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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 adiposity on 1/4/2010 2:41:55 PM , Rating: 1
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.



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
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?


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
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.

"Let's face it, we're not changing the world. We're building a product that helps people buy more crap - and watch porn." -- Seagate CEO Bill Watkins

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