As the biodiesel industry anxiously awaits Congress’ renewal of the federal $1-a-gallon biodiesel tax credit, an energy consulting company that specializes in biodiesel and ethanol operations is actually calling for elimination of these types of credits for all biofuels.
This opinion piece in Biofuels Digest from Sklar & Associates makes the case that we don’t have to give the biofuels industries government money to make them competitive with petroleum (which, by the way, gets plenty of government funds):
Although these blenders’ credits have had the effect of keeping biofuels prices comparable to prices received for petroleum based transportation fuels, while providing biofuels producers with enough additional revenue to allow them to remain in operation at a time of falling petroleum prices, it appears that blenders’ credits programs will ultimately prove to be inadequate.
First, they do not provide the certainty that adequate biofuels prices can always be obtained. The obvious problem is structural, as the blenders’ credits are set by legislation as a fixed amount per gallon, and subject to change, without regard to changes in fuels market prices.
Second, blenders’ credit legislation that is passed is subject to potential revision, discontinuance or repeal, depending on the prevailing mood in the Congress. And investors in projects that rely on price floors that are propped up by blenders’ credits, have no assurance that these floors would be sustained over the project’s life.
So what’s the solution? The article goes on to say that while more taxes on petroleum-based fuels are bad ideas, there are a couple of things that can be done that would equalize cost differentials that different blenders actually incur:
a) A biofuels use mandate imposed by the Federal Government on blenders of gasoline and diesel fuel to create a demand for biofuels; and,
b) A biofuels cost equalization program similar to the FEA’s Old Oil Entitlements program that would make those blenders who do not blend the mandated percentage of biofuels into their petroleum fuels products, to pay the added cost they would have incurred for doing so, to those resellers who blend more than the mandated percentage at a higher cost.
It’s an interesting concept, but I think I would feel better if we got rid of the subsidies to Big Oil and cut the biofuel makers a bit a slack.