The EPA has announced that 2010 production of cellulosic ethanol will reach 6.5 million gallons instead of the 100 million gallons required by the 2007 Energy Independence and Securities Act. Another highly touted biofuel, biodiesel, is encountering similar shortcomings.
Biodiesel is made from vegetable oils, mainly soy. The oil cost depends on the price of the fossil fuels used to grow, harvest, fertilize and process vegetable crops into oil. Those functions make biodiesel inherently more expensive than fossil fuels, where nature has done the conversion of biomass into oil.
To counter this for biodiesel, Congress in 2004 created a $1 per gallon tax credit for biodiesel; it was later extended through 2009. Hopes were high that this would support a significant role for biodiesel in the U.S. diesel market.
A mandate for 2015
The Energy Independence and Security Act of 2007(EISA) added to the push with mandates for biodiesel, calling for 2.5 billion annual gallons of biodiesel by 2015.
EISA also did not prevent the export of subsidized biofuels. American producers of biodiesel have been exporting a majority of their product to Europe, thanks to the edge that the dollar-per-gallon blending credit gives them over European rivals. But in March 2009, the European Commission imposed anti-dumping duties on imports of U.S. biodiesel.
Legislation to continue the $1 gallon credit in 2010 has stalled in the Senate. This delay and European duties have U.S. biodiesel production down to less than 20 percent of capacity.
In 2009, 600 million gallons
In 2009, the U.S. biodiesel industry produced 600 million gallons of biodiesel, just 1.4 percent of total U.S. diesel consumption of 48.5 billion gallons.
One of many investors in biodiesel facilities is the City of Seattle Employee’s Retirement Fund. That fund invested $10 million of the $90 million that Imperium Renewables spent to build the largest U.S. biodiesel refinery, now idle.
One small bright spot for the struggling industry is Minnesota, which requires a 5 percent biodiesel blend in conventional diesel.
It’s time to let subsidies and mandates for this biofuel expire.
Rolf Westgard is a professional member of the Geological Society of America and teacher of energy subjects for the U of M College of Continuing Education.