U.S. subsidy for ethanol could shift

The change is designed to encourage production of fuel from crop residue.

The subsidy for fuel ethanol could be trimmed to help pay for new incentives to promote the next generation of biofuels.

The Senate Finance Committee is proposing to reduce the 51-cent-per-gallon tax credit for ethanol by a nickel. The reduction would likely kick in about 2010.

That reduction would help pay for a new tax credit of 50 cents per gallon for ethanol made from crop residue, wood and other sources of plant cellulose.

The first 60 million gallons of cellulosic ethanol produced would qualify for that new tax break, plus the existing credit for conventional ethanol.

The proposals are part of a package of energy tax incentives that the committee is scheduled to vote on Tuesday and then add to a major energy bill now being debated in the full Senate.

Des Moines Register