p510/ch02.html
Renewable Diesel Tax Credit
• Administered by: Internal Revenue Service
• Established: 2005 by the Energy Policy Act of 2005, §1346 (P.L. 109-58);
amended by the Energy Improvement and Extension Act of 2008 (P.L. 110-343,
Division B), §202-203
• Scheduled termination: December 31, 2009—Expired
• Description: Producers of biomass-based diesel fuel (or producers of
diesel/renewable biodiesel blends) can claim $1.00 per gallon tax credit.
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Renewable diesel is similar to biodiesel, but it is produced through different
processes and thus is ineligible for the (above) biodiesel credits.
• Qualified applicant: Renewable diesel producers and blenders
• For more information: IRS Publication 510, Chapter 2: Fuel Tax Credits and
Refunds http://www.irs.gov/publications/p510/ch02.html
Credit for Production of Cellulosic Biofuel
• Administered by: Internal Revenue Service
• Established: January 1, 2009, by the Food, Conservation, and Energy Act of
2008, §15321 (P.L. 110-246)
• Scheduled termination: December 31, 2012
• Description: Producers of cellulosic biofuel can claim $1.01 per gallon tax credit.
For producers of cellulosic ethanol, the value of the credit is reduced by the
amount of the volumetric ethanol excise tax credit and the small ethanol producer
credit (see above)—currently, the value is 46 cents per gallon. The credit applies
to fuel produced after December 31, 2008.
• Qualified applicant: Cellulosic biofuel producers
• Note: The credit for cellulosic ethanol varies with other ethanol credits such that
the total combined value of all credits is $1.01 per gallon. As the volumetric
ethanol excise tax credit and/or the small ethanol producer credits decrease, the
per-gallon credit for cellulosic ethanol production increases by the same amount.
Special Depreciation Allowance for Cellulosic Biofuel Plant
Property
• Administered by: Internal Revenue Service
• Established: 2006 by the Tax Relief and Health Care Act of 2006, §209 (P.L. 109-
432); amended by the Energy Improvement and Extension Act of 2008 (P.L. 110-
343, Division B), §201
• Scheduled termination: December 31, 2012
• Description: A taxpayer may take a depreciation deduction of 50% of the
adjusted basis of a new cellulosic biofuel plant in the year it is put in service. Any
portion of the cost financed through tax-exempt bonds is exempted from the
depreciation allowance. Before amendment by P.L. 110-343, the accelerated
depreciation applied only to cellulosic ethanol plants that break down cellulose
through enzymatic processes—the amended provision applies to all cellulosic
biofuel plants.
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• Qualified applicant: Any cellulosic ethanol plant acquired after December 20,
2006, and placed in service before January 1, 2013. Any plant that had a binding
contract for acquisition before December 20, 2006, does not qualify.
• For more information: See Senate Finance Committee, Summary of House-
Senate Agreement on Tax, Trade, Health, and Other Provisions, December 7,
2006.
Alternative Fuel Station Credit
• Administered by: Internal Revenue Service
• Established: 2005 by the Energy Policy Act of 2005 §1342 (P.L. 109-58);
extended by the Energy Improvement and Extension Act of 2008, §207 (P.L. 110-
343, Division B); expanded by the American Recovery and Reinvestment Act,
§1123 (P.L. 111-5)
• Scheduled termination: December 31, 2010
• Description: A taxpayer may take a 50% credit for the installation of alternative
fuel infrastructure, up to $50,000, including E85 (85% ethanol and 15% gasoline)
infrastructure. Residential installations qualify for a $2,000 credit (biofuels
pumps are not generally installed in residential applications)
• Qualified applicant: Individual or business that installs alternative fuel
infrastructure
Department of Agriculture (USDA)
Biorefinery Assistance
• Administered by: Rural Business-Cooperative Service (RBS)
• Annual funding: $74 million in mandatory spending for FY2009, $245 million
for FY2010; authorization of and additional $150 million annually for FY2009-
FY2012
• FY2010 Appropriation: $245 million to guarantee $691 million in loans
• Established: 2008 by the Food, Conservation, and Energy Act of 2008, §9001
(P.L. 110-246)
• Scheduled termination: End of FY2012
• Description: Grants to biorefineries that use renewable biomass to reduce or
eliminate fossil fuel use.
• Qualified applicant: Biorefineries in existence at the date of enactment.
• For more information: See RBS website—http://www.rurdev.usda.gov/rbs/busp/
baplg9003.htm
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Biofuels Incentives: A Summary of Federal Programs

Repowering Assistance
• Administered by: RBS
• Annual funding: $35 million in mandatory funding for FY2009, to remain
available until expended, plus $15 million authorized annually for FY2009
through FY2012
• FY2010 Appropriation: None ($35 million in FY2009)
• Established: 2008 by the Food, Conservation, and Energy Act of 2008, §9001
(P.L. 110-246)
• Scheduled termination: End of FY2012
• Description: Grants to biorefineries that use renewable biomass to reduce or
eliminate fossil fuel use. RBS issued a Notice of Funding Availability June 12,
2009—http://www.rurdev.usda.gov/rbs/busp/9004%20FR%20NOFA.pdf.
• Qualified applicant: Biorefineries in existence at the date of enactment.
• For more information: See RBS website—http://www.rurdev.usda.gov/rbs/busp/
RepoweringAssistance.htm
Bioenergy Program for Advanced Biofuels
• Administered by: RBS
• Annual funding: Mandatory funding of $55 million for FY2009, $55 million for
FY2010, $85 million for FY2011, and $105 million for FY2012, plus $25 million
authorized annually for FY2009-FY2012
• FY2010 Appropriation: $55 million ($30 million in FY2009)
• Established: 2008 by the Food, Conservation, and Energy Act of 2008, §9001
(P.L. 110-246)
• Scheduled termination: End of FY2012
• Description: Provides payments to producers to support and expand production
of advanced biofuels. RBS issued a Notice of Contract Proposal June 12, 2009—
http://www.rurdev.usda.gov/rbs/busp/NOCP%20FR%209005.pdf
• Qualified applicant: Producer of advanced biofuels
• For more information: See RBS website—http://www.rurdev.usda.gov/rbs/busp/
9005Biofuels.htm
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Biofuels Incentives: A Summary of Federal Programs

Feedstock Flexibility Program for Producers of Biofuels (Sugar)
• Administered by: Commodity Credit Corporation (CCC)
• Annual funding: Such sums as necessary are authorized to be appropriated—no
appropriation to date
• FY2010 Appropriation: None
• Established: 2008 by the Food, Conservation, and Energy Act of 2008, §9001
(P.L. 110-246)
• Scheduled termination: None
• Description: Authorizes the use of CCC funds to purchase surplus sugar, to
ensure the sugar program operates at no-net-cost, to be resold as a biomass
feedstock to produce bioenergy.
• Qualified applicant: Producer of biofuels using eligible sugar as a feedstock
Biomass Crop Assistance Program (BCAP)
• Administered by: Farm Service Agency (FSA)
• Annual funding: Commodity payment—depends on the number of applications
• Established: 2008 by the Food, Conservation, and Energy Act of 2008, §9001
(P.L. 110-246)
• Scheduled termination: End of FY2012
• Description: Dollar-for-dollar matching payments for collection, harvesting,
storage, and transportation (CHST) of biomass to qualified biofuel production
facilities (as well as bioenergy or biobased products), up to $45 per ton
• Qualified applicant: Person who delivers eligible biomass to a qualified facility
• For more information: See FSA website—http://www.fsa.usda.gov/FSA/webapp?
area=home&subject=ener&topic=bcap
Rural Energy for America Program (REAP)
• Administered by: RBS
• Annual funding: $255 million total in mandatory spending from FY2009-
FY2012; an additional authorization of $25 million annually for FY2009-
FY2012
• FY2010 Appropriation: $99.4 million in discretionary and mandatory spending to
cover $19.7 million in grants and $388 million in loans ($60 million in FY2009
to cover $30 million in grants and $300 million in loans)
• Established: 2008 by the Food, Conservation, and Energy Act of 2008, §9001
(P.L. 110-246)
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Biofuels Incentives: A Summary of Federal Programs

• Scheduled termination: End of FY2012
• Description: This program replaced the Renewable Energy Systems and Energy
Efficiency Improvements program in the 2002 farm bill. The program provides
grants and loans for a variety of rural energy projects, including efficiency
improvements and renewable energy projects. Although REAP is not exclusively
aimed at biofuels projects, the program could be a significant source of loan
funds for such projects.
Biomass Research and Development
• Administered by: National Institute of Food and Agriculture (NIFA)
• Annual funding: $118 million total mandatory spending for FY2009-FY2012; up
to $35 million additional discretionary funding annually
• FY2010 Appropriation: $28 million ($20 million in FY2009)
• Established: FY2001 by the Biomass Research and Development Act of 2000,
§307 (P.L. 106-224); program extended and mandatory appropriations provided
by the Farm Security and Rural Investment Act of 2002, §9008 (P.L. 107-171);
program extended and funding authorization expanded by the Energy Policy Act
of 2005, §941 (P.L. 109-58); significantly modified by the Food, Conservation
and Energy Act of 2008, §9008 (P.L. 110-246)
• Scheduled termination: End of FY2012
• Description: Grants are provided for biomass research, development, and
demonstration projects. Eligible projects include ethanol and biodiesel
demonstration plants.
• Qualified applicant: Wide range of possible applicants
• For more information: http://www.brdisolutions.com/default.aspx
Other USDA Programs
The following programs within the Rural Business Cooperative Service could possibly be used to
assist biofuels producers indirectly:
• Business and Industry (B&I) Guaranteed Loans
• Rural Business Enterprise Grants (RBEG)
• Value-Added Grants
• Rural Economic Development Loan and Grant Programs
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Biofuels Incentives: A Summary of Federal Programs

Department of Energy (DOE)
Biorefinery Project Grants
• Administered by: Office of Energy Efficiency and Renewable Energy
• Annual funding: Approximately $200 million appropriated annually for the
biomass program—not all of this funding will go toward biorefinery project
grants
• FY2010 Appropriation: $220 million for entire biomass program
• Established: FY2001 through funding authorized in various statutes
• Scheduled termination: None
• Description: This program provides funds for cooperative biomass research and
development for the production of fuels, electric power, chemicals, and other
products.
• Qualified applicant: Varies from year to year, depending on program goals in a
given year
• For more information: http://www.eere.energy.gov/biomass/
Loan Guarantees for Ethanol and Commercial Byproducts from
Cellulose, Municipal Solid Waste, and Sugar Cane
• Administered by: DOE
• Annual funding: Not specified
• FY2010 Appropriation: $0
• Established: 2005 by the Energy Policy Act of 2005, §§1510, 1511, and 1516
(P.L. 109-58)
• Scheduled termination: Varies, depending on specific program
• Description: The Energy Policy Act of 2005 authorizes several programs to
provide loan guarantees for the construction of facilities that produce ethanol and
other commercial products from cellulosic material, municipal solid waste, or
sugar cane.
• Qualified applicant: Private lending institutions, to guarantee loans for the
construction of biofuels plants
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DOE Loan Guarantee Program
• Administered by: DOE
• Annual funding: $5.4 million for administrative expenses in FY2008; authority
for $51 billion in loan guarantees for energy projects in FY2008, including $10
billion for renewable energy and energy efficiency; $6 billion additional FY2009
appropriation to cover $49 billion in loans to all projects (not just biofuels)
• FY2010 Appropriation: $43 million for administrative expenses—to be offset by
loan application fees
• Established: 2005 by the Energy Policy Act of 2005, Title XVII (P.L. 109-58)
• Scheduled termination: Not specified
• Description: Title XVII of the Energy Policy Act of 2005 authorizes DOE to
provide loan guarantees for energy projects that reduce air pollutant and
greenhouse gas emissions, including biofuels projects.
• Qualified applicant: Private lending institutions, to guarantee loans for clean
energy projects.
• For more information: http://www.lgprogram.energy.gov/
Cellulosic Ethanol Reserve Auction
• Administered by: DOE
• Annual funding: $1 billion total authorized for all fiscal years; not more than
$100 million may be paid in any given year
• FY2010 Appropriation: None; $5 million in FY2008 for administrative expenses
• Established: 2005 by the Energy Policy Act of 2005, §942 (P.L. 109-58)
• Scheduled termination: Not specified
• Description: Section 942 of the Energy Policy Act of 2005 authorizes DOE to
provide per-gallon incentive payments for cellulosic biofuels until annual U.S.
production reaches 1 billion gallons or 2015, whichever is earlier. DOE finalized
regulations on October 15, 2009. http://www.epa.gov/fedrgstr/EPA-IMPACT/
2009/October/Day-15/i24778.htm.
• Qualified applicant: Any U.S. cellulosic biofuel production facility that meets
applicable requirements.
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Biofuels Incentives: A Summary of Federal Programs

U.S. Customs and Border Protection—Import Duty
for Fuel Ethanol
• Administered by: U.S. Customs and Border Protection
• Annual funding: N/A
• Established: 1980 by the Omnibus Reconciliation Act of 1980 (P.L. 96-499);
amended by the Tax Reform Act of 1986, §423 (P.L. 99-514) extended by the Tax
Relief and Health Care Act of 2006, §302 (P.L. 109-432); further extended by the
Food, Conservation, and Energy Act of 2008, §15333 (P.L. 110-246)
• Scheduled termination: December 31, 2010
• Description: A 2.5% ad valorem tariff and a most-favored-nation duty of $0.54
per gallon of ethanol (for fuel use) applies to imports into the United States from
most countries; most ethanol from Caribbean Basin Initiative (CBI) countries
may be imported duty-free.
• Covered Entities: Fuel ethanol importers
• For more information: CRS Report RS21930, Ethanol Imports and the
Caribbean Basin Initiative (CBI), by Brent D. Yacobucci; Senate Finance
Committee, Summary of House-Senate Agreement on Tax, Trade, Health, and
Other Provisions, December 7, 2006.
Department of Transportation—Manufacturing
Incentive for Flexible Fuel Vehicles
• Administered by: National Highway Traffic Safety Administration
• Annual funding: N/A
• Established: 1975 by the Energy Policy and Conservation Act of 1975 (P.L. 94-
163); amended by various statutes, most recently the Energy Independence and
Security Act of 2007, §109 (P.L. 110-140)
• Scheduled termination: After model year 2019
• Description: Automakers are required to meet Corporate Average Fuel Economy
(CAFE) standards for their passenger cars and light trucks. Manufacturers may
gain credits for the sale of alternative fuel vehicles, including ethanol/gasoline
flexible fuel vehicles (FFVs). However, the credits are limited—the maximum
fuel economy increase allowed through the use of these credits is 1.2 miles per
gallon through model year (MY) 2014. The credits are phased out after MY2014
and are completely eliminated after MY2019.
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Appendix. Summary of Federal Incentives
Promoting Biofuels
Table A-1. Federal Biofuels Incentives by Agency
Original
Administering
Authorizing FY2010
Expiration
Agency Program
Description
Legislation
Appropriation Date
Environmental
Renewable
Mandated use of renewable
P.L. 109-58
N/A None
Protection
Fuel
fuel in gasoline: 4.0 billion
§1501
Agency
Standard
gal ons in 2006, increasing to
36 billion gallons in 2022
Internal
Volumetric
Gasoline suppliers who blend
P.L. 108-357
N/A End
of
2010
Revenue Service Ethanol
ethanol with gasoline are
§301
Excise Tax
eligible for a tax credit of 45
Credit
cents per gal on of ethanol
Small
Ethanol
An ethanol producer with
P.L. 101-508
N/A
End of 2010
Producer
less than 60 million gallons
Credit
per year in production
capacity may claim a credit of
10 cents per gal on on the
first 15 million gallons
produced in a year
Biodiesel
Tax
Producers of biodiesel or
P.L. 108-357
N/A
End of 2009
Credit
diesel/biodiesel blends may
– Expired
claim a tax credit of $1.00
per gallon of biodiesel.
Small
Agri-
An agri-biodiesel (produced
P.L. 109-58
N/A
End of 2009
Biodiesel
from virgin agricultural
– Expired
Producer
products) producer with less
Credit
than 60 million gallons per
year in production capacity
may claim a credit of 10 cents
per gal on on the first 15
million gallons produced in a
year
Renewable
Producers of renewable
P.L. 109-58
N/A
End of 2009
Diesel Tax
diesel (similar to biodiesel,
– Expired
Credit
but produced through a
different process) may claim a
tax credit of $1.00 per gallon
of renewable diesel
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Original
Administering
Authorizing FY2010
Expiration
Agency Program
Description
Legislation
Appropriation Date
Credit
for
Producers of cel ulosic biofuel P.L. 110-246
N/A
End of 2012
Production
may claim a tax credit of
of Cellulosic
$1.01 per gallon. For
Biofuel
cel ulosic ethanol producers,
the value of the production
tax credit is reduced by the
value of the volumetric
ethanol excise tax credit and
the smal ethanol producer
credit—the credit is currently
valued at 46 cents per gallon.
The credit applies to fuel
produced after December 31,
2008.
Special
Plants producing cellulosic
P.L. 109-432
N/A
End of 2012
Depreciation
biofuels may take a 50%
Allowance
depreciation allowance in the
for Cellulosic first year of operation,
Biofuel Plant
subject to certain restrictions
Property
Alternative
A credit of up to $50,000 is
P.L. 109-58
N/A End
of
2010
Fueling
available for the installation of §1342
Station
alternative fuel pumps,
Credit
including E85 (85% ethanol
and 15% gasoline)
Department of
Biorefinery
Loan guarantees and grants
P.L. 110-246
$245 million to
End of
Agriculture
Assistance
for the construction and
§9001
guarantee $691
FY2012
retrofitting of biorefineries to
million in loans
produce advanced biofuels
Repowering
Grants to biorefineries that
P.L. 110-246
$35 million in
End of
Assistance
use renewable biomass to
§9001
FY2009
FY2012
reduce or eliminate fossil fuel
use
Bioenergy
Provides payments to
P.L. 110-246
$55 million
End of
Program for
producers to support and
§9001
FY2012
Advanced
expand production of
Biofuels
advanced biofuels
Feedstock
Authorizes the use of CCC
P.L. 110-246
No
None
Flexibility
funds to purchase surplus
§9001
appropriation
Program for
sugar, to be resold as a
to date
Producers of
biomass feedstock to
Biofuels
produce bioenergy
(Sugar)
Biomass
Provides financial assistance
P.L. 110-246
Dol ar-for
End of
Crop
for biomass crop
§9001
dollar
FY2012
Assistance
establishment costs and
commodity
Program
annual payments for biomass
payment
(BCAP)
production; also provides
payments to assist with costs
for biomass col ection,
harvest, storage, and
transportation
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Biofuels Incentives: A Summary of Federal Programs

Original
Administering
Authorizing FY2010
Expiration
Agency Program
Description
Legislation
Appropriation Date
Rural
Energy
Loan guarantees and grants
P.L. 110-246
$99.4 million to
End of
for America
for a wide range of rural
§9001
cover $19.7
FY2012
Program
energy projects, including
million in grants
(REAP)
biofuels.
and $388
million in loan
guarantees
Biomass
Grants for biomass research,
P.L. 106-224
$28 million End
of
Research and development, and
FY2015
Development demonstration projects
Department of
Biorefinery
Funds cooperative R&D on
Various
$220 million
None
Energy
Project
biomass for fuels, power,
statutes
total for
Grants
chemicals, and other
biomass
products
program
Loan
Several programs of loan
P.L. 109-58
No
Varies
Guarantees
guarantees to construct
§§1510, 1511, appropriation
for Ethanol
facilities that produce ethanol
and 1516
to date
and
and other commercial
Commercial
products from cellulosic
Byproducts
material, municipal solid
from Various waste, and/or sugarcane
Feedstocks
DOE
Loan
Loan guarantees for energy
P.L. 109-58
$43 million
None
Guarantee
projects that reduce air
Title XVII
FY2010
Program
pollutant and greenhouse gas
appropriation
emissions, including biofuels
to be offset by
projects
loan fees
Approximately
$100 billion in
loan authority
from FY2008
and FY2009
appropriations;
$10 billion in
loan authority
for renewable
energy and
energy
efficiency
Cellulosic
Authorizes DOE to provide
P.L. 109-58
No FY2010
August 8,
Ethanol
per-gal on payments to
§942
appropriation
2015
Reserve
cel ulosic biofuel producers
Auction
$5 million in
FY2008 for
administrative
expenses
U.S. Customs
Import Duty
All imported ethanol is
P.L. 96-499
N/A
End of 2010
and Border
for Fuel
subject to a 2.5% ad valorem
Protection
Ethanol
tariff; fuel ethanol is also
subject to a most-favored-
nation added duty of 54 cents
per gallon (with some
exceptions)
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Biofuels Incentives: A Summary of Federal Programs

Original
Administering
Authorizing FY2010
Expiration
Agency Program
Description
Legislation
Appropriation Date
Department of
Flexible Fuel
Automakers subject to
P.L. 94-163
N/A
Incentive
Transportation
Vehicle
Corporate Average Fuel
expires
Production
Economy (CAFE) standards
after model
Incentive
may accrue credits under that
year 2019
program for the production
and sale of alternative fuel
vehicles, including
ethanol/gasoline flexible fuel
vehicles (FFVs)
Source: CRS.

Author Contact Information

Brent D. Yacobucci

Specialist in Energy and Environmental Policy
byacobucci@crs.loc.gov, 7-9662


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