The U.S. Senate Finance committee has voted to more than double the subsidy for ethanol produced from cellulose. This is triply good news, because cellulosic alcohol is an important step toward reducing U.S. dependence on foreign oil, slowing global warming and protecting the precious water resources underlying the Great Plains.
The cellulosic alcohol subsidy is part of a package of agriculture-related tax provisions that will complement the upcoming Farm Bill. The bill also makes it easier for farmers to receive disaster payments and creates a new 30 percent tax credit for small wind energy investments by homes, ranches and small business. The credit is limited to $4,000 a year.
The bill creates a first-ever tax credit specifically for cellulosic biofuels. Originally set at 50 cents a gallon, the subsidy was raised to 67 cents Wednesday at the behest of Colorado Sen. Ken Salazar. That 67 cents is in addition to the existing 51-cent per gallon credit for ethanol distilled from starchy sources such as corn. Current law also provides a 10-cent per gallon credit for producers making less than 60 million gallons per year. Combining all three credits would yield a subsidy of $1.28 a gallon for cellulosic ethanol producers. The special 67-cent subsidy would end after any year in which 1 billion gallons of cellulosic alcohol was produced.
A billion gallons sounds like a lot of ethanol. But Americans burn about 400 million gallons of gasoline a day. While the existing ethanol industry has made only a modest dent in that oil consumption, it has sent the prices of corn and other grains soaring. That’s why it’s critical to shift to cellulosic ethanol from corn stalks, wheat straw and other agricultural by-products. Switchgrass, wood chips and even citrus peels can also be used to make cellulosic ethanol.
The U.S. Department of Energy estimates it costs about $1.28 more per gallon to produce cellulosic ethanol than it does from the traditional sources such as corn. The new subsidy is designed to bring those production costs down by stimulating large-scale cellulosic production, as urged by President Bush in his State of the Union address.
Because so much less energy is used in production of cellulosic ethanol than starch-based ethanol, it is a more efficient way to reduce greenhouse gas emissions such as carbon dioxide. A University of Chicago study found cellulosic ethanol reduces greenhouse gas emissions by 85 percent over gasoline. By contrast, ethanol from corn typically reduces such emissions by 18 percent to 29 percent.
Happily for Colorado, wheat straw or switchgrass can be grown with dryland farming techniques. In the semi-arid West, corn is usually grown by irrigation. Cellulosic alcohol can thus help keep the ethanol boom going in Eastern Colorado while conserving our scarce water resources.
While on the subject of renewable energy, we’d also like to commend Denver International Airport for its new solar energy project, which is designed to reduce carbon emissions by more than 5 million pounds a year. The system will use 9,800 solar panels to produce 3.5 million kilowatt-hours of clean energy annually — another step toward a sustainable energy future.
