Biodiesel Companies Folding Left and Right, After Gov't Cuts Tax Credit
January 4, 2010 10:30 AM
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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.
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
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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Level the paying field
1/5/2010 11:27:24 AM
I love it when people complain about biodiesel subsidies but ignore the fact that for the last 100 plus years, the petroluem industry has been subsidized by the US and other governments around the world far more heavily than biofuels ever were. We could have produced biodiesel for every truck in America for what we spent securing the oil fields in Iraq in the last decade.
If we want a truly level playing field, we would have to end all coal and gas subsidies today and fund things like biodiesel and alternative energy for 100 years.
RE: Level the paying field
1/5/2010 11:55:30 AM
The so called subsidies were and are reduced taxes, usually by increased deductions (depletion allowances for instance). Taxes are not government money. They are people's money that government confiscates.
Subsidies are direct payments based on political whims.
The big difference is that fossil fuels produce usable energy that is several times more than the energy required for production. Biofuels are mostly negative energy producers, subsidy or no subsidy. Touchy feely wishes never trump thermdynamics.
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