NRDC fact sheet lays out a path to jumpstarting advanced biofuels through a Greener Biofuels Tax Credit
Posted February 15, 2011 in Health and the Environment, Moving Beyond Oil, Solving Global Warming, U.S. Law and Policy
We here at NRDC have written extensively about the need to move quickly away from first generation biofuels like corn ethanol towards the next generation of cleaner, better performing advanced biofuels—those that not only deliver reductions in greenhouse gas emissions but also result in cleaner water and healthier soils, with less impact on food and feed prices. Today, NRDC is releasing a new Fact Sheet outlining our proposal to jumpstart advanced biofuels with a technology-neutral Greener Biofuels Tax Credit that rewards producers for creating biofuels that protect our climate and natural resources.
To date, our policies have failed to create the necessary transition to advanced biofuels by continuing to funnel an overwhelming share of biofuels incentives towards dirty biofuels like corn ethanol that are bad for our climate, water, soils and forests. We cannot afford to continue taking two steps back for every one step forward. Congress must stop rewarding volume without requiring biofuels to deliver measurable environmental performance. This starts by immediately putting an end to the main corn ethanol tax credit—the Volumetric Ethanol Excise Tax Credit, commonly known as the “VEETC”—which costs U.S. taxpayers nearly $6 billion per year with little to show in terms of jobs, additional ethanol production, or environmental benefits.
Ending the wasteful VEETC would itself be a huge step forward in getting biofuels right. What’s encouraging is that the end of last year saw calls from all corners of the political spectrum to expire the VEETC once and for all. But if biofuels are to play an important role in achieving our climate goals without sacrificing the air we breathe, the water we drink, or our most biodiverse landscapes, ending the VEETC is not enough. As we discuss here, it is equally important for U.S. policy to shift meaningful resources towards rewarding producers that create the low-carbon biofuels we need to protect our climate and natural resources.
As the fact sheet outlines, a Greener Biofuels Tax Credit will reward sustainable producers by shifting from paying blenders—the oil companies and refineries that blend ethanol into gasoline—to paying the biorefineries that produce biofuels. Because it is performance-based, it will give refineries an economic incentive to purchase more sustainable biomass feedstocks will encourage farmers to manage for sustainability, which in practice means minimizing tillage, fertilizer use, erosion, and runoff. It will pay equally for climate performance and ecosystem services, and in direct proportion to greenhouse gas emissions reduction and sustainability scores for biomass feedstocks across key environmental elements affected by farmers such as soil quality, water quality and wildlife habitat. By being convertible from a production tax credit to an investment tax credit or direct grant, it will also support innovation by recognizing that many innovative biofuel technologies are being advanced by startup companies with limited revenues.
It’s time we stop paying for more of the dirty fuels we don’t need and start paying for real, measurable environmental performance. A Greener Biofuels Tax Credit would cost just a fraction of corn ethanol tax credits like the VEETC and can help us get on the path to better biofuels.
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Comments
Ron S. — Feb 16 2011 05:13 AM
I admire the NRDC's efforts to reform the existing biofuel policies. But I don't think that its proposed Greener Biofuels Tax Credit is the answer. For a start, what cost-benefit calculation led to an exact $1.00 per gallon of ethanol-equivalent subsidy? It is a totally arbitrary number. Second, it would reward feedstock sourced from farms meeting USDA Conservation Compliance requirements. Great, but has the NRDC determined that the value to society of that is equal to the proposed subsidy? Third, it would disallow feedstock is sourced from lands not converted from perennial species to annual crops. That's a start, but what about the reverse -- i.e., the conversion of arable land formerly producing feed or fuel to grow biomass for fuel?
And, finally, whatever happened to the notion of the Polluter Pays Principle? Should taxpayers be trying to reduce GHG emissions from transport by paying for lower-carbon alternatives, or should it be taxing those fuels that emit carbon?
Europe and Japan, where transport fuels are taxed at levels unimaginable to most Americans, already use 1/3 the energy for transport per capita, and their GHG emissions from transport are proportionately less. Your proposed tax credit would have little net effect on GHG emissions and would do nothing to encourage energy conservation in the transport sector.
Sorry to rain on your parade. But you need to go back to the drawing board.
jp — Feb 16 2011 11:26 AM
We are an AEROSPACE NATION. This is by SECURITY DESIGN. WE need clean green advanced BTL & GTL. We also need GREEN JOBS. We as a people are nothing without work. Green Guru's drawing and re drawing on some LEGAL board somewhere doesn't get the JOB DONE. This perfect green energy world debate, going on, year after year, while the old energy designers make BILLIONS every quarter with coal, oil, & nuclear power. Every DAY YOU DRAW, THEY are producing both ENERGY & PROFIT. As for me & my few, WE will be working to PRODUCE Green JOBS and Green Fuel. No doubt never perfect enough for some.
Ron S. — Feb 16 2011 04:37 PM
@jp
And everyday that redundant ethanol tax credits stay in place, other people are having to pay taxes to fund it -- or, more to the point, the federal government goes deeper in debt.
Sasha Lyutse — Feb 17 2011 12:59 PM
Ron,
Thanks very much for your comment. To answer your question, the $1.00 per gallon value comes from the cellulosic ethanol tax credit, so it's largely a "political value". That said, we are currently in the process of doing a bottom-up analysis to determine how much it would cost in different regions of the country to induce the types of changes to farm-level management practices that the Greener Biofuels Tax Credit is meant to encourage. To do so, we plan to examine profits per hectare of biomass production compared to conventional crops, as well as the break even price per ton of biomass that would be required by a farmer in each of these regions to change cropping practices. This value can then be compared to an assumed biomass price to determine the shortfall/subsidy per ton that would be needed to induce production.
jp — Feb 17 2011 03:34 PM
@Ron
Corn based feedstocks were chosen over methanol due in large part to supply & Big Cap money to produce production plants. It was never a feedstock anyone who truly cared about clean green solutions considered. IT was a oxygenate bridge to NOW, no doubt, soon to go by the wayside, as will all crop based feedstocks.
Would you like to talk about what it takes to produce a cup of coffee?