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New U.S. Tax Legislation Set to Include Extensions to Renewable Cash Grants and Ethanol Subsidies

The U.S. Senate is preparing to propose new tax legislation that would include a one year extension of the renewable energy cash grant program and the subsidies for the ethanol industry.

The new bill is set to be introduced on the Senate floor on Monday.  The renewable energy industry has been working furiously to lobby for the cash grant program to be extended — it was set to expire at the end of this month. 

The cash grant program, introduced in 2009 as part of the American Recovery and Reinvestment Act, offers companies federal grants equal to 30% of the cost of installing new renewable facilities.  According to the U.S. Treasury Department, US$5.5 billion in grant money has been dispersed since the program was enacted. 

The cleantech industry says the program is essential for the continued development of clean energy in America.  Denise Bode, CEO of the American Wind Energy Association, said the one year extension would stave off industry stagnation: “Factories across the country will restart production lines, recall workers, and avoid layoffs that would have followed the loss of this key incentive for wind energy.  With consistent policies like this one, wind energy can generate 20% of America’s electricity within 20 years, and employ half a million Americans.”

It is estimated the one year extension of the grant program will cost US$3 billion.

Meanwhile, the new legislation will also bear good news for the U.S. corn ethanol industry.  An extension to the 45 cent per gallon tax gallon for ethanol blenders as well as the 54-cent ethanol import tariff are also expected to be part of Monday’s bill.  According to The Hill, the one year extension of this subsidy will cost over US$4.8 billion.

Corn-based ethanol has come increasingly under fire for its elevated position within the U.S. biofuel industry.  Detractors say corn ethanol is neither sustainable nor environmentally conscious; furthermore, that its subsidies hurt competition from other biofuels in the U.S. market.  Its supporters say those claims are unfounded and that corn ethanol is best biofuel to help wean America from its addiction to foreign oil.

The subject has become increasingly volatile and divided.  Within the last two weeks there have been two different calls within the U.S. Senate by bipartisan coalitions for the subsidies to be abolished and also for them to be extended.

One program that will not be included in the new legislation is the “clean-energy manufacturing credits,” which offered a tax incentive for U.S. manufacturers to invest in clean technologies.  This program was highly popular and successful.

The bill has yet to be introduced, let alone debated and subjected to inevitable amendments.  So, the provisions as they are laid out today could very well look different if and when the legislation is passed into law.

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Nathanael Baker's picture

Thank Nathanael for the Post!

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