Biodiesel incentives: the kiss of death

When Dr. Bush exhorted the benefits of renewable fuels recently, I was suspicious. This snake-oil salesman of a president has put one over the American taxpayer so many times, I am not inclined to take anything he says at face value. Point in case: the biodiesel tax incentive could potentially damage the nascent biodiesel industry because the incentive is written in a way that leaves the small and mid-size biodiesel producers, who care most about the product, out in the cold. One of them, Kumar at Fueled for Thought has a detailed analysis of how this tax incentive shoots the biodiesel industry in the foot:

  1. The incentive for pure biodiesel (B100) is a corporate income tax credit, which has the greatest benefit for very large corporations
  2. The more accessible tax incentive is tied to bio-petrodiesel blends
  3. The incentive prefers first-use oil over yellow grease products, although recycling used grease is an essential benefit of biodiesel
  4. The incentive destroys the balance of supply and demand for biodiesel, which creates opportunities for bankers and other thieves to speculate with a product they don’t understand or care about

Biodiesel is still an early-adopter market, largely unregulated, or rather self-regulated. I’m not a free-marketer, but here is an industry that was doing well on its own, growing by leaps and bounds, thank-you-very-much. Then those big-government Republican (and Dem) wheeler-and-dealer types came in and started messing with it. Not because they give a damn about the technology, saving the earth from choking to death or relieving our landfills from tons of grease. No, they smell money.


This tax incentive was written to support big agribusiness, especially soy-bean producers, and it is supposed to make it attractive for big oil to get into the biodiesel business. However, neither of these players really understand or care about biodiesel. Yet, as a largely self-regulated industry, biodiesel has done so well so far precisely because so many producers and distributors understand and care about the product.

Now that there may actually be money to be made with biodiesel, the market may well get flooded with poor-quality product that’s going to clog the fuel lines of unsuspecting consumers and ruin the reputation of a technology that has the potential to dramatically improve living conditions in our cities and on our planet, and our ability to “survive” peak oil.

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