Tax credits for renewable fuel in the U.S. have been inconsistent at best. Recently Congress voted to pass the $1.00 per gallon biodiesel and renewable diesel blenders tax credit retroactive to January 1, 2015 through December 31, 2016. While any tax benefit to the renewable fuel industry seems like a win, there are many trade groups including the National Biodiesel Board who have been advocating for the tax incentive to be reformed to a domestic producers tax credit.
The current blenders credit allows biodiesel that is imported from foreign countries and blended in the U.S. access to the tax incentive. This situation is problematic to the U.S. biodiesel industry and to taxpayers for many reasons.
The U.S. Energy Information Administration estimates that the biodiesel import volume for 2016 will be more than 700 million gallons. If that biodiesel is blended into petroleum diesel here in the United States, it could result in a potential $700 million paid in taxpayer dollars to foreign biodiesel producers.
Today the U.S. market is flooded with biodiesel from places like Argentina and Malaysia, where the production is already subsidized in their countries yet they are able to undercut U.S. markets and double dip with the U.S. blenders incentive. To add insult to injury, much of the biodiesel produced in countries like Malaysia comes from questionable feedstock including palm oil, that has numerous negative impacts both environmental and social including rainforest clear cutting and forced labor and does not meet the sustainability requirements of the RFS.
Changing the blenders tax credit to a domestic producers tax credit would ensure that U.S. tax dollars are benefiting only U.S. biodiesel producers. Groups that oppose the reform say that a domestic producers credit would limit the global market essence of fuels, but as many countries including the U.S. look into the future towards energy security and renewable solutions, a robust domestic industry is key. U.S. Biodiesel producers big and small can all get behind that.