Buffeted by the economic crisis and a drop in the oil price, US producers of corn ethanol are encountering increasing scepticism from the legislators on Capitol Hill even as producers of the 'greener' cellulose-derived ethanol struggle to move beyond basic research and development.
Producers of ethanol from corn (maize) starch got what they needed out of a tax package enacted by the US Congress last week: a year's extension of the subsidies and protections granted under current law. But they had been hoping for a longer extension, to avoid a similar battle next year, and industry officials say the government still is not giving advanced ethanol companies the kind of support they need to scale up their technologies and bring down costs.
The tax package brokered by US President Barack Obama focused on tax-cut extensions and unemployment benefits, but it also included a host of incentives for energy development. Among them was a one-year extension of a tax credit giving refiners nearly 12 cents of federal cash for every litre of corn ethanol they blend into gasoline. A tariff of more than 14 cents per litre on imported ethanol was also extended through 2011.
These are shorter times than industry wanted, marking a victory for environmentalists and budget hawks who see the roughly US$6-billion-a-year benefit as wasteful spending on a mature industry. Critics say the corn ethanol credit eats up scarce federal resources and puts cellulosic ethanol at a competitive disadvantage.