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The rollback of a $1/gallon federal tax credit on biofuels threatens to sink many small biodiesel producers across the country.  (Source: Alibaba)
Without the $1/gallon federal tax credit, the biodiesel industry no longer appears commercially viable

While most are hoping that the U.S. can transition to electric vehicles and vehicles running on sustainable biofuels, this last year has made it clear that the process will be no walk in the park.  Recent studies showed that, in their current form, hydrogen cars emit more carbon over their lifecycle than gas cars.  And early consumer electric vehicles, like the BMW Mini E, while low emissions, have suffered from a variety of temperature related woes.

Now the biofuels sector has become the latest green transportation field to suffer disappointment in 2009.  The year started off rocky with the European Union in March unveiling import-killing tariffs on biodiesel and other biofuel.  Then, as the U.S. recovered from the recession, diesel prices dropped 18 percent off their highs, making it harder to justify the high costs of biodiesel.

Now another nail has been placed in the commercial biofuel industry' coffin -- the government $1/gallon federal tax credit will expire this Friday.  And for many businesses in the industry, it may be the last; amid a frustrating market, many biodiesel makers across the U.S. say they will likely call it quits and cease production when the credit ends.

The largest biodiesel refinery, located in Houston, Tex. has already shut down.  Another large refinery, located in Hoquiam, Wash. has been shut down as well, following a December explosion. 

However, it's not just big businesses that are cutting biofuel production and jobs.  Small businesses are also suffering.  Dwight Francis of Valliant, Okla. launched a new biodiesel venture earlier this year when the local timber economy tanked.  He was producing 12,000 gallons of biodiesel fuel per week by mid-year, and his business was viable, thanks to the $1/gallon tax credit.  Now with the credit gone, he says he's shutting down the promising startup.

He bemoans, "By the time you buy the feedstock and the chemicals to produce the fuel, you have more money in it than you get for the fuel without the tax credit.  We won't be producing any without the tax credit."

Congress and the U.S. Environmental Protections Agency have set the ambitious benchmark of producing 36 billion gallons of home-grown biofuel a year by 2022, reducing dependence on volatile foreign oil.  The prospects of achieving that goal now look bleak, according to government officials.  States Robert McCormick, principal engineer at the Department of Energy's National Renewable Energy Laboratory, "You could say the entire biofuels industry has had a rough year."

Despite these setbacks both optimism and debate on biofuels remains high.  Many liken the departure from traditional gas combustion to EVs, fuel cell vehicles, and biofuel vehicles to be similar to other past modern technological breakthroughs such as the computer, internet, airplane, and railroad.  These past innovations only reached consumers thanks to massive subsidies and investment of both money and land from the U.S. federal government.  Many argue that similar investments are needed to allow the alternative energy transportation industry to reach viability.  The real question, many say, is which candidate(s) is/are best to invest in (EVs, fuel cells, and/or biofuels) and when and how much should be invested.


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RE: just goes to show
By 67STANG on 1/4/2010 11:12:31 AM , Rating: 1
I believe they say "necessity is the mother of invention". That being the case, perhaps the increased leaning towards EV's will lead to innovative battery technologies. Which of course would also filter down to every other device that runs on batteries.

Don't get me wrong, I don't think there's anything wrong with green subsidies-- to a point. It's a matter of balance between allowing for interim solutions while not veering off course for a more permanent solution. The same goes for solar and wind-- until we have a viable fusion option.


RE: just goes to show
By AEvangel on 1/4/2010 11:33:05 AM , Rating: 4
quote:
Don't get me wrong, I don't think there's anything wrong with green subsidies


There are tons of things wrong with Green or any other kind of subsidy. The distort the market and create demand for items that are not needed nor practical.

While I'm not for this tax credit it made ALLOT more sense then Ethanol subsidies or even subsidies for Electric cars, since the first is more damaging to the environment then bio-diesel and the the latter doesn't while some studies show is as bad lacks the infrastructure and technology to work at this time.

Bio-diesel was a really the only practical way at this time of lessening our dependence on oil based vehicles if you truly believe that is needed at this time.

Plus our Government and it's leaders are not going to support something that you can grow and create on your own since that would mean they have less means of taxing and control you. Which is something that bio-diesel provides.


RE: just goes to show
By Iaiken on 1/4/2010 11:43:56 AM , Rating: 1
quote:
There are tons of things wrong with Green or any other kind of subsidy. The distort the market and create demand for items that are not needed nor practical.


You mean... like marketing?


RE: just goes to show
By AEvangel on 1/4/2010 12:11:35 PM , Rating: 5
quote:
You mean... like marketing?


No cause I don't have to pay for Marketing, unless I choose to buy a product.

Subsidies don't give me a choice since they take my money with the threat of force and then give it to others.


RE: just goes to show
By adiposity on 1/4/2010 2:41:55 PM , Rating: 1
quote:
No cause I don't have to pay for Marketing, unless I choose to buy a product.


So, you don't really care about market distortion unless you have to pay for it?

I understand the aversion to helping pay for a technology to be viable, against your will. But, if you were truly opposed to market distortion, you would recognize that marketing, collusion, branding, etc. can be as bad as (or worse than) subsidies at creating market distortion.

So which is it? You don't like market distortion or you just don't want to pay the taxes? I mean, I understand both, but don't pretend to be so concerned about the "market" when all you care about is being taxed.

-Dan

-Dan


RE: just goes to show
By Solandri on 1/4/2010 4:00:45 PM , Rating: 3
Marketing exists in the same feedback loop as regular sales. If your product sucks, you can have the best marketing and it will still tank in the market.

Political subsidies exist outside this feedback loop. The product can suck, and politicians can keep approving the subsidy because they're enamored by the product or refuse to see the evidence that it sucks.


RE: just goes to show
By rcc on 1/4/2010 4:51:25 PM , Rating: 4
Or get a nice kickback from one or more of the companies involved.

Oops, my cynical side slipped out again.


RE: just goes to show
By adiposity on 1/4/10, Rating: 0
RE: just goes to show
By afkrotch on 1/4/2010 10:46:09 PM , Rating: 2
Ya, look at Apple to see that.


RE: just goes to show
By Boze on 1/5/2010 7:41:32 AM , Rating: 1
I hate Apple as a company, and I'm not overly fond of Steve Jobs, but they don't make crap.

They make average, extremely overpriced computers, MP3 players, and telephones.


RE: just goes to show
By adiposity on 1/4/2010 5:42:32 PM , Rating: 1
quote:
Marketing exists in the same feedback loop as regular sales. If your product sucks, you can have the best marketing and it will still tank in the market.


You are quite an optimist. You don't think sales can make crappy products sell?

-Dan


RE: just goes to show
By seamonkey79 on 1/4/2010 6:06:45 PM , Rating: 5
The difference is that if I get suckered into purchasing a crappy product... *I* got suckered into it. For the salesperson to come to me, tell me to give them money, and here, take this, is a completely different story, and that's what tax + subsidy equals.


RE: just goes to show
By BansheeX on 1/4/10, Rating: 0
RE: just goes to show
By Ringold on 1/4/2010 5:55:56 PM , Rating: 1
quote:
you would recognize that marketing, collusion, branding, etc. can be as bad as (or worse than) subsidies at creating market distortion.


Of all the random things to get upset about..

On the other hand, without some degree of marketing, how would you, for example, be alerted to the existence of a new product? Studiously walking every isle in every store in a shopping mall/strip mall looking for new items? Visiting a website to find what movies are playing -- but names only, because trailers are marketing in themselves?

Wish I had less things to worry about such that I could get on the internets and go off about marketing. :P


RE: just goes to show
By adiposity on 1/5/2010 1:18:34 PM , Rating: 1
I'm not against marketing. I was just saying, market purists are one thing: people who hate taxes are another.

In a perfect capitalist world, the market would select the best choice for a product (combination of quality, price, availability, efficiency, etc.).

The poster I replied to implied that subsidies are bad because they distort the market, but then basically accepted market distortion as ok, as long as his taxes don't get raised. He cares less about the principle than his tax rate. The principle is just an excuse, which will likely be discarded as soon as it's convenient.


RE: just goes to show
By satinspiral on 1/5/10, Rating: 0
RE: just goes to show
By Jaybus on 1/4/2010 1:30:16 PM , Rating: 3
Bio-diesel is simply too expensive. A government subsidy doesn't make it cheaper. Who do you think pays the subsidy? It's a pyramid scheme. It makes the bio-diesel competitive (sort of) so long as only a few use it and the subsidy is paid by the vast majority that do not. Scale it up so that the majority of people use bio-diesel, then guess what? Everybody pays the subsidy and it costs the same as if there were no subsidy to begin with.

Perhaps if the price of petroleum diesel goes up enough bio-diesel will become competitive. If so, people will start companies again to produce it. Not a problem. As stated in the article, it only takes a few months to get bio-diesel production up to speed. It doesn't really deserve to be subsidized.


RE: just goes to show
By lelias2k on 1/4/2010 2:54:33 PM , Rating: 3
Anything produced in small scale is expensive. And when you're competing with the biggest companies in the world (oil companies) you may need a hand.

Pay attention to this website for a little while and you will see that most users only talk about how stupid any green tech is because it costs too much.

Most of them forget that they're using a sub-$1000 computer due to the $5000+ computers of the 80s.

I know, I know, computers weren't subsidized, but they weren't competing against one of the biggest industries in the world either.

And while some may argue the oil companies are investing in renewable energy, including biodiesel, their business is still focused on gasoline.

Maybe if they added a $0.1 tax to gasoline to subsidize American biodiesel companies... oh wait, I forgot, we don't want to pay for anything...


RE: just goes to show
By rcc on 1/4/2010 4:56:03 PM , Rating: 2
quote:
Maybe if they added a $0.1 tax to gasoline to subsidize American biodiesel companies... oh wait, I forgot, we don't want to pay for anything...


While you're at it, could we tax the fuel oil used for heating in cold regions and apply it to air conditioners?? Cuz you know, you can always put more on, but there is only so much you can take off.


RE: just goes to show
By lelias2k on 1/5/2010 10:34:49 AM , Rating: 1
Better yet, provide better tax incentives so people replace their HVAC from 30 years ago for something that is 10x more efficient...

http://www.energystar.gov/index.cfm?c=heat_cool.pr...


RE: just goes to show
By rcc on 1/5/2010 3:54:35 PM , Rating: 2
WOOOOOOOOOOSH


RE: just goes to show
By Cerin218 on 1/5/2010 10:43:40 AM , Rating: 4
How much tax is on a gallon of gas? I pay 27.1 cents in Minnesota on top of the 18.4 cents Federal. So 45 cents total. At what point will you be satisfied to stop taking money? Why is it I only hear people ask how we get more money, not how to control spending. Biodiesel is not necessary. We have plenty of oil in this country if people would quit whining about it and start using it. Simply put, "green" technology is not mature enough to actually use. Where will I plug my electric car in at work? If I live some where the temp doesn't kill the battery in the first place. 60 miles on a charge and 3 hrs to charge? How is that realistic? I am not using a computer thats 1k because 20 years ago it was 5K, it's because the cost to produce that computer has dropped due to changes in manufacturing and technology. It's a great idea to start looking green, but realistically the technology is in it's infancy and is not currently scalable. Or does stupid things like use our food supply as an energy source.

So keep looking for your tax increase. ANd while you are at it, do a little research and understand how much money you pay now in taxes. I don't understand why people are always so quick to say tax more so we can spend more. Yes if it makes sense, but when a product costs more to produce then it does to consume, that's just bad economics. I'll give you a quarter for every dollar you give me and we'll see how long till your broke.


RE: just goes to show
By ArcliteHawaii on 1/5/2010 6:29:52 PM , Rating: 1
It isn't about "taking money". There should be a floor on gas prices to provide stability for other start up alternatives like electric and others. It would also promote conservation and innovation in high mileage cars. When gasoline prices hit $8 per gallon we as a nation are going to be in extreme pain. Shouldn't the USA be preparing for that now? Other nations like Japan and Germany have had these in place for decades, and as a result, have much higher fuel economy averages than we do (I think Japan is double mpg on average than the US). It has also spurned innovation. Is it any wonder that the best and best selling hybrids are coming out of Japan? Is it any wonder that the best diesel vehicles come out of Germany? Is it any wonder that the only US car company to survive the collapse last year was Ford who didn't put all of its eggs in the SUV basket ( by basically realizing gas prices could get very high very quickly)?


RE: just goes to show
By hashish2020 on 1/5/2010 11:57:35 PM , Rating: 1
And the taxes you pay on petroleum product is nothing compared to the market subsidies of an artificially strong dollar, CIA funded revolutions, wars in a part of the world that was just flat desert that noone wanted until oil spurted up...if you think oil itself is not subject to government subsidies than I think you have blinders on.


RE: just goes to show
By lelias2k on 1/14/2010 2:07:03 PM , Rating: 1
I'm originally from Brazil, so don't talk to me about taxes, because you have no idea what it is to pay taxes in order of 50% or more of the price of pretty much anything.

You can dream as much as you want about trying to control spending, but there are two factors that make that almost impossible: We're dealing with humans, and most of those who are responsible for spending do so in areas where they are not experts. This won't change for at least a few generations more, and only if we revamp our education system.

quote:
I am not using a computer thats 1k because 20 years ago it was 5K, it's because the cost to produce that computer has dropped due to changes in manufacturing and technology.


Duh, that was partially the point of the comment. The other half is that if people didn't buy those 5k computer the industry wouldn't have survived long enough to be able to produce today's computers at these prices.

quote:
It's a great idea to start looking green, but realistically the technology is in it's infancy and is not currently scalable.


And that's why somebody has to invest in it. Other governments are investing in it. Why can't we?

And we have to be happy for those who have the vision (and the money) to buy these "pieces of crap," just as we should thank the ones who bought those 5k computers. But instead all you hear is people whining and making fun of them.

Oh well, I guess we are the smart ones, right?


RE: just goes to show
By xmichaelx on 1/4/10, Rating: 0
RE: just goes to show
By afkrotch on 1/4/10, Rating: 0
RE: just goes to show
By JediJeb on 1/5/2010 5:53:19 PM , Rating: 2
That would be great if they will give the money cut from the subsidies back to the tax payers so we can use it to pay for the higher price gasoline ourselves. But you and I both know that they will just use it somewhere else and we will be left paying the same taxes and more for our fuel.


RE: just goes to show
By jimbojimbo on 1/6/2010 5:19:43 PM , Rating: 2
It'll never happen because the oil moguls will just start pumping more oil to keep the prices at their sweet spot, just below where bio-diesel would work.


RE: just goes to show
By gamerk2 on 1/4/2010 3:14:03 PM , Rating: 1
There are tons of things wrong with Green or any other kind of subsidy. The distort the market and create demand for items that are not needed nor practical.

Like food? Our farming industry is built around subsidies. Without them, farming isn't profitable. Of course, less farms = less food = higher prices for everybody. :D


RE: just goes to show
By corduroygt on 1/5/2010 11:59:11 AM , Rating: 2
Without the farm subsidy, you'd have more of the money you've earned going into your pocket instead of the government's, which means you'd have more money to buy the more expensive food.


RE: just goes to show
By JediJeb on 1/5/2010 5:56:10 PM , Rating: 2
The money would most likely just go to some other pet project and we would be left with higher priced food and no money to pay for it.


RE: just goes to show
By ArcliteHawaii on 1/5/2010 6:14:20 PM , Rating: 2
The market usually works, but not always. It isn't going to work in this case. It will take 20 or more years to convert a gasoline based transport infrastructure to something else. But gas prices will become intolerably high well before that. It makes sense for the gov't to use subsidies to encourage these fledgling industries so they can more quickly achieve economies of scale so we don't end up with a lag between not having enough gasoline and having something else.

However, on the specific case of biodiesel, it's probably a good idea to let it die. THe world currently uses six times more oil calories than the amount of calories grown from food worldwide. Meaning that even if all the food on earth were converted to fuel that we'd only have 15% of what we need. It's simply impossible to grow enough fuel to satisfy demand, barring some kind of exponential increase in the amount of fuel per acre. I fully support the research, but as an industry it currently cannot be scaled to cover even a reasonable fraction of what is needed.


RE: just goes to show
By hashish2020 on 1/5/2010 11:54:25 PM , Rating: 2
...so there is no such thing as a market externality and humans consume rationally?

The libertarian capitalism I see all over DailyTech has more in common with communist revolutionary idealists than the real world and empiricism


RE: just goes to show
By funyun on 1/4/2010 11:30:51 AM , Rating: 3
Battery research is already a fore front technology. Who doesn't have an electronic device in their pocket that they wish would last longer?

There is no need to dump public money in it.

People assume that if the .gov puts money into a program it will come true. If people knew how much money put into these programs went no where, they wouldn't be so hot to scream for .gov intervention all the time.


RE: just goes to show
By Torment on 1/4/2010 11:49:09 AM , Rating: 3
That's the case with *all* new research. And there is good reason for the government to put money into research, in one way or another. The market isn't an all-knowing, benevolent god. The reality is, most new technology had its genesis in publicly funded research.


RE: just goes to show
By mikefarinha on 1/4/10, Rating: 0
RE: just goes to show
By Bateluer on 1/4/2010 1:38:25 PM , Rating: 4
Google 'NASA' or 'DARPA'.


RE: just goes to show
By afkrotch on 1/4/2010 11:14:58 PM , Rating: 2
Might want to google ARPA-E (energy), HAARPA (homeland security), and IARPA (intelligence). Like DARPA, but centered around their respective fields.

There's tons of government spending for research. Not just the US, but other nations as well.


RE: just goes to show
By bhieb on 1/4/2010 1:54:35 PM , Rating: 2
quote:
And there is good reason for the government to put money into research


Key word there is research. Tax funding of research is fine by me, but subsidizing immature tech because it fits a political agenda is not OK. Continue to research and perfect it, fine, then bring it to market when it can compete on it's own.


RE: just goes to show
By Torment on 1/4/2010 4:30:40 PM , Rating: 2
The goal, though, is to marriage the benefits of the market with funding for research (ie, the market, provided subsidies, will work to develop a tech not is not yet financially viable). I think the real problem is in funding specific technology (eg Corn ethanol), as this largely abates the benefit of the market--that the problem will be attacked by many minds, and failures will be weeded out by market failure.


RE: just goes to show
By Schrag4 on 1/4/2010 2:29:50 PM , Rating: 5
quote:
The market isn't an all-knowing, benevolent god.


I suppose you're going to tell me that our elected officials are the gods we should be following without questioning. Or should I say official (not pluralized).

Do we really need to explain what the market is and why it's (just about) always better at determining how things should be priced when compared to a handful of corrupt politicians?


RE: just goes to show
By Torment on 1/4/10, Rating: -1
RE: just goes to show
By rcc on 1/4/2010 5:02:04 PM , Rating: 4
Hmmm,ammo bin ran dry again, eh?


RE: just goes to show
By Cerin218 on 1/5/2010 10:48:52 AM , Rating: 1
Obviously it's beyond you if you connect mortgage backed securities to Rush Limbaugh. Sounds like you don't really understand how the housing market crashed. You should read more and post less.


RE: just goes to show
By hashish2020 on 1/6/2010 12:00:44 AM , Rating: 2
We can vote the politicians out. Rich people give their money to their stupid, indolent kids, who then weigh on the true middle class. I think we should show everybody "Keeping up the the Kardassians(sp--like I care)" who thinks that we live in a meritocracy...


RE: just goes to show
By Screwballl on 1/5/2010 1:57:08 PM , Rating: 2
The real problem is that the entire fuel, battery and automotive industry has shut down and bought out most of the patents for magnet based motors/engines that have proven to work very well to power up to a normal "full size" consumer truck (without towing or heavy loads). There has already been proven magnetic motors powering cars since the 60s, yet they get shut down and silenced by big oil and automakers.

I know a local retired guy that lives by my brother in law in a small town in FL that bought a 1990 Geo Metro and made a magnet motor... if I was not 6'5" and could fit, I would have taken a ride. But I saw under the hood and there is no question that there is no external power source, and it still has the alternator and battery for 12V stuff like radio and lights and the usual stuff. Just no need for sensors, emissions or the extra computer related/controlled stuff (he took out the lights in the dash for those items).


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