More than 17.4 million U.S. vehicles are flex fuel-ready. States can meet the demand of this growing fleet by installing flex fuel pumps at gas stations. Flex fuels are gasoline-ethanol blends with up to 85 percent ethanol (E85). Gas stations must be specially retooled to provide this option for customers. The high overhead costs associated with installing flex fuel infrastructure create a significant barrier to growth. To help overcome this barrier, state policymakers could establish a tax credit for retailers with flex fuel pumps.
Biofuel retailer tax credits have proven successful in Iowa, a leading ethanol-producing state. Iowa currently offers four tax credits to promote the distribution of ethanol, E85 and E15 gasoline, and biodiesel-blended fuel. Currently, Iowa boasts more than 200 E85 fueling stations throughout the state. State leaders could encourage a similar spike in flex fuel adoption through a tax credit that mitigates high upfront installation costs and provides sustained benefits for retailers and consumers. Incentivizing retailers to make flex fuels readily available to customers could boost statewide demand for biofuels and encourage production.