Congress has finally passed the 2007 Farm Bill, complete with energy provisions that gently steer America’s burgeoning biofuel industry away from corn and soy fuels towards more sustainable energy crops, a much-needed boost for celluosic biofuel brewers.
Congress added a new $1.01 per gallon production tax credit for cellulosic biofuel, good through the end of 2012. This is great news for startups racing to get their cellulosic biorefineries online and should help the country meet the renewable fuel standard’s cellulosic ethanol goal of 21 billion gallons by 2022.
Off the farm, the bill provides $320 million in loan guarantees for the construction of those biorefineries. This is in addition to a separate, vaguely defined $300 million in mandatory funding to support production of advanced biofuels.
Farmers get $70 million to experiment with new energy crops, plus a Biomass Crop Assistance Program to help them transition to this new cellulosic-biofuel-centric way of agriculture.
Interestingly, the bill trims subsidies for corn ethanol to 45 cents a gallon from 51 cents. The move shows how the U.S. is, in theory, trying to move away from unsustainable corn ethanol and towards cellulosic. But the renewable fuel standard from last year’s Energy Bill requires corn ethanol consumption to rise to 9 billion gallons this year and 15 billion gallons by 2022. So this disconnect shows just how out of sync Congress is with their energy policies.
What the farm bill didn’t do was change the 54-cent-per-gallon tariff on ethanol imports, and instead extended it to 2010. Many critics, including presumptive Republican presidential candidate John McCain, want to cut this subsidy based on a belief that it will spur domestic innovation.
President Bush has said he will veto this version of the bill as he sees no reason to increase crop subsidies amid rising commodity prices, especially since much of the money would go to big agribusiness. But such a move will almost certainly be overridden by Congress. The bill passed by 318-106 in the House and 81-15 in the Senate, more than enough votes to override an executive veto.
The cellulosic biofuel industry now has Congress firmly in their corner. Now it needs to figure out how to make cellulosic biofuel economically feasible. Or at least within $1.01 a gallon of breaking even.
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