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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 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
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
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...

“Then they pop up and say ‘Hello, surprise! Give us your money or we will shut you down!' Screw them. Seriously, screw them. You can quote me on that.” -- Newegg Chief Legal Officer Lee Cheng referencing patent trolls

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