Could a variable ethanol blender's tax credit work?

The purpose of this article is to analyze how a variable corn-based ethanol blender's credit might work in comparison with the current fixed per gallon credit. We first review some specifics regarding the current fixed-credit policy and then discuss basic issues pertaining to a variable credit policy. We follow this with a comparison of the historical performance of two variable blending policies, namely one that is based on crude oil prices and one that is based on ethanol-blending margins. A comparison of a variable credit and the present fixed rate policy shows that a variable tax credit can achieve program savings, by providing incentives to the ethanol industry only when it would experience losses without support from the tax credit.