The Expiration of the Ethanol Tax Credit: An Analysis of Costs and Benefits

The Volumetric Ethanol Excise Tax Credit expired on December 31, 2011. This cost benefit analysis concludes that without the tax credit, the net benefits will be $168.1 billion in net present value from 2012 to 2022. The total costs will be $116.8 billion, primarily imposed upon ethanol producers and farmers. The benefits, realized through improved environmental conditions and stabilized food prices, will save society a total of $284.9 billion. Alternative considerations beyond the scope of this assessment are presented, such as the role of innovation and foreign alternative fuel imports. These considerations will play a significant role in future outcomes from the expiration of the tax credit.