Ask POET Episode 3: the Ethanol Tax Credit

The question for the third episode of Ask POET comes from R-Squared Energy blogger Robert Rapier. His question, which you can watch in the video from POET TV, is whether or not the ethanol industry needs the tax credit known as VEETC (Volumetric Ethanol Excise Tax Credit) when the Renewable Fuel Standard already mandates the use of ethanol.

The question was well-timed considering Growth Energy's announcement of the Fueling Freedom Plan, which calls for the redirection and phase out of government support for ethanol in return for a level playing field. As Jeff Broin, CEO of POET, points out in the video, government support is necessary for the ethanol industry today, because oil still has generous subsidies and an de facto mandate for 90 percent of the market.

Here's episode 3 of Ask POET:

Ask POET is a monthly program on POET TV where we answer the public's questions about ethanol and the role that we, as the largest producer, play in that industry. If you'd like to ask a question for a future episode, leave a comment below or at POET TV. Or, you can email your question to askpoet@poet.com.

Comments

[Mary]

Hello,

I'd like a little clarification on the Fueling Freedom Plan. The plan calls for a re-direction of tax credits towards building infrastructure instead of a blender's credit. However, there is a caveat that an exception must be made for cellulosic ethanol. Is the proposal to use X% of tax credits for infrastructure, and Y% for cellulosic ethanol? Or is it to first re-direct funds towards cellulosic, and then towards infrastructure? Why can't cellulosic succeed without the tax credit?

[Nathan Schock]

Mary,
Good question. There is currently a $1 per gallon tax credit for cellulosic ethanol. We propose keeping that tax credit in place because it is currently much more expensive to produce ethanol from cellulose than it is to produce ethanol from grain. The tax credit that goes to grain would be phased out and redirected to infrastructure. Thanks!