Monday, January 10, 2011

Renewable Fuels Industry and Government Incentives

     The US renewable fuels industry recently got a boost with the extension of the tax credits through 2011.  
     The expiration of the biodiesel tax credits at the end of 2009 nearly killed the industry in 2010.  In 2010 the biodiesel industry operated at less than 10% of the available capacity.  Needless to say the tax credits where necessary to support the industry.  Extending the biodiesel tax credits for a year may increase biodiesel production a little in 2011 but in order to make a significant difference and attract investment the biodiesel credits would need to be extended for 3-5 years to make a notable change in production.
     The blenders tax credits for ethanol are giving people in the ethanol industry a little breathing room but in all actuality the RFS mandates for ethanol are nearing the capacity of the corn ethanol industry.  The essentially means that margins should improve over the next few years since the capacity and demand will be in sync.  There are ethanol industry insiders which estimate that 2011 is the last year the tax credits would be needed to help the corn ethanol industry.
     So what should we do in 2012 with tax incentives to spur the renewable fuels development necessary to really make a difference in our future?  Clearly we should not continue business as usually another year.  The incentives need to be overhauled to ensure that the industry as a whole is developing better pathways for fuel production and improving existing pathways.
     The corn ethanol production is nearly reaching the mandate cap of 15 BGY set by the RFS.  What other renewable fuels are going to propel the US to a more significant renewable portfolio?
     Considering the rocky start of cellulosic production and biodiesel there is a long way to go.  It is a critical year for the government to move to a strategic focus and provide incentives to truly move us forward.
Please make sure you elected officials know the importance of this year and let them know decisions need to be made quickly so the proper long term incentives can be in place for 2012.

No comments:

Post a Comment