US Farm Bill provides incentives for biofuels

28 May 2008

The US Congress has adopted the Food, Conservation, and Energy Act of 2008 (H.R. 2419)—also referred to as the Farm Bill—which brings a number of incentives for commercialization of biofuels. In passing the $289 billion legislation, the Congress overrode a presidential veto.

Biofuel and bioenergy provisions of the bill, which amount to over $1 billion in total, accelerate the commercialization of “advanced biofuels” (i.e., cellulosic ethanol and other fuels that are not produced from corn kernel starch), encourage the production of biomass crops, and expand the current Renewable Energy and Energy Efficiency Program. Some of the provisions include:

• Biorefinery grants and guarantees: Grants will be available for up to 30% of the cost of developing and building demonstration-scale biorefineries for producing advanced biofuels. The bill also allows for loan guarantees of up to $250 million for building commercial-scale advanced biofuel refineries.
• Tax credit for cellulosic biofuels: A new cellulosic biofuel producer credit is set at $1.01 per gallon. It applies to fuel produced from wood, grasses, or the non-edible parts of plants, and only to fuel produced and used as fuel in the United States.
• Rural Energy for America Program: The US Department of Agriculture’s Renewable Energy and Energy Efficiency Program will be renamed to “Rural Energy for America Program”. The program will provide grants of up to 25% of the cost of renewable energy systems and energy efficiency improvements for agricultural producers and rural small businesses. A new “Rural Energy Self-Sufficiency Initiative” will support efforts to develop community-wide renewable energy systems (such as wood-fueled energy systems).
• Sugar ethanol program: The Secretary of Agriculture is directed to purchase sugar to avoid forfeitures under sugar price support loans, and to sell that sugar to bioenergy producers (such as corn ethanol facilities).
• Biomass R&D: $118 million is provided for the Biomass Research and Development program, conducted by the Department of Agriculture and the Department of Energy.
• Biofuels infrastructure study: The Secretary of Agriculture, in cooperation with the Departments of Transportation, Energy, and the EPA, will conduct of study of the infrastructure needs associated with the expanding production and use of biofuels.

The bill was criticized by a number of countries at the World Trade Organization (WTO) for raising farm support at the time the WTO is working toward an agreement to reduce global agricultural subsidies.

Source: US Congress