Does ethanol make economic sense even without government subsidies?
Current laws provide for a federal tax exemption of 51 cents per gallon of ethanol blended into gasoline. For example, fuel blended with 10 percent ethanol receives a tax credit of 5.1 cents per gallon. E-85, which is 85 percent ethanol by volume, receives a 43 cent credit for each gallon. Legislation passed in 2004 (the Volumetric Ethanol Excise Tax Credit) extends this tax credit through 2010. Even with the federal tax credit, ethanol receives far less government support than the oil industry. “A recent study by the U.S. General Accounting Office found that, since 1968, the oil industry has received approximately $150 billion in tax incentives. By contrast, the ethanol industry has received $11.2 billion through a partial exemption of the federal excise tax and $200 million in income tax credits.” Oil has received 92.4 percent more financial support than ethanol from the government. A 1997 editorial in the New York Times put the real cost of gasoline—including military expenditures t
