No matter where you look along the biofuels supply chain today, there is a tax credit of some sort for someone. From producers to blenders, infrastructure developers to fuel dispensers, educators to end users, there are incentives by the barrelful. On May 22, when Congress overrode a Presidential veto to pass the new Farm Bill, it assured that the funds for the development and commercialization of biofuels would just keep flowing faster than ever before.
Section 9003 of the Food, Conservation, and Energy Act of 2008, for instance, provides for grants covering up to 30% of the cost of developing and building demonstration-scale biorefineries for producing “advanced biofuels.” It also allows for loan guarantees of up to $250 million for commercial-scale biorefineries.
There is a new tax credit of $1.01/gal. for producers of cellulosic biofuels (made from wood, grasses and other non-edible plant matter) and another $35 million in Commodity Credit Corp. (CCC) funds to encourage existing biorefineries to reduce their dependence on fossil fuels. There are grants of up to 25% of the cost of renewable energy systems and energy-efficiency improvements for agricultural producers and rural small businesses, and much more. (Go to the U.S. Dept. of Energy's Energy Efficiency and Renewable Energy web site at www.eere.energy.gov for a short overview and link to the complete bill.)
Some critics, however, call the U.S. investment in biofuels a drop in the bucket, and perhaps the wrong bucket at that. In June, the European Union accused American biodiesel producers of “dumping” inexpensive biofuel (about a million tons in 2007) into the European market.
They complain that U.S. producer/blender exporters benefit from two levels of subsidies — tax credits, and other financial incentives from the U.S. federal government and then again from subsidies granted by individual European governments when the fuel is sold there. This situation is not warming the hearts of American taxpayers, either, who believed they were helping to underwrite development of the domestic biofuel business to reduce U.S. dependence on foreign oil and clean up the air at home.
So today, biodiesel production is fast becoming entangled in tax and trade as well as technology issues that will have to be resolved if it is to play even a modest part in America's fuel future, much less meet production and utilization goals the U.S. Congress has set. And no one wants to take the credit for that.