Biodiesel Needs Tax Credit To Grease Production

In the U.S., biodiesel is the only fuel currently produced at a commercial scale that meets the Environmental Protection Agency (EPA) definition of an “advanced biofuel.” Biodiesel is a renewable, clean-burning diesel substitute that meets strict fuel specifications and can be burned in existing diesel engines. It is also produced in nearly every state in the country, and can be made from an increasingly diverse mix of resources such as agricultural oils, recycled cooking oil and animal fats.

These factors enabled the U.S. biodiesel industry to produce 1.1 billion gallons of fuel in 2011—an industry record, according to the National Biodiesel Board (NBB). This volume far surpasses the 800 million gallon target set by the EPA’s Renewable Fuel Standard (RFS), and the previous record for biodiesel production, which was about 690 million gallons, set in 2008.

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image via Imperium Renewables

According to the NBB, the biodiesel industry’s success in 2011 was driven by two key factors: Congressional reinstatement of the $1-per-gallon tax credit for biodiesel producers, and the first year of implementation of the EPA’s RFS program for biodiesel. In fact, the numbers show that a record 160 million gallons of biodiesel were produced in December alone, to take advantage of the tax credit.

However, the tax incentive for biodiesel producers expired on Dec. 31, 2011, and the industry is urging Congress to reinstate it. Biodiesel producers learned their lesson in 2010, when production fell dramatically in the U.S. without the tax incentive, despite being record year for biodiesel production globally. A recent study commissioned by the NBB found that extension of the tax credit and continued growth in the RFS could create an additional 11,698 jobs over the next two years.

Lauren Craig is a writer and consultant living in Seattle, WA. She holds an M.S. in International Development from Tulane University, and is co-founder of Sustainable Systems Integrators, LLC., an employee-owned solar energy design and installation firm in New Orleans, LA. She is also certified in PV design and installation by the North American Board of Certified Energy Practitioners (NABCEP).