Coalition for E85

E85 offers American drivers a true alternative to petroleum, but an upcoming tax hike threatens its availability.

E85, America’s most widely adopted alternative fuel, could be an unintended casualty of a Congressional repeal of the current tax subsidy for ethanol. While E85 is derived from ethanol, it is not purely a fuel additive like the E10 blend found in gas stations across the country. It is a true alternative to petroleum for over 9 million American Flex Fuel vehicle drivers, and has been recognized as such in federal legislation.
Blenders of ethanol currently receive a $0.45 per gallon incentive through the Volumetric Ethanol Excise Tax Credit (VEETC). This same credit is used for E10 ($0.045 per gallon) and E85 ($0.3825 per gallon). It is scheduled to expire at the end of 2011.
While E10 sales will be marginally impacted by the end of this credit, sales of E85 will dramatically decline, as E85 requires the incentive to allow motorists to achieve a competitive price on a Gasoline Gallon Equivalency to regular unleaded gasoline.
Failure to preserve the E85 option may negatively impact the future sale of other mid-level ethanol blends such as E30, as well as the next generation of biofuels made from non-food sources such as farming byproducts, algae biomass and household waste.

Congress has already designated E85 as an alternative fuel, in the Energy Policy Act of 1992. However, E85 was not included in the tax credit commonly used for other alternative fuels (the Alternative Fuel Credit) in order to avoid any instance when ethanol would recieve both that credit and VEETC.
With the expiration of VEETC however, this potential double dipping is no longer an issue. E85 should be eligible for the Alternative Fuel Credit, similar to compressed natural gas, propane and hydrogen.
We support the inclusion of E85 in the Alternative Fuel Credit in the tax code, as well as the extension of that credit beyond 2011.
As opposed to extending VEETC for all ethanol blends, including E85 in the Alternative Fuel Credit can be done at a fraction of the cost (about one percent of the cost of VEETC) while benefiting our environment, our national security, our health and our economy.