Great Lakes Regional Pollution Prevention Roundtable
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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.


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:

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

Getting bucks back for your biodiesel production

State & Federal Incentives & Laws
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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