Ontario's Liberal government is putting up another half-billion dollars to boost production of alcohol as a motor fuel, an idea popular with politicians and farmers in at least five provinces.

Premier Dalton McGuinty announced a $520-million fund on Friday to subsidize producers and sellers of ethanol over 12 years. Ethanol, commonly made from corn or grain, is chemically the same thing found in a glass of whisky.

As a fuel, it's often blended with gasoline at concentrations of up to 10 per cent. McGuinty last year announced that gasoline sold in the province must contain an average of five per cent ethanol by Jan. 1, 2007.

Ethanol is often made from corn. (photo courtesy: www.foodsafetynetwork.ca)
Ethanol is often made from corn. (photo courtesy: www.foodsafetynetwork.ca)

Such blends burn cleaner than straight gasoline, but uncertainty remains about the amount of energy gained from a litre of ethanol after taking into account the energy spent on fertilizers, pesticides, machinery, tractor fuel and other production inputs.

Supporters of ethanol in the U.S. welcomed a study this year that estimated a 35 per cent energy gain, saying it put to rest charges that the balance is negative. In Toronto, provincial officials didn't respond to an inquiry about Ontario's view of the matter.

Ontario Premier Dalton McGuinty (CP file photo)
Ontario Premier Dalton McGuinty (CP file photo)

"By supporting the production of ethanol fuel, we're helping our farmers, creating jobs in rural Ontario and moving forward with our plan to reduce greenhouse gases and the harmful emissions that cause smog," McGuinty said in statement.

"This fund will improve the air we breathe by encouraging the construction of ethanol plants to meet the growing demand for cleaner-burning fuels."

The money will include "capital assistance to help meet financial challenges" and "operating assistance to address changing market prices," the statement said.

The recipients are likely to include Suncor Energy Inc., which was breaking ground for an ethanol plant in Sarnia on Friday, and Commercial Alcohols Inc., which has plants at Chatham and Tiverton. Some companies have already cashed in on $78 million in subsidies announced last year by the federal government.

Apart from the producer subsidies, the Ontario fund is to provide support for independent retailers who sell ethanol blends and money for ethanol research and development.