Saving the Biodiesel Industry is Good for Both the Environment and Consumers
For nearly two decades, the federal biodiesel tax credit incentivized production of a clean, safe fuel that has become an economic engine and a reliable fuel source across the country. It has also been vital to job creation and the reduction of greenhouse gas emissions. But all of those benefits are now at risk because of congressional inaction in Washington.
The biodiesel tax credit lapsed in 2018 to the detriment of truck stop and gas station owners, the biodiesel and trucking industries, consumers and others that rely on the tax credit to expand their businesses and bring down energy costs. Unless Congress renews the tax credit soon, businesses across the supply chain — as well as consumers — will pay the price.
The credit has helped fuel retailers offer biodiesel, a cost effective and environmentally friendly fuel, to consumers at a lower cost. It also sustained increased economic activity and job creation for retailers and producers alike. Without the biodiesel tax credit in place, retailers have been selling biodiesel at a loss and market uncertainty has made long term growth difficult. Retailers that had been planning to increase their investments in biodiesel are pulling back. The travel center industry’s inability to anticipate the availability of the incentives has severely disrupted access to capital, inhibiting their ability to make necessary investments. These projects can cost as much as $500,000 per store. This lack of certainty has hindered the ability of these businesses to hire and expand.
It doesn’t stop there. The fault lines created by the lapse in the biodiesel tax credit run far and wide across the fuel supply chain. The price savings generated by the tax credit mean that consumers, including the nation’s trucking industry, pay significantly more to fill up at the pump. Consumers inevitably want to buy the cheapest fuel possible. In the highly competitive retail fuels market, where consumers can price-compare without leaving their vehicles, just a one- or two-cent per-gallon difference in the price of fuel means that drivers invariably look for a better deal.
The lapse of the biodiesel tax credit is also seriously harming the biodiesel production industry. Since its implementation in 2005, the biodiesel tax credit has played a key role in stimulating growth in the U.S. biodiesel industry. Biodiesel production grew from 100 million gallons in 2004 to nearly 2.6 billion gallons a year in 2017.
In the nearly two years since Congress allowed the credit to lapse, production has declined and at least 10 biodiesel production facilities in the United States have shut down or been idled. U.S. production of biodiesel dropped 16 million gallons between August 2018 and August 2019, according to the U.S. Energy Information Administration. Just this month, Indiana-based Integrity Biofuels announced it is slowing production and laying off workers. The decline in production and stalemate on extending the credit are no coincidence.
The lack of federal action will have both short- and long-term impacts. Biodiesel is an essential, cost effective fuel option in the current marketplace. A dwindling supply of biodiesel will drive up costs for other energy sources and increase costs for consumers.
When the public and the trucking industry purchase alternative fuels such as biodiesel, it reduces their emissions footprint. Renewal of the credit also would support the long-term growth of fuel retailers that want to sell this important product to the public. Failure to act would simply be irresponsible.
The biodiesel tax credit has been stuck in limbo for far too many years. But there is a path forward.
House lawmakers recently introduced a draft tax incentive package that includes the $1 per gallon biodiesel tax credit. The draft calls for extending the biodiesel and renewable diesel credit through 2021, and then phasing the credit down to $0.75 in 2022, $0.50 in 2023, and $0.33 in 2024. Other measures have been introduced, too, that include similar language. This represents a sound approach to solving the mounting problems created by the lapse in the tax credit.
There is strong evidence that if Congress renews the biodiesel tax credit by the end of this year the impact through at least 2024 would be significant. According to a recent FTI study, if the credit were to be renewed this year, at least 31,400 new jobs would be supported.
Lawmakers in Washington, D.C., must renew the biodiesel tax credit for the sake of businesses and consumers across the U.S.
Lisa Mullings is President and CEO of NATSO, representing America’s travel plazas and truck stops.