June 16, 2011 / 8:14 PM / 6 years ago

Factbox: Senate looks at plans to cut ethanol subsidies

3 Min Read

(Reuters) - The Senate voted overwhelmingly on Thursday to eliminate $6 billion in subsidies for the ethanol industry, although the measure must clear high political hurdles before it would take effect.

While farmers and the ethanol industry like biofuels programs, the incentives have been targeted by environmentalists and lawmakers looking to cut spending, as well as the World Bank, which says they are driving up world food prices.

The Obama administration said it wants changes to U.S. ethanol policy but not a complete repeal of incentives.

The U.S. government has mandated that 13.95 billion gallons of renewable fuels be produced this year, and 36 billion gallons of renewable fuel must be blended by 2022.

Here are some details about proposals for ethanol subsidies:

Eliminate Tax Credit, Import Tariff

The Senate voted 73-27 to cut the 45 cents given to refiners for every gallon of ethanol blended with gasoline. The amendment also would cut the 54 cents-per-gallon tariff on imported ethanol from Brazil and other countries. If enacted, it would save $6 billion annually.

The tax credit is set to expire at the end of the year. The amendment received bipartisan support, but it was attached to an economic development bill that will face a difficult time passing the Senate.

A previous vote on a similar amendment earlier this week failed. Democratic Senator Dianne Feinstein, who co-authored the amendments, said that was because Republican Tom Coburn forced a vote too quickly.

(For the text of the Feinstein amendment, click here: r.reuters.com/gur22s)

Cut Funds for Ethanol Infrastructure

The U.S. House on Thursday passed an amendment blocking the use of federal funds to build ethanol blender pumps and storage facilities. But the Senate voted down a similar measure from Senator John McCain.

Tie Subsidies to Oil Prices

Democratic Senator Amy Klobuchar and Republican John Thune introduced a bill to end the ethanol tax break and swap it for a variable incentive tied to the price of oil.

The bill could be more successful, because it would direct some of the savings to ethanol infrastructure programs, which the industry likes, and extend tax incentives to next-generation biofuel technologies.

(For the text of the bill, click here: r.reuters.com/xer22s)

Trim Subsidies, Don't Cut Them

Farm-state senators, earlier this month, offered legislation to modify subsidies instead of cutting them.

The measure, introduced by Iowa Republican Charles Grassley, would extend the tax credit for ethanol makers for two years, but reduce it to 20 cents per gallon in 2012 and 15 cents per gallon in 2013.

The ethanol industry backs the move and, analysts said, it could satisfy some lawmakers' cost-cutting goals if a full repeal doesn't pass.

(For the bill text, click here: r.reuters.com/hur22s)

Reporting by Emily Stephenson; Editing by Carole Vaporean

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