Using Biofuel Tax Credits to Achieve Energy and Environmental Policy Goals
(Congressional Budget Office) The federal government supports the use of biofuels—transportation fuel produced usually from renewable plant matter, such as corn—in the pursuit of national energy, environmental, and agricultural policy goals. Tax credits encourage the production and sale of biofuels in the United States, while federal mandates specify minimum amounts and types of biofuel usage each year through 2022. Tax credits effectively lower the private costs of producing biofuels relative to the costs of producing their substitutes, gasoline and diesel fuel. Together, the credits and mandates increase domestic supplies of energy and reduce U.S. emissions of greenhouse gases, albeit at a cost to taxpayers and consumers.
…In the future, cellulosic ethanol—made from plant wastes such as corn stalks—could account for a significant share of domestic production of biofuels. Its producers are eligible for a tax credit of $1.01 per gallon if it is produced and blended with gasoline; even with that credit, however, cellulosic ethanol is not commercially viable today and is produced in very limited quantities.
In a study prepared at the request of the Chairman of the Subcommittee on Energy, Natural Resources, and Infrastructure of the Senate Committee on Finance, CBO assesses the incentives provided by the biofuel tax credits for producing different types of biofuels and analyzes whether they favor one type of biofuel over others. In addition, we estimate the cost to U.S. taxpayers of reducing the use of petroleum fuels and emissions of greenhouse gases through those tax credits; we also analyze the interaction of the credits and the biofuel mandates. READ MORE and MORE and MORE Download Study
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