Governors’ Ethanol Coalition Presents Recommendations

Member governors of the Governors’ Ethanol Coalition, whose mission is “to increase ethanol use, decrease imports, and improve the environment and economy,” believe providing decisive leadership to further expand production in ways that deliver this renewable fuel to consumers at lower prices, more efficiently, and in greater quantities is fundamental to achieving a biofuels future for America. As such, they have compiled a report focusing on recommendations: “Ethanol from Biomass: How to Get to a Biofuels Future.”

Introduction from the Report Two years ago, the Governors’ Ethanol Coalition recommended several policies to dramatically expand the production and use of ethanol. The recommendations — Ethanol from Biomass: America’s 21st Century Transportation Fuel — emerged from the governors’ deep concern that the combination of increasing global competition for oil, higher prices, and the massive transfer of their states’ wealth to unstable oil producing nations, as well as the impact of oil use on our environment, was untenable. With the governors’ encouragement, Congress and the President enacted the Renewable Fuels Standard (RFS) and authorized expanded ethanol research efforts and production incentives as a part of the Energy Policy Act of 2005. These and other efforts resulted in the production of 5.0 billion gallons of ethanol in 2006, the addition of 3.5 billion gallons of new production capacity under construction today, and the likelihood the nation will exceed the 2012 goal of the RFS of 7.5 billion gallons of annual ethanol production in 2008. Even as more ethanol is produced, the governors believe providing decisive leadership to further expand production in ways that deliver this renewable fuel to consumers at lower prices, more efficiently, and in greater quantities is fundamental to achieving a biofuels future for America. The governors envision increasing ethanol’s contribution to the U.S. motor fuel supply from the few percentage points of today, to replace 25 percent of U.S. motor fuel demand by 2025. According to a study commissioned by the Governors’ Ethanol Coalition, the resulting growth from providing only 20 percent of the nation’s gasoline supply with biofuels would reduce the oil trade deficit by $52 billion annually.1 Strikingly, this amount would displace about 10 billion barrels of oil over 20 years or an amount equal to one third of the United States’ proven oil reserves. Realizing this vision requires bold policies, including the following provisions: * Expanding the Renewable Fuels Standard to include a short-term target of 12 billion gallons a year of ethanol and biodiesel utilization by 2010, and longer-term British thermal unit-based targets of 15 percent of total motor fuels consumption by 2015 and 25 percent by 2025, with equal incremental steps provided for each year in between; * Assigning a financial value to the RFS cellulosic ethanol 2.5:1 trading credit by converting the credit into a more practical Cellulosic Ethanol Production Tax Credit (“CETOH PTC”) valued at 1.5 times the current Volumetric Ethanol Excise Tax Credit (VEETC) level ($0.765/gal.). Cellulosic ethanol producers would also be eligible for the traditional VEETC as discussed below, and would therefore benefit from a total value of $0.765 plus the value of VEETC at that time; * Establishing a timetable for delivering 85% Ethanol/15% gasoline infrastructure on a regional basis – expanding from several major metropolitan areas to an entire region or regions within five years. This expansion would be synchronized with the production of not less than 70 percent of new vehicles sold being ethanol flex-fuel capable within 10 years; and * Providing adequate funding for the Energy Policy Act of 2005 authorized biofuel research, demonstration, and incentive programs. Ethanol is now a mainstream American fuel that has been met with enthusiasm by consumers as they seek choices in the fuel they purchase and vehicles they drive. These choices are driven by price, national security and environmental concerns, and a desire to keep money working at home creating jobs rather than turning it over to oil exporting regimes.