The U.S. Environmental Protection Agency Tuesday proposed a new alternative fuel standard that will likely prohibit some corn ethanol production processes based on their greenhouse gas emissions and encourage other advanced biofuels.

The EPA decision walks a fine political line that attempts to placate a very large ethanol voter base - especially in the Midwest - and carves out a pathway to biofuels that emit fewer greenhouse gases over the production life-cycle.

The new rule was required under the Energy Independence and Security Act, setting a standard for greenhouse gas reductions compared to conventional gasoline.

Although existing corn ethanol facilities will be grandfathered in, the EPA has proposed a rule that would prohibit some corn ethanol production processes such as the "dry gas mill" and "coal dry mill" methods.

But by restricting some ethanol production processes, it provides a greater market incentive for advanced biofuel technologies.

Of the 36 billion gallons of renewable fuels that Congress ordered to be blended into the fuel supply by 2022, 21 billion gallons of the total must be advanced biofuels. To qualify as an advanced biofuel, each type must have greenhouse-gas emissions that are at least 50% lower than the emissions associated with ordinary gasoline. New biofuel plants must produce fuels with emissions that are at least 20% lower.

The corn-based ethanol industry was concerned about how the EPA would consider the entire production process, including the use of fossil-fuel-based tractors to cultivate and harvest crops, the energy used to distill ethanol, the loss of emissions from the soil and land-use changes. Pastures and rainforests tend to absorb relatively high levels of greenhouse gases.

Businesses such as ethanol maker POET LLC and seed-corn seller DuPont Co. (DD) have been complaining that regulators may be improperly focusing on the worst-case scenarios. They have said that some models that deal with the effects of land conversion are flawed and that forecasters have failed to account for idled cropland or look at the chances of making more productive use of existing land.

-By Ian Talley, Dow Jones Newswires; (202) 862-9285; ian.talley@dowjones.com;

(Siobhan Hughes contributed to this article.)