Corn-based ethanol, beloved by farm states and maligned by some environmentalists, received more than three-quarters of all federal renewable energy tax credits in 2007 – a balance that the Environmental Working Group says needs to change.

The Washington, D.C.-based group released a report Thursday citing U.S. Department of Energy data showing the corn-based ethanol industry took about $3 billion in federal tax credits in 2007, or 76 percent of all the tax credits going to renewable energy nationwide. That could grow to $5 billion by 2010, the report stated.

Solar, wind and geothermal power, which the Environmental Working Group supports as more environmentally friendly, received about $750 million in tax credits in 2007, or about 19 percent of the total, and biodiesel makers received $180 million, or 5 percent of the total.

Tax incentives make up about four-fifths of all federal support for renewable energy, making it an important measure for which industries the government is most heavily backing, said Craig Cox, the Environmental Working Group's Midwest director and author of the report, said Friday.

The Environmental Working Group wants to do away with ethanol's subsidies and link any future subsidies for biofuels to those that can "prove themselves as a more promising solution," he said.

"Then it's time to talk about what the next steps are," Cox said. "Clearly I think the administration and Congress need to take a hard look at where they're putting tax dollars in our renewable energy portfolio, and look at what the appropriate distribution of those public investments are."

Corn-based ethanol has come under attack from critics that say it may not reduce greenhouse gas emissions and can lead to other negative environmental impacts, although those criticisms are hotly disputed (see Tesoro Sues California Over Ethanol Mandate and Biofuels to More Then Double by 2030).

Ethanol makers have disputed their critics, saying their product is the only biofuel with short-term viability to make a dent in the nation's appetite for petroleum-based fuel.

The Renewable Fuels Association, an ethanol trade group, has also pointed to the industry's role in bringing hundreds of thousands of jobs to rural areas.

"Additional investment in power generation technologies should not come at the expense of the only renewable fuel technology making a measurable impact on this nation's dependence on foreign oil," association spokesman Matt Hartwig said Friday in an email response to the report. "Expanding the investment in all renewables is the only way for this nation to secure its energy future."

But corn-based ethanol makers have suffered from a boom-and-bust cycle, as the massive growth in production has led to higher corn prices, cutting into producers' profit margins and leading some to insolvency (see The Year in Biofuels, VeraSun Files for Bankruptcy and Ethanol's Tough Times Continue.)

U.S. corn-based ethanol production has grown from 3.9 billion gallons in 2005 to a projected 9 billion gallons in 2008, according to the Renewable Fuels Association. Refiners of ethanol receive a 51-cent tax credit for every gallon they use, affectively lowering the price of the fuel in the market.

Solar, wind and geothermal energy plants, on the other hand, receive a variety of investment and production tax credits, as well as incentives for selling their power into markets in some states. These industries have asked Congress for changes to federal incentives to speed investment in the midst of the economic downturn, including asking the government to make cash payments in lieu of tax credits (see Industry Groups Call for Changes to Federal Incentives).

Ethanol maker are also lining up for federal aid. According to the Wall Street Journal, the Renewable Fuels Association last month asked lawmakers and the incoming administration of President-elect Barak Obama for $1 billion in short-term credit and a $50 billion federal loan guarantee program.

The association also asked that any automaker receiving federal bailout money be forced to produce only "flex-fuel" vehicles that can run on fuel made of 85 percent ethanol and 15 percent gasoline. Most ethanol sold in the country today comes as a 5 percent to 10 percent gasoline blend.

The Obama campaign's energy platform did call for all new vehicles sold in the country to be "flex-fuel" vehicles by the end of his first term. It also called for boosting production of so-called "next generation" biofuels, made from non-food sources such as grasses, waste and algae, to 60 billion gallons by 2030, up from the current federal goal of 21 billion gallons by 2022 (see Ethanol, Farm Industries Split on Candidates).

Cox of the Environmental Working Group said those next-generation biofuels may "make a contribution to our renewable energy future."

"But the jury's still out on some very basic questions about advanced biofuels, including whether ethanol really is the appropriate fuel," he added.

Companies seeking to use feedstocks like algae, grasses and municipal waste to make butanol, bio-oil or other hydrocarbons may have more energy-efficient products that do more to reduce greenhouse-gas emissions, he said (see Algae Biofuel Investments Explode and Amyris: We're Better Than Biodiesel, Ethanol or Gas).

Corn ethanol makers say that their industry needs to thrive in order to create a broader market for ethanol made from non-food sources. But reports have cast doubt on the industry's ability to meet those goals, either for corn-based ethanol production or ethanol made from non-food sources (see U.S. Won't Meet its own Biofuel Mandate and Consumers to Pick Up Tab for Off-Target Cellulosic Ethanol Industry).

In a Thursday speech to boost his massive economic stimulus proposal, Obama called for the nation to double its renewable energy production in three years. But while he stressed how this push could lead to new jobs in solar and wind power industries and in making more fuel-efficient cars and buildings, he did not mention biofuels (see Obama Calls for Doubling Renewable Energy in Three Years). 

Tags: biofuel, corn, ewg, federalgovernment, obama