International Policies on Bioenergy and Biofuels - Industrial Crops: Breeding for BioEnergy and Bioproducts - page 384

addition to federal tax credits, some U.S. states apply additional tax credits/exemp-
tions. For example, the state level tax credit for corn ethanol averaged $0.048/gal in
2009 [ 42 ].
In Brazil and the European Union, member states are allowed to grant tax
exemptions for renewable fuels. A tax exemption represents a reduction in the
fuel excise tax collected at the pump. The level of the tax exemption varies across
EU countries and between biofuels, but it is declining as governments wish to
recoup fiscal revenues from fuel taxes that were foregone because of the exemp-
tions. For example, a tax exemption for biodiesel in Germany declined from € 0.47
per liter to € 0.29 per liter between 2005 and 2009. For Brazil, Kliauga, de Gorter,
and Just [ 41 ] report the (consumption weighted) average tax exemption of R$ 0.67
per liter which was approximately 2.7 times the U.S. tax credit.

Subsidies to Feedstock Production

Subsidies to feedstock production directly stimulate supply of crops used for
production of biofuels. They target biofuel crops, such as corn, soybean/rapeseed,
or sugarcane, either specifically contracted for use in biofuel production or regard-
less of the crop use. Both types of subsidies reduce the cost of production of
biofuels, thus expanding their supply and lowering the market prices [ 16 ]. For
example, the European Union used to provide 45 per hectare to farmers who were

producing feedstock used for production of biofuels (energy crops) or to generate
heat or power. The set-aside land was eligible for production of feedstock for
biofuels or for generation of heat or power. However, the Common Agricultural
Policy's (CAP) revision, called “Health Check,” abolished the energy crop pre-
mium and the set-aside scheme in January 2009.
In Brazil, sugarcane growers were eligible for the Regional Producer Subsidy in
the amount of R$ 5.00 per metric tonne of sugarcane up to 10,000 tonnes regardless
of the use of sugarcane (ethanol or sugar). Similarly, the subsidies for the U.S. corn
production are estimated to reach $4.6 billion in 2011 [ 43 ].
The subsidies to biomass production usually represent an integral part of the
general support system to agriculture in most countries. Agricultural subsidies are
most often not directed specifically toward biofuel crops but are rather applied to all
agricultural production and include various policy instruments such as direct
income payments to farmers, input subsidies, price support, trade measures and
production quotas, or environmental payments.
Agricultural subsidization is in particular prevalent in developed countries. For
example, the agricultural support, known as Producer Support Estimate (PSE), 10
calculated by the OECD represented 20 % of the total value of OECD countries'

€

10 The Producer Support Estimate is an indicator of the annual monetary value of gross transfers to
farmers.