Tuesday, January 19, 2010

The Never-Ending Biodiesel Subsidy


Maria Cantwell, U.S. Senator [D-WA]

[UPDATE 12/21/2010] The tax credit of $1.00 per gallon has been officially reinstated. From Biofuels Digest:

John Plaza, CEO, Imperium Renewables:

Today marks a tremendous event for the biodiesel industry. With both the Senate and House including the biodiesel tax credit in the President’s Tax Package, we can get back to the job of supplying our Nation with renewable fuels made in America. We are thrilled that Congress has extended the biodiesel blender’s tax credit and we must thank U.S. Senator Maria Cantwell, U.S. Senator Patty Murray, and U.S. Congressman Dicks along with many others for their tireless support of our industry, and Imperium Renewables in particular. We greatly appreciate the leadership of President Obama and his administration’s efforts to ensure that these job-creating investments in the U.S. biofuels industry were part of the overall bill.

[UPDATE 9/21/2010] From an article on Bright Energy titled:

Democrats blamed as Senate rejects biodiesel tax credits
Senators threw out the amendment to the "small business bill" by 58 votes to 41
But get this:
The "small business bill" passed by a 61-38 vote, with just two Republicans crossing party lines to support the bill.

How do you know when a politician is lying? His or her lips are moving.

[UPDATE 1/24/2010] See Obama's speech lambasting the five goofballs on the Supreme court who may have driven the last nail into our already dysfunctional political process.

Original article written in January 2010 continues below:

Rather than write an email to my senator to air my concerns about her pending biofuel legislation, I'm going air them on this blog because, well, that's what blogs are for.

Does she realize that Seattle and Berkeley dropped food-based biodiesel last year?

Is she unaware of the peer reviewed science demonstrating the links between agricultural expansion, eutrophication of waterways, and biodiversity loss?

Does she know that biodiesel made from Midwest soy does not at this time qualify as a low carbon fuel per the EPA?

Does she know that the food riots in dozens of countries in the summer of 2008 were caused in large part by speculation fueled by government mandates for and subsidization of corn ethanol and soy biodiesel?

Assuming that, as a United States Senator, she must be aware of all of these issues, I'm at a loss as to why she has introduced more legislation to yet again extend the blending credit for biodiesel.

I wrote a short op-ed that was accepted for publication in the latest issue of Subsidy Watch (produced by the Global Subsidies Initiative). Following is an excerpt:

In 2004 the U.S. Congress created a USD$ 1/gallon (US$ 0.264/litre) blenders' tax credit for biodiesel that was slated to expire in 2006. But in 2005 it extended the tax credit through the end of 2008 and, before that year was up, extended it again, through 2009.

Predictably, last autumn, legislation was introduced to extend the tax credit for yet another year, through 2010.


Now this, from Agriculture Online:

Farmer leaders in the soybean industry are asking farmers to tell members of Congress that they support two stand-alone bills that would put the tax credit back into effect for five years.

In the Senate, Senator Maria Cantwell (D-WA) and Senator Chuck Grassley (R-IA) have introduced S.1589 to do that. In the House, a similar bill, H.R. 4070, has been introduced by Representative Earl Pomeroy (D-ND) and Representative John Shimkus (R-IL).


I know a guy who owns a diesel powered Jeep Liberty. It uses twice as much fuel per mile as the midsized hatchback I drive. Thanks to the dollar per gallon biodiesel blending subsidy, fellow citizens were paying him $15 every time he filled up with biodiesel (95% of which is made out of virgin soy or canola vegetable oil diverted from food processors).

Note that three out of the four senators are from farming powerhouses where corn and soybeans are the dominant crops. They are legally securing future campaign funding from the powerful and well-funded farm lobby.

The big biodiesel refinery here in Washington State only employs a few dozen people and has always bought its vegetable oil from Canada, because it was cheaper, and until the European Union forced them to stop, that same refinery was shipping most of its biodiesel overseas to undercut other producers with the dollar per gallon blending subsidy it was receiving.

Shortly after hoovering up funding from wealthy venture capitalists, as well as ten million dollars from the City of Seattle Employee's Retirement System, this refinery shut down from a lack of operating capital. During the food price crisis in the summer of 2008, soy based biodiesel was selling for $6 a gallon in Seattle as food producers and fuel producers bid against one another over the same feed stock.

It has recently attempted to restart operations thanks to government mandates for biodiesel use in the neighboring state of Oregon.

Making biodiesel from food has proven to be a dead end business model. Why would a politician from a state that provides very little, if any vegetable oil for biodiesel continue to support it?

I can only think of one reason for Cantwell's dedication to this dead fuel walking. She is being lobbied to bring home the bacon by a very small but very vocal minority of wealthy investors, biodiesel producers, and retailers in her state (see Obama's speech).

According to the the book Comeback America (saw it on the Daily Show last night, downloaded it from the Library today), the typical American family's share of our country's foreign debt is over five hundred thousand dollars.

From the Global Subsidies Initiative's about page:

Subsidies are powerful instruments. They can play a legitimate role in securing public goods that would otherwise remain beyond reach. But they can also be easily subverted. The interests of lobbyists and the electoral ambitions of office-holders can hijack public policy ...

But the case for scrutiny goes further. Even when subsidies are legitimate instruments of public policy, their efficacy - their fitness for purpose - must still be demonstrated. All too often, the unintended and unforeseen consequences of poorly designed subsidies overwhelm the benefits claimed for these programs. Meanwhile, the citizens who foot the bills remain in the dark ...

When subsidies are the principal cause of the perpetuation of a fundamentally unfair trading system, and lie at the root of serious environmental degradation, the questions have to be asked: Is this how taxpayers want their money spent? And should they, through their taxes, support such counterproductive outcomes?


Consider sending the senator from Washington an email, or just post something on your blog like I just did.

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7 comments:

Neal Breakfield said...

Found this via google. Interesting piece. I don't think that you and I would agree on most things, but I think that we agree on this. Subsidies for biodiesel only serve the purpose of lining the pockets of a select few, and provide no real benefit to the economy or the environment.

In fact, the whole industry is a detriment to all whom it purports to benefit. It is bad for the economy because the tax dollars it consumes serve to reduce jobs and provide a drain to the economy. It further reduces jobs by artificially increasing the supply of a competitor to other legitimate home grown fuels that do not require subsidy. Lost jobs x 2.

Furthermore, it diverts food producers from producing raw agricultural products for which there is a legitimate demand. This reduced supply means higher food prices. That's nice if you have a disposable income that can absorb increases in food cost, but not so nice if you can't. In the US we subsidize our poor, so no riots here. In other places that don't subsidize their poor (or are mostly poor) there are riots.

Subsidies as a whole are of limited benefit, but are sometimes really bad for all. Any time that an industry is completely dependent on a subsidy, it it is time for that industry to die... or survive on it's own. Darwin should rule the day with this one.

kallisti5 said...

All Wrong.. several incorrect points here:

"I know a guy who owns a diesel powered Jeep Liberty. It uses twice as much fuel per mile as the midsized hatchback I drive."

Most modern (>1999) Diesel engine vehicles get almost double the gas mileage of their gas equals. So unless you are comparing a 1980 Jeep Liberty to your modern car.. this is simply incorrect.

"Thanks to the dollar per gallon biodiesel blending subsidy, fellow citizens were paying him $15 every time he filled up with biodiesel"

Petrol is heavily laced with subsidies as well as Diesel... how is this a valid point? With your logic, why should I pay for your gas car's subsidies?


"Does she know that the food riots in dozens of countries in the summer of 2008 were caused in large part by speculation fueled by government mandates for and subsidization of corn ethanol and soy biodiesel?"

Biodiesel can be made from many non-food products such as algae or beef tallow as well as waste vegetable oil.

"Why would a politician from a state that provides very little, if any vegetable oil for biodiesel continue to support it?"

Because it is better for your engine, it produces *much* less pollution, and unlinks us from big oil.

Russ Finley said...

"...Most modern (>1999) Diesel engine vehicles get almost double the gas mileage of their gas equals. So unless you are comparing a 1980 Jeep Liberty to your modern car.. this is simply incorrect..."

The diesel Liberty was only produced for two years because it polluted so bad. Your claim that it gets double the mileage of a gasoline liberty (a 100% improvement) is simply incorrect. It gets roughly 20% better mileage.

Go to the EPA Green Vehicle Guide website and compare say, a diesel and gasoline Jetta for example. It does not list the diesel Liberty.

I was comparing the diesel Liberty to a Prius (24 mpg vs 48 mpg)

"...Petrol is heavily laced with subsidies as well as Diesel... how is this a valid point? With your logic, why should I pay for your gas car's subsidies?..."

Biodiesel gets a dollar per gallon subsidy. Three separate studies by three environmental groups estimate that oil gets a total of roughly 15 cents per gallon. And I don't think you should pay for my car's subsidies either.

"...Biodiesel can be made from many non-food products such as algae or beef tallow as well as waste vegetable oil..."

Nobody but the military can afford biodiesel made from algae:

http://www.consumerenergyreport.com/2009/03/10/the-prospects-for-algal-biodiesel-dim/

http://www.consumerenergyreport.com/2009/05/15/greenfuel-bites-the-dust/

http://www.consumerenergyreport.com/2010/10/08/us-navy-pays-big-bucks-for-biofuels/

98 percent of our biodiesel comes from virgin vegetable oil (food). Biodiesel made from waste can't scale up to anything meaningful.

"...it (biodiesel) is better for your engine, it produces *much* less pollution, and unlinks us from big oil..."

It is not better for your engine. It will ruin many engines. It wrecked my friend's oil pump which cost $2,600 to replace. Put more than 5% in a 2009 Jetta and you will void your warranty. With the ultra low sulfur diesel fuels and the new air pollution devices now feasible as a result, on new diesels, the difference in pollution between biodiesel and diesel is negligible. On the other hand, a 2006 diesel Jeep liberty burning biodiesel is so dirty they banned their sale in several states trying to meet air pollution standards.

Allan Michaud said...

I am researching a possible documentary I am want to make on the destruction of rainforests out here in Cambodia, where I have worked with conservation groups for the past decade. The rate of deforestation that has taken place over the past 3-4 years is shocking and it is largely for bio-fuel production (mostly to China and the EU) This has become a serious problem around the world and government subsidies are wiping out entire species on a wide scale. Here enormous areas of primary forest are being cleared to grow, cassava, sugar cane and palm oil. Having made expeditions with botanical experts from Denmark and the US, I am aware of just how much potential knowledge we are losing because of bio-fuels. This needs action on a global scale, governments across the planet are all jumping on the bio-fuel bandwagon (and lining the pockets of the already rich and powerful). If something is not done to regulate subsidies and ensure sustainability we will lose countless species that, with further study, could be of so much benefit to us as a species. This headlong rush for mass production of bio-fuels is in my opinion insane.

Russ Finley said...

Keep me abreast of your efforts and I'll see what I can do as far as writing about it is concerned. Mongabay might also be a good contact.

Susan Bauer said...

Between the article and the comments, there is about 80% bad/confused non-analogous information about biodiesel. I just don't know where to start. Briefly, it matters from WHAT biodiesel is blended and from WHOM you are sourcing it as well as to WHAT MONSTER VEHICLE/FUEL ABUSING purpose you are about. Please consider reading interesting biodiesel facts at the group, Northwest Biodiesel's, website: www.nwbiodiesel.org. Also, please consider most biodiesel or electric vehicle users/promoters believe there is no silver bullet for killing the petro fuel industry - - every market, and dare i say every soul, should find its best solution.

Russ Finley said...

Susan, if you are saying that biodiesel sourced from waste vegetable oil is OK, then I don't disagree. But why didn't you just say that?

Biodiesel can't scale without increasing negative agricultural ramifications.