Biodiesel Subsidies Up for Renewal

Biodiesel Subsidies Up for Renewal

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Biodiesel currently received a $1.00 per gallon subsidy when blended into diesel fuel.  This subsidy is through a tax credit, which is to expire at the end of 2009.  This credit is given irrespective of the impact that this fuel is having on the environment or economy.  In fact, it is possible for the subsidy to apply to the dirtiest of biofuels, including imported palm oil from Malaysia or soy biodiesel from Brazil.  

Increased biodiesel production is at the heart of rainforest destruction in the Borneo and Amazon Rainforests, contributing to biodiversity loss in addition to global warming pollution.  

The tax credit is an unnecessary incentive for increased biodiesel production, particularly because of the protected market biodiesel receives through the Renewable Fuels Standard mandate.  Unless the tax credit subsidizes something beyond what the mandate already incentivizes, then it is completely duplicative and unnecessary.

Friends of the Earth is advocating for this subsidy to be renewed for only a year–instead of the five year norm.  This way, next year when other biofuel tax credits are up for renewal, the utility of these subsidies can be weighed based on performance instead of fuel type.  The House has already passed a tax package that does this, but the Senate is up next.  Friends of the Earth and other environmental organizations wrote to the Senate and encouraged them to also only extend the subsidy for a year.

Biodiesel Tax Credit Letter