US Biodiesel Policy – Current Update (July 2010)

Renewable Fuel Standard 2 (RFS2)
The RFS2, created under the Energy Independence and Security Act 2007, was officially implemented by the Environmental Protection Agency (EPA) on July 1, 2010. Obligated parties in the United States are required to utilize 345 million gallons of biomass-based diesel this year. Beginning in 2011, when the pathway for palm oil feedstock is expected to be approved, obligated parties will be required to use 840 million gallons per year of biomass-based diesel, an increase of 143%.

The United States Department of Agriculture’s (USDA) Regional Roadmap to Meeting the Biofuels Goals of the Renewable Fuels Standard by 2022 lays out the agencies expectations for how the RFS2 requirements will be met by 2022. The USDA focuses primarily on the US capabilities to meet the goal; however, it does note that they expect 2.2 billion gallons of the required 36 billion gallons of renewable fuel to be met by foreign imports. Interestingly, the USDA also estimates that oilseed crops (foreign and domestic) will only account for 0.5 billion gallons of the total goal. This estimate is based on the expectation that the use cellulosic-based fuels will grow exponentially over the next 20 years.

Biodiesel Blender Tax Credit Extension
In the short term, the extension of the biodiesel tax credit, which lapsed at the beginning of 2010, is an even more crucial issue for the biodiesel industry than the implementation of RFS2. Without the tax credit in place, sales of biodiesel in the US have been minimal. Currently the process is at somewhat of a standstill. The tax credit extension is part of the House of Representatives bill H.R. 4213. The bill passed in the House of Representatives but has been stalled in the Senate and its passage is uncertain. The date of passage of either H.R. 4213 or a similar bill with the tax credit extension included is anyone’s guess.

A different bill, H.R. 4070/S. 1589 is currently being heavily supported by the National Biodiesel Board (NBB) and many politicians from agricultural districts. Although the bill is highly unlikely to be seriously considered until 2011, it is of concern to foreign biodiesel producers as it would shift the tax credit from its current form of being received by the party that blends the biodiesel with petroleum fuel to a new form of a producer tax credit. If this bill is enacted, only producers of biodiesel within the US would be eligible for the $0.99 per gallon tax credit, putting foreign produced biodiesel at a major disadvantage in the US market.

  US Biofuel Policy – Current Update (July 2010) (30kb)
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