Iowa Sen. Charles Grassley and Washington Sen. Maria Cantwell and 14 other senators introduced legislation April 26, 2017, to reform the biodiesel tax credit and extend the incentive for three years.
The bill, the American Renewable Fuel and Job Creation Act of 2017, extends the clean-fuel incentive for three years and reforms the incentive by transferring the credit from the blenders to the producers of biofuels. The switch ensures that the tax credit incentivizes domestic production and taxpayers aren’t subsidizing imported fuel.
“Once again, Sen. Grassley is leading the fight to extend and reform the federal biodiesel tax credit," said Iowa Renewable Fuels Association executive director Monte Shaw. "Taking these steps is vital to maximize the impact U.S. biodiesel producers can have on powering our economy, cleaning our air, and enhancing our energy security."
“This bill allows producers the security they need to grow their operations and will help to continue biodiesel’s success in diversifying the fuel market,” said ASA president and Illinois soybean farmer Ron Moore. “This tax credit and extension is vital to the industry’s continued growth, and will maximize the added value of domestic production of biofuels.”
Since 2014, biofuels imports have increased from 510 million gallons to about one billion gallons in 2016. Already in the first quarter of 2017, imports are 10% higher than they were at this time in 2016. In many cases, foreign biodiesel benefits both from the existing tax credit and from additional foreign subsidies, which makes it difficult for domestic biodiesel facilities to compete. In 2015 alone, the U.S. Treasury spent more than $600 million on tax credits for imported biodiesel and renewable diesel.
“U.S. tax policy should support U.S. products and U.S. jobs,” Grassley said. “This bipartisan bill would end a system that gives many foreign producers a leg up over U.S. producers and give certainty to the biodiesel industry, which is responsible for employing thousands of Americans. U.S. producers shouldn’t be put at a disadvantage by foreign producers that in many cases are double dipping by benefiting from U.S. tax incentives on top of their own significant government subsidies.”
“The biodiesel tax credit already has a track record of reducing emissions, creating 50,000 jobs, and greening our economy, removing the equivalent of 16 million cars from the road,” Cantwell said. “This legislation will remove millions more cars while promoting energy independence, saving taxpayer dollars, and accelerating by up to 45% the creation of new clean energy jobs in the domestic biodiesel production industry.”
Switching from a blenders credit to a producers credit would offer numerous additional benefits. The blenders credit can be difficult to administer, because the blending of the fuel can occur at many different stages of the fuel distribution. This can make it difficult to ensure that only fuel that qualifies for the credit claims the incentive, making the program susceptible to abuse.
Joining Grassley and Cantwell to co-sponsor the American Renewable Fuel and Job Creation Act of 2017 are Sens. Pat Roberts (R-Kan.), Mazie Hirono (D-Hawaii), Roy Blunt (R-Mo.), Sheldon Whitehouse (D-R.I.), Joni Ernst (R-Iowa), Heidi Heitkamp (D-N.D.), John Thune (R-S.D.), Tom Udall (D-N.M.), Martin Heinrich (D-N.M.), Jeanne Shaheen (D-N.H.), Amy Klobuchar (D-Minn.), Al Franken (D-Minn.), Joe Donnelly (D-Ind.) and Patty Murray (D-Wash.).
Modifying the credit is estimated to have little to no impact on the consumer. Much of the credit would continue to be passed on to the blender and ultimately, the consumer. Additionally, the U.S. biodiesel industry is currently operating at approximately 65% of capacity.
In 2005, Congress created the biodiesel tax incentive.
Read the text of the legislation here.
Source: Sen. Grassley, ASA, Iowa Renewable Fuels Association