Biofuel Requirement and Tax Incentives Included in Energy Act
August 10, 2005
The Energy Policy Act of 2005, which President Bush signed on August 8th, sets a new national minimum requirement for the use of biofuels, particularly ethanol. The new "Renewable Fuels Standard" requires that gasoline sold in the United States contain a total of 4 billion gallons of biofuels in 2006, increasing to 7.5 billion gallons in 2012. The standard provides greater flexibility for refiners by allowing renewable fuel credits and by eliminating the reformulated gasoline oxygenate standard. The bill allows a credit of 2.5 gallons for every gallon of ethanol produced from wastes or cellulosic (woody) biomass sources. A recent report by DOE's Energy Information Administration analyzed a similar requirement and found it had a negligible impact on fuel prices. See the report.
Should you install a refueling station for alternative fuels at your home or business, you can earn a 30 percent tax credit (this sounds unlikely for the home, but Honda is now offering home natural gas fueling stations in California). The credit applies to fueling stations for ethanol, natural gas, compressed natural gas, liquefied petroleum gas, hydrogen, and biodiesel blends containing at least 20 percent biodiesel. The act also extended tax incentives for fuel distributors that blend biodiesel into their diesel fuel. See the press releases from the Renewable Fuels Association and the National Biodiesel Board (PDF 22 KB). Download Adobe Reader.
The act also requires federal alternative fuel fleets with flexible fuel vehicles (vehicles that can be fueled with gasoline or alternative fuels) to actually use alternative fuels, provided they are reasonably available and not unreasonably expensive. Currently, many federal fleets are buying the flexible fuel vehicles but fueling them only with gasoline or diesel fuel. See pages 682 to 1724 of the energy act (PDF 2.6 MB).