Biodiesel Board Study Asserts Critical Importance of Biodiesel Tax Credit, Calls for Extension
09 December 2009
According to a study released by the US National Biodiesel Board (NBB), allowing the Federal biodiesel tax incentive to expire on 31 December would result in a loss of jobs and income; increased demand for petroleum diesel; a degradation of energy security; decreased demand for soybean oil and lower soybean prices leading to a negative impact on farm income; and stranded investment as biodiesel capacity is idled and lost tax revenue for States and local governments.
The original biodiesel tax credit was passed in 2004 and has been extended twice. Biodiesel produced from both virgin feedstocks (such as soybean oil) and waste feedstocks such as yellow grease and animal fats qualifies for the $1.00 per gallon excise tax credit.
The study was conducted by economic analyst John M. Urbanchuk. The study examined the economic impact of the biodiesel industry and the negative consequences of allowing the credit to lapse. The biodiesel tax incentive is designed in a manner that makes biodiesel price competitive with diesel fuel in the marketplace. The incentive is structured so that the value of the incentive is reflected in the market price of the fuel.
The US biodiesel industry has grown significantly over the past several years. However, the combination of volatile commodity prices and weak motor fuel demand caused by the worst recession in decades has severely impacted the biodiesel industry. The Census Bureau reports that biodiesel production for the ten months ended in October 2009 totaled 409 million gallons, nearly 30 percent below the same period in 2008. The National Biodiesel Board (NBB) estimates that biodiesel sales for 2009 will total about 475 million gallons, 31 percent below the 691 million gallons sold in 2008. The NBB reports that 173 American companies have invested in production capacity that currently approaches 2.7 billion gallons. However, as a result of weak industry economics, capacity utilization in the biodiesel industry currently hovers around 15 percent.
—“Economic Impact of Eliminating the Biodiesel Tax Credit”
The NBB is the national trade association of the biodiesel industry and is the coordinating body for biodiesel research and development in the US.
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Help me understand: is the biodiesel *subsidized* or simply *not taxed as much*?
You know what might help the biodiesel folks? Raise the tax on all non-bio motor fuels a bit more, making their biofuels relatively less expensive.
Posted by: stomv | 09 December 2009 at 05:03 AM
Rather than focus solely on tax relief, we still have social benefit questions to understand. I guess that no one will dispute the recycling of various esp especially waste into bio fuels.
There are also the national interests of countries left otherwise in economic doldrums that are managing internal affairs and the well being of the peoples.
Then there is the chemical and plastics industries that have an interest in low environmental impact feed stocks to be balanced up by the effects of land degradation, loss of forest and food diversion. The metrics are complicated, not to understand, but to regulate.
Posted by: arnold | 09 December 2009 at 08:35 PM