World Energy Outlook 2006

Table 14.4: US Biofuels Production Capacity
Available Under construction Total
end-August 2006 or planned
kb/d Mtoe kb/d Mtoe kb/d Mtoe
Ethanol 319 9.4 193 5.7 512 15.1
Biodiesel 26 1.2 47 2.1 72 3.3
Total 344 10.6 240 7.8 584 18.4
Source: IEA analysis based on data from the Renewable Fuels Association website
(www.ethanolrfa.org/industry/locations/) and the National Biodiesel Board website (www.biodiesel.org/).
The development of the corn-based ethanol industry has been boosted by a
federal excise-tax credit on the sale of ethanol, currently amounting to $0.51
per gallon for all blends ($0.13 per litre). Some states also have partial tax
exemptions and provide direct support to ethanol producers. To protect
US corn growers, an import tariff of $0.54 per gallon ($0.14 per litre) is
applied. Federal and state fleet alternative-fuel vehicle purchase mandates and
voluntary programmes, such as Clean Cities, have also boosted ethanol use.
Corn and soybean growers also receive generous federal subsidies. Roughly
10% of the corn crop is currently used for ethanol production. Support for
biodiesel is much more recent. In 2005, Minnesota became the first state to
introduce a requirement that diesel contain at least 2% biodiesel. A federal
excise-tax credit of $0.01 per gallon of crop-based biodiesel for each percentage
point share in the fuel blend was introduced in January 2005.
The phase-out of MTBE from the US gasoline pool is giving added impetus to
ethanol demand and prices. Under the 2005 Energy Bill, refiners are no longer
required to add any oxygenates, such as MTBE, to gasoline blends, though
certain emission limits still apply. MTBE has been implicated in the
contamination of groundwater wells in many areas around the nation and the
compound is also believed to be a carcinogen. More than half of the states have
now adopted legislation banning its use and refiners have decided to drop the
additive altogether to avoid the threat of costly legal action where it is still
allowed. The US Energy Information Administration estimates that the phaseout
of MTBE could raise ethanol demand in 2006 by approximately 130 kb/d
– an increase of almost 50% on 2005 (USDOE/EIA, 2006). US ethanol
capacity is expected to jump by about a quarter in 2006, but even this may not
be sufficient to meet all of the new demand. As a result, there are calls for fuel
standards to be eased and for import tariffs to be removed to prevent domestic
402 World Energy Outlook 2006 - FOCUS ON KEY TOPICS