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Help Desk Archive


Biodiesel tax incentives
Question submitted on 1/31/07

I have heard about a $1/gallon government incentive for biodiesel. I would like some information about who provides the incentive and who gets it.

Answer:

This incentive is also known as the Biodiesel and Ethanol (VEETC) Tax Credit. According to the U.S. Department of Energy, the American Jobs Creation Act of 2004 (Public Law 108-357) created tax incentives for biodiesel fuels and extended the tax credit for fuel ethanol. The biodiesel credit is available to blenders/retailers beginning in January 2005. It also established the Volumetric Ethanol Excise Tax Credit (VEETC), which provides ethanol blenders/retailers with $.51 per pure gallon of ethanol blended or $.0051 per percentage point of ethanol blended (i.e., E10 is eligible for $.051/gal; E85 is eligible for $.4335/gal). The incentive is available until 2010.

Section 1344 of the Energy Policy Act of 2005 extended the tax credit for biodiesel producers through 2008. The credits are $.51 per gallon of ethanol at 190 proof or greater, $1.00 per gallon of agri-biodiesel, and $.50 per gallon of waste-grease biodiesel. If the fuel is used in a mixture, the credit amounts to $.0051 per percentage point ethanol or $.01 per percentage point of agri-biodiesel used or $.0050 per percentage point of waste-grease biodiesel (i.e. E100 is eligible for $.51 per gallon) (Source: http://www.eere.energy.gov/afdc/progs/view_ind_fed.cgi?afdc/319/0)

For more details on this program and other incentives for using alternative fuel sources, see:

Getting bucks back for your biodiesel production
http://www.alternativeenergyhq.com/2006/12/24/getting-bucks-back-for-your-biodiesel-production-government-incentives-biodiesel/

State & Federal Incentives & Laws
http://www.eere.energy.gov/afdc/laws/incen_laws.html
This database captures state and federal laws and incentives related to alternative fuels and vehicles, air quality, fuel efficiency, and other transportation-related topics. State-level information is updated annually after each state's legislative session ends. Federal information is updated after enacted legislation is signed into law.

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