A report by the Food and Agricultural Policy Research Institute of the University of Missouri-Columbia reveals the degree to which ethanol production is dependent on subsidies in the United States.

Ethanol production in the US currently benefits from a US$ 0.51 per gallon tax credit and a US$ 0.54 per gallon import tariff. Currently, the tax credit is set to expire in 2008 and the tariff in 2010.

The report, The Economic Impacts of Not Extending Biofuels Subsidies, finds that eliminating the excise tax and import tariff on ethanol in the United States would lead to American ethanol production contracting by 30 percent and biodiesel production by more than half.

Commodity prices would also drop, with corn prices declining by US$ 0.30 per bushel. Lower commodity prices results in net farm income shrinking by an average of US$ 3.1 billion per year over the 2011-2016 period.

The study's authors estimate that eliminating the US$ 0.51 per gallon tax credit would save taxpayers $6.5 billion on average. Since little ethanol is imported into the US under the US$ 0.54 per gallon import tariff, not much revenue would be lost if it were eliminated. However, as commodity prices fall, other farm subsidy programs would kick in, costing US$ 0.57 billion on average. So, total net government savings are estimated to amount to US$ 5.9 billion per year.