In addition to federal biofuels policies, many states have also enacted policies.
Biofuel producer incentives (credits) promote the construction and expansion of biofuels production facilities by reducing the high startup and uncertain input costs. As of 2006, 22 states incentives for ethanol have producer incentives for ethanol:(CA,FL,HI,IN,KS,ME,MD,MN,MS,MO,MT,NC,ND,OK,PA,SC,SD,TX,TN,WA,WI, and WY) and 18 states (AR,FL,IN,KS,KY,ME,MD,MS,MO,MT,NC,ND,OK,PA,SC,SD,VA, and WA) have incentives for biodiesel.
Retail incentives make biofuels more price competitive with gasoline and diesel at the fuel pump and typically involve state fuel tax exemptions. As of 2006, 17 states (AK,CT,HI,IA,ID,IL,IN,ME,MN,NE,ND,NM,OK,SC,SD,TX, and WA) have tax exemptions for ethanol and 14 states (IA,ID,IL,IN,LA,MT,NE,ND,NM,RI,SC,SD,TX, and WA) have biodiesel incentives.
Several states have renewable fuel standards to increase the amount of biofuels used within the states including Iowa, Missouri, Hawaii, Louisiana, Washington, and Minnesota.
Infrastructure grants and credits are offered to fuel retailers to help cover the cost of installing or retrofitting refueling equipment to be compatible with ethanol and are currently available in 10 states (IA,IL,MN,NC,ND,NJ,OH,SC,SD, and TN).
Currently, 23 states (CA,CO,GA,HI,IA,IL,IN,KS,KY,MD,MN,MO,MS,NE,NC,NM,NY,OH,SD,VA,VT,WA, and WI) have renewable fuel purchase requirements for their state vehicle fleets.
Other grants may be offered to promote renewable energy in general or a specific type of renewable technology; for research and development efforts; for implementation activities; or to reduce costs. Illinois, Delaware, and Indiana offer these types of grants.
Due to drinking water contamination from Methyl Tertiary Butyl Ether (MTBE), an oxygen additive for gasoline, 25 states have banned its use(AZ,CA,CO,CT,IA,IL,IN,KS,KY,ME,MI,MN,MO,MT,NC,NE,NH,NJ,NY,OH,RI,SD,VT,WA, and WI) and 5 states (DE,MA,MD,MS, and PA) have proposed banning MTBE. Ethanol can be used as an oxygen additive in gasoline in place of MTBE.