The United States currently has a number of policies that support ethanol and biodiesel production and use.
Currently, ethanol production is federally subsidized at a flat tax rate of $0.51/gallon of ethanol blended with gasoline and biodiesel production is federally subsidized at a rate of $1.00 per gallon for biodiesel.
The Energy Policy Act of 2005 includes a Renewable Fuel Standard (RFS) which mandates the use of 7.5 billion gallons of renewable fuel in 2012, however, actual 2007 ethanol production will exceed this level, negating the standard. Cellulose-derived ethanol is required beginning in 2013 (250 million gallons/year).
The small producer tax credit ($0.10/gal for the first 15 million gallons with an annual cap of $1.5 million) is available to ethanol and biodiesel producers whose annual production is less than 60 million.
The alternative fuel infrastructure tax credit provides up to 30% of the cost to retrofit refueling equipment from gasoline to ethanol (E85) or biodiesel (B20) with a maximum level of $30,000 for businesses and $15,000 for individuals.
The biodiesel blenders tax credit provides $1.00 per gallon for agribiodiesel produced from virgin oils (derived from agricultural commodities or animal fats) or renewable diesel fuel produced from biomass resources using a thermal depolymerization process, and $0.50/gallon for biodiesel produced from recycled grease.
The Clean School Bus USA program assists school districts to modify existing buses to run on biodiesel or to purchase new buses that use biodiesel.
The 2002 Farm Bill includes several energy related provisions including a biobased procurement program; a biodiesel education program; grants and loans for farm and rural renewable energy projects; research and development funding; and payments to reimburse the purchase of commodities used to expand existing ethanol and biodiesel production.
Several new policies have been proposed including increasing the Renewable Fuels Standard, increasing automobile fuel efficiency standards, and requiring major oil companies to install ethanol and/or biodiesel pumps at fueling stations.