U.S. Biodiesel Continues to Need Taxpayer Support, or Else…

Michael Giberson

I am mildly amazed that it is possible to take something as simple as, say, palm oil or soybean oil, and – with a few relatively simple chemical tricks – turn it into motor vehicle fuel.  [See it on YouTube.] However, I’m not so amazed that I’m willing to pay you or anyone else a $1 for every gallon of the fuel produced.

The biodiesel business in the United States is hoping that enough people remain amazed at the simple techno-wizardry that they can continue to claim a $1 per gallon federal tax break.  The tax break, which has been around since 2004, will expire at the end of this year unless Congress approves another year of subsidies for the companies.

The Houston Chronicle suggests that several biodiesel companies are having a hard time making money even with the $1 per gallon subsidy.  The story does, briefly, hint that there could be some sort of public benefit involved in the production and consumption of biodiesel (“help reduce greenhouse gas emissions and oil consumption”), but nowhere else in the article does anyone express concern over anything other than how the loss of the subsidy will hurt the economic fortunes of the subsidized companies.  Instead, the concern is mostly for protecting investors in the biodiesel business (Comments: “[Loss of tax support] would be devastating,” “The tax extension is critical to an industry that is on life support,” “Every day that policy doesn’t get passed hurts us”).

I admit, biodiesel is a neat trick, just not so neat that I want to pay to keep these guys in business.

[As of today, the most current information on biodiesel that I could find on the EIA website only covers through the end of 2008, so it doesn’t reveal if U.S. producers have been hard hit by the loss of the European “splash and dash” market.]

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