USDA suggests new incentives for ethanol By PHILIP BRASHER Register Washington Bureau
August 8, 2006
Washington, D.C. – The Bush administration suggested today several ways of promoting the development of biofuels, including extending tax subsidies and requiring more use of ethanol.
The paper suggests special incentives for production of fuel ethanol from crop waste and trees rather than grain. Other ideas are targeted to wind and solar energy.
The policy suggestions are included in a 31-page paper that the U.S. Agriculture Department has prepared for Congress to consider in writing a new farm bill.
The paper does not endorse any specific proposals, but USDA’s attention to renewable fuels provides further evidence that bioenergy is going to be a significant issue in the next farm bill.
In the paper, USDA economists argue that encouraging the development of biofuels can be good for the environment and reduce the nation’s dependence on foreign oil.
“In a competitive market, market prices usually provide the best stimulus to meet consumer demand in the most cost-effective way. Even so, there is a strong economic rationale for increased government support for the development of domestic alternative energy supplies,” the paper says.
Earlier papers released by USDA have dealt with farm subsidies, conservation and rural development.
"USDA is committed to encouraging the entrepreneurial innovation of America's farmers and ranchers to help build a new energy economy," said Agriculture Secretary Mike Johanns.
An energy bill passed by Congress last year requires motorists to use at least 7.5 billion gallons of biofuels nationwide by the year 2012.
But the USDA paper says the mandate may not provide that much incentive for new production since the industry already is expanding ahead of the yearly targets set by the energy bill.
The paper says that expanding the mandate would “provide a greater production incentive” and encourage the production of ethanol from crop waste and other sources of plant cellulose, or biomass.
Cellulosic ethanol currently costs more to produce than alcohol from corn. But experts say that advances in technology, aided by government funding, should eventually make cellulosic ethanol much more economical.
Congress is due to write a new farm bill in 2007, but some farms groups are pressing Congress to extend existing programs for one or two years.
