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Biofuels: A Compendium
Since the late 1970s, U.S. policymakers at both the federal and state levels have enacted a variety of incentives, regulations, and programs to encourage the production and use of agriculture-based biofuels. Initially, federal biofuels policies were developed to help kick-start the biofuels industry during its early development, when neither production capacity nor a market for the finished product was widely available. Federal policy has played a key role in helping to close the price gap between biofuels and cheaper petroleum fuels. Now, as the industry has evolved, other policy goals (e.g., national energy security, climate change concerns, support for rural economies) are cited by proponents as justification for continuing policy support.
The U.S. biofuels sector has responded to these government incentives by expanding output every year since 1980 (with the exception of 1996), with important implications for the domestic and international food and fuel sectors. The production of ethanol (the primary biofuel produced in the United States) has risen from about 175 million gallons in 1980 to nearly 14 billion gallons in 2011. U.S. biodiesel production, albeit much smaller, has also shown strong growth, rising from 0.5 million gallons in 1999 to a projected 800 million gallons in 2011.
Despite this rapid growth, total agriculture-based biofuels production accounted for only about 8% of U.S. transportation fuel consumption (gasoline and diesel combined) on a volume basis and 6% on a gasoline-equivalent basis in 2011. Federal biofuels policies have had costs, including unintended market and environmental consequences and large federal outlays (estimated at over $6 billion in 2011). Despite the direct and indirect costs of federal biofuels policy and the relatively small role of biofuels as an energy source, the U.S. biofuels sector continues to push for federal involvement. But critics of federal policy intervention in the biofuels sector have also emerged.
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