Stop the Presses! Lowering a Soviet-style Production Quota for Biodiesel Hurts Biodiesel Industry

by William Yeatman on February 7, 2012

in Blog

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Thanks to the 2007 Energy Independence and Security Act, motorists are subject to a Soviet-style production quota for biofuels. Every year, Americans must purchase greater volumes of biofuels–motor fuels distilled from corn, soy, and plant matter–until 2022, when the production quota tops out at 36 billion gallons. Fifteen billion gallons of that figure would come from corn ethanol. Most of the rest must come from cellulosic ethanol, a fuel that doesn’t yet exist. (That’s right, the U.S. Congress passed, and President George W. Bush signed, a bill that requires the production of 16 billion gallons of an imaginary fuel). For biodiesel, the Energy Independence and Security Act requires the production of 500 million gallons in 2009, 650 million gallons in 2010, 800 million gallons in 2011, and 1 billion gallons this year. Thereafter, the biodiesel mandate remains at 1 billion gallons, although EPA Administrator Lisa Jackson has the discretion to increase the quota.

Last year, EPA proposed to use its authority to increase the biodiesel mandate in 2013 to 1.28 billion gallons—a 28% increase over the statutory minimum. In December, however, EPA postponed the announcement of the 2013 production quota for biodiesel, and the Agency left open the possibility that it would keep the biodiesel mandate at 1 billion gallons. Naturally, EPA’s reticence outraged the biodiesel industry. According to Energy & Environment GreenWire (subscription required),

“There’s no question that the production capacity is there. The biodiesel industry can do it, and there’s no question that the 1.28 can be met,” said Ben Evans, director of federal communications at the National Biodiesel Board. “It’s really surprising to us that there would be this hesitation and the potential for moving it back to a billion. To us, it would really be a devastating blow.”

Of course, the effect would be “devastating” because the biodiesel industry simply cannot compete on an open fuel market. Don’t take my word for it! Even biodiesel producers are willing to concede that their product is inferior. From the same GreenWire article:

“If [EPA] backs off that once it said it, it’s sending a signal that it’s potentially going to let this industry swing, and by swing I mean from the end of the rope,” said [Joe] Gershen, [director of sales and marketing at Crimson Renewable Energy LP, a California-based biodiesel company].

The biodiesel producers’ warning of imminent catastrophe absent increased government support harks back to the wise words of the Toronto Sun editorial board, “…since renewable energy can’t survive without massive government subsidy, when you cut the subsidy, you cut the jobs that subsidy creates.”

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