Biodiesel at a Crossroads: With the Tax Credit Gone, Its Future is Uncertain

A burgeoning deficit coupled with election year politics are wreaking havoc on industries, such as biodiesel, that have great potential to cut our dependence on foreign oil.

You would think that recent events in the Gulf Coast would have placed a renewed interest in alternative energy research. But in fact, the most promising forms of alternative energy struggle as critical investment incentives have been allowed to lapse.

It takes a large commitment over several years to develop an alternative fuel infrastructure; yet, politicians who had begun to invest in this infrastructure are now reluctant to build on the foundation that was previously laid. A burgeoning deficit coupled with election year politics are wreaking havoc on industries, such as biodiesel, that have great potential to cut our dependence on foreign oil.

A tax credit critical to the continued growth of the biodiesel industry was allowed to expire over six months ago, and politicians -- while paying lip service to the need for alternative fuels -- are reluctant to introduce anything that could be interpreted as a spending bill and used against them in the mid-term elections.

"The catastrophe in the Gulf is crushingly sad and infuriating to continue to watch month after month," exclaims Joe Jobe, CEO, National Biodiesel Board. "But what is almost as frustrating for our industry is to hear members of Congress talk about the need for more clean energy sources like wind, solar and advanced biofuels. Meanwhile, their inaction is suffocating the only advanced biofuel that has achieved commercial success in America -- biodiesel. Congress needs to stop talking and start acting."

Track record of success

The biodiesel incentive program has achieved great success in a very short time. "The biodiesel tax credit has been one of the most successful pieces of energy policy in U.S. history, leading to the construction of over 150 plants throughout the U.S. and the creation of over 53,000 American jobs -- all in the five short years since the credit took effect in January 2005," claims Jobe.

The previous investment could be wasted without continued support. "While the Renewable Fuel Standard will ensure a minimum amount of usage for biodiesel, the industry needs more than five years of a tax credit to help it grow and mature in order to survive the very hostile and volatile energy sector," says Jobe. "The petroleum industry has benefited from very favorable energy policy support for over 70 years and still receives significant support today."

A real difference

The biodiesel industry is positioned to make a real difference in our national energy plan. "The biodiesel industry has a goal of 5 x 15," says Jobe. "We are aiming at an annual displacement of 5% of the nation's diesel fuel supply by 2015. This amount roughly equates to the same amount of diesel fuel that America refined from all of the crude that we imported from Iraq in 2005."

Such a percentage must be taken in context. "While 5% may not sound like a lot to some, on the diesel side of the ledger, that is a very significant amount," explains Jobe. "This is because there are very few renewable and alternative energy options for heavy-duty transportation.

"Most viable alternative energy options are either for power generation -- such as wind, solar, hydro, geothermal, etc. -- or for light-duty transportation, such as ethanol, methanol, fuel cells, electric vehicles, etc.," he points out. "There are no immediate options to replace the power, performance, durability and efficiency of diesel to move semi-trucks, barges, trains and heavy equipment. For example, it is just not feasible to try to run a bulldozer or dump truck using batteries or fuel cells, or even a spark ignition."

Biodiesel doesn't require that equipment owners invest in new technology or divest current assets. "Biodiesel is not only compatible with the diesel platform, it is complimentary, as it offers emissions, performance, safety, energy security and domestic economic development benefits to the nation," says Jobe. "And realization of these benefits does not require investment in new engines or national infrastructure. Biodiesel is here now, ready for use today. And because no special engine or infrastructure modifications are necessary, there are no operational range issues associated with biodiesel."

Biodiesel is not dependent on one feedstock, which positions it well for the future. Jobe claims biodiesel is among the most diverse and sustainable transportation fuels available.

"It is made from a wide variety of regionally-grown fats and oils. Biodiesel has the highest energy content, highest energy balance and best greenhouse gas reduction of any domestic liquid transportation fuel," he states. "Increased biodiesel production has also led to increased investment in plant science research, which is leading to increased yields with less energy inputs, as well as new varieties of plants which will be able to be grown in otherwise non-productive soils and regions. The National Biodiesel Board is investing directly in research for next-generation feedstocks for biodiesel, such as algae, jatropha and halophytes, which in the long-term offer significant volume potential."

Industry needs support

Government support is necessary for any emerging energy source. "The biodiesel industry remains determined to see the tax credit reinstated," says Jobe. "During our recent membership meeting in Washington D.C., we had members from virtually every state meet with their Congressional delegations.

"The overwhelming feedback we received was that biodiesel has broad bipartisan support, but that the credit is mired down by the political process and election year gridlock," he notes. "Unfortunately, the outcome is the same for the biodiesel industry, as our plants are being forced to shed jobs."

Contractors who rely on diesel fuel have a vested interest to help support the National Biodiesel Board in its efforts. Go to see how you can help ensure a renewable energy source for your industry.