"U.S. Ethanol Industry Faces Subsidy Battle Next Year"

"U.S. ethanol makers face a battle over reforming subsidies next year after current incentives are rolled over in the tax package signed into law by President Barack Obama on Friday.

The new law extends the 45-cents-per-gallon blenders' credit worth up to $6 billion a year and the 54-cents-per-gallon tariff on imports through 2011. It also revives through 2011 an incentive of $1.00 per gallon for the smaller biodiesel industry which expired at the end of 2009.

But it left the battle to reform the incentives -- possibly transforming the blender tax credit into a lower-cost subsidy for pipelines and new fuel pumps -- until next year.

Foodmakers and livestock producers say ethanol subsidies shrink margins for their products because they raise prices for corn, the main grain used to make ethanol. Nearly 40 percent of the U.S. corn crop goes to ethanol, and corn futures prices are at two-year highs."

Charles Abbott and Timothy Gardner report for Reuters December 20, 2010.

SEE ALSO:

"Ethanol Gets A Boost; Will It Return The Favor?" (NPR)

"U.S. Automakers Sue EPA Over Higher Ethanol Blends" (Reuters)

"E15 Fears: More Ethanol in Gasoline Is Bad News for Power Equipment, Critics Say" (Washington Post)