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Thursday, February 24, 2011

Ethanol industry discusses reforming tax credit

Yesterday we reported the ethanol industry had lost one of its strongest congressional supporters in the budget debate, but even before that blow, industry leaders were discussing a new path forward in Washington for the industry. At the National Ethanol Conference in Phoenix, Renewable Fuels Association President Bob Dinneen said ethanol should be part of a broad conversation about motor-fuel tax policy, but few other speakers at the event expected Congress to address comprehensive energy legislation this year, the weekly Washington newsletter Agri-Pulse reports.

The message from the debate about extending ethanol's per-gallon  tax credit "was unambiguous," Dinneen said during his annual "State of the Industry" address. "Our industry needs to work with Congress and the administration to reform the tax incentive moving forward." Dinneen went on to advocate for determining how to isolate consumers from fluctuations in the global oil market, encouraging investments in infrastructure and flex-fuel vehicles and discussing how the industry can commercialized new technologies using new feedstocks while continuing the evolution of the industry in a sustainable way.

Suggestions for reform included: incorporating a refundable producer tax incentive, linking the incentive only to gallons above the Renewable Fuels Standard, limiting the incentive to only mid-level ethanol blends and E85, phasing out the incentive while phasing in incentives for flex fuel vehicles and blender pumps, and creating a carbon-based performance credit and making the incentive tied to the price of oil and corn processors' profit margins. "Frankly, each of these has both advantages and disadvantages," Dinneen said. "But we must allow dispassionate debate, based on fact and market analysis, and guided by political reality." Agri-Pulse is a subscription-only newsletter but offers a free four-issue trial subscription.

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