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5 Biofuels Subsidies
Pages 91-112

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From page 91... ... Although the tax credits and the tariff have expired, the renewable fuels standards are playing an increasingly important role in the motor fuels sector. The committee devoted considerable attention to the taxation and regulation of biofuels for three principal reasons. Read the entire page →
From page 92... ... This credit was limited to the first 15 million gallons of annual ethanol production from producers capable of distilling less than 60 million gallons per annum. Producers of cellulosic biofuels received a $1.01 per gallon income tax credit until December 31, 2012, one year after the expiration of the general ethanol income tax credits. Read the entire page →
From page 93... ... ethanol market and thereby decrease the GHG emissions from ethanol fuels used in the United States. Pathway to GHG Impact The various tax credits lowered the cost of biofuels and therefore should have encouraged their substitution for petroleum motor fuels. Read the entire page →
From page 94... ... Fiscal Impact Expenditures on biofuels subsidies represent only a small tax expenditure if measured solely by lost income tax revenue. Ignoring the recently expired excise tax credits, the Treasury Department and Joint Committee on Taxation estimate the 2010 tax expenditures on ethanol and biodiesel at $90 million and $100 million, respectively. Read the entire page →
From page 95... ... and their interaction with investment and production tax credits that differentially treat different biofuel production pathways and feedstocks that are the focus of this report; (3) international linkages in agriculture and energy markets; (4) Read the entire page →
From page 96... ... . Instead, the greenhouse gas implications of alternative policies are assessed by applying a fixed GHG coefficient per unit of fuel for different biofuel production pathways. Read the entire page →
From page 97... ... ANALYSIS OF VOLUMETRIC ETHANOL EXCISE TAX CREDIT (VEETC) , BIODIESEL BLENDER CREDIT, CELLULOSIC BIOFUEL PRODUCER CREDIT, ETHANOL-SPECIFIC DUTY Modeling Results The FAPRI-MU model, described above, is used to estimate the impacts of the identified biofuel provisions on GHG emissions and other key variables. Read the entire page →
From page 98... ... However, the modeling exercise assumes that the cellulosic ethanol component of the mandate will be waived each year, as it has since inception of the program, due to insufficient production capacity. The exercise assumes the EPA resets the cellulosic waiver amount to the level of output that would be produced economically in response to the market price for cellulosic ethanol, the separate renewable fuels credit (RIN) Read the entire page →
From page 99... ... . The second policy scenario that removes all biofuel provisions has a very small incremental impact on GHG emissions, with a central estimate of an additional 0.6 MMT emissions reduction if the three other biofuel provisions were also removed. Read the entire page →
From page 100... ... 0.0007 0.0004 Baseline (with RFS2) Change Relative % Change Relative % to Reference Scenario to Reference Scenario FUEL USE (billion gallons, gasoline equivalent) Read the entire page →
From page 101... ... 1.31 0.00 __ 0.00 __ U.S. FUEL PRICES (wholesale $ per gallon unless otherwise indicated) Read the entire page →
From page 102... ... For the best-guess estimates of the parameters used in this study, the provisions lead to both revenue losses and higher GHG emissions. Fuel Consumption Effects As discussed below, removing the biofuel provisions changes the relative prices of motor fuels. Read the entire page →
From page 103... ... . Key Interaction Effect: Renewable Fuels Standard The modeling results above all assume that the RFS2 mandate remains in place. Read the entire page →
From page 104... ... The effects of provision removal is smaller in the cases of advanced and cellulosic ethanol when there are no RFS2 mandates, primarily because there is very weak demand for those products when the mandate is removed and thus much less substitution among ethanol types. SENSITIVITY ANALYSES Sensitivity Analysis 1: Biofuel Net GHG Coefficients The net GHG effects of each biofuel component are exogenously determined via coefficients used in the FAPRI-MU model. Read the entire page →
From page 105... ... -5.4 -7.0 Federal Expenditures ($ billion) -12.6 -10.1 Tons CO2-e per $ of Revenue 0.0004 0.0007 Reference Change Relative % Reference Change Relative % Scenario to Reference Scenario Scenario to Reference Scenario FUEL USE (billion gallons, gasoline equivalent) Read the entire page →
From page 106... ... 1.31 0.00 __ 0.36 -0.14 -39.0% U.S. FUEL PRICES (wholesale $ per gallon unless otherwise indicated) Read the entire page →
From page 107... ... energy sector -- between sectors (e.g., transportation, industrial, commercial, and residential) and between energy sources that could be caused by the effect of the biofuel provisions and the interacting RFS on relative fuel prices within the United States. Read the entire page →
From page 108... ... . Figure 5-3 shows the impact of removing the provisions on federal revenues, indicating: In the reference scenario, which projects the effects had the ethanol tax subsidies and import tariff stayed in force through 2035, the cost of the biofuel credits rises to roughly $18 billion per year while the ethanol import tariff brings in almost $0.8 to 1.1 billion per year. Read the entire page →
From page 109... ... FIGURE 5-4 Effects of biofuel provisions removal on U.S. CO2 emissions. Read the entire page →
From page 110... ... This result arises in part because the quantitative response on the fuel market is small and in part because the renewable fuel standards constrain the effects of tax changes on ethanol production. SUMMARY This chapter estimates the effects of biofuel tax provisions on global and domestic GHG emissions. Read the entire page →
From page 111... ... Taken together, the modeling results and existing literature suggest that, when the renewable fuel standards are in place, the biofuels provisions of the tax code have a small net effect on global GHG emissions. Although the effects are small, they are likely to increase GHG emissions slightly when key factors such as petroleum substitution and indirect land-use change are taken into account. Read the entire page →

From page 91...

... Although the tax credits and the tariff have expired, the renewable fuels standards are playing an increasingly important role in the motor fuels sector. The committee devoted considerable attention to the taxation and regulation of biofuels for three principal reasons.

5 Biofuels Subsidies Pages 91-112

5 Biofuels Subsidies
Pages 91-112