The National Biodiesel Board (NBB) applauded the introduction of a bipartisan biodiesel tax credit bill that would convert the blenders’ credit for biodiesel to a $1.00-per-gallon production credit for fuels produced in the United States for three years. The bill provides an additional 10-cent-per-gallon credit for small U.S. biodiesel producers.
“Well-crafted and efficient tax incentives can be powerful policy mechanisms to achieve the nation’s energy objectives and to create jobs. But subsidizing foreign manufacturing and hurting U.S. workers were not Congress’s intent. We applaud the senators’ bill to close this loophole by reforming the credit as a domestic production credit,” said Anne Steckel, Vice President of Federal Affairs at NBB. “Updating this tax credit is necessary to create a level playing field for U.S. biodiesel producers—and it has the added benefit of saving millions of taxpayer dollars.”
This bipartisan bill seeks to reinstate the biodiesel and small producers tax credits that expired at the end of 2016, but with a change to who is eligible for the credit. Previously, the tax credit was open to blenders of biodiesel, but this legislation would provide tax credits to U.S. producers instead of blenders. Doing so prevents subsidization of foreign manufacturers.
Taxpayer dollars and U.S. energy policy should be—and typically are—aimed at incentivizing domestic production, not foreign production. The current structure of the biodiesel tax incentive as a blenders’ credit increasingly allows foreign producers to access the credit if their fuel is blended in the United States. Importantly, this reform would not block imported biodiesel from entering the U.S. market; in fact, significant imports would likely continue coming to the U.S. and receiving incentives under the Renewable Fuel Standard (RFS) and California’s Low Carbon Fuel Standard (LCFS).
U.S. biodiesel producers just need a level playing field to compete with foreign production. For example, since 2009, the European Union has levied duties on U.S. biodiesel that effectively block U.S. biodiesel from entering the European market. Additionally, Argentinian biodiesel that receives significant incentives under that country’s Differential Export Tax regime is increasingly being shipped to the U.S. market where it also can qualify for the U.S. tax incentive.
Without this reform, U.S. tax policy is increasingly creating competitive disparities in which U.S. companies are losing U.S. jobs and market share to subsidized foreign production in Europe, Argentina and other nations. Because of this flood of imports, the NBB also had to file an antidumping and countervailing duty petition against Argentina and Indonesia for violating trade laws and for harming U.S. workers and manufacturers.
Changing the structure of the tax credit also would save taxpayers millions of dollars. Biodiesel imports to the U.S. have grown sharply in recent years, largely as a result of the tax credit. In 2015 alone, the U.S. Treasury spent more than $600 million on tax credits for imported biodiesel and renewable diesel. Importantly, this fuel often had already received subsidies in its country of origin (Argentina, Indonesia and the European Union, for example). According to the Joint Committee on Taxation, reforming the tax incentive would save U.S. taxpayers $90 million as imports are reduced and domestic production grows.
Since being implemented in 2005, the biodiesel tax incentive has played a key role in stimulating growth in the U.S. biodiesel industry, helping it become the first Environmental Protection Agency (EPA)-designated advanced biofuel to reach commercial-scale production nationwide.
By helping biodiesel compete on a more level playing field with petroleum, the $1.00-per-gallon tax credit creates jobs, strengthens U.S. energy security, reduces harmful and costly emissions, diversifies the fuels market and ultimately lowers costs to the consumer. There is a clear correlation between the tax incentive and increased U.S. biodiesel production, which has grown from nearly 100 million gallons in 2005 when the tax incentive was first implemented to almost 1.8 billion gallons in 2016.
The American Renewable Fuel and Job Creation Act of 2017 was introduced by U.S. Senators Chuck Grassley and Maria Cantwell, with 14 other original sponsors, including Pat Roberts, Heidi Heitkamp, John Thune, Sheldon Whitehouse, Martin Heinrich, Joni Ernst, Joe Donnelly, Roy Blunt, Mazie Hirono, Al Franken, Patty Murray, Amy Klobuchar, Tom Udall and Jeanne Shaheen.
NBB is the U.S. trade association representing the entire biodiesel value chain, including producers, feedstock suppliers and fuel distributors, as well as the U.S. renewable diesel industry.