A bill that would make the federal excise tax credit for biodiesel permanent was recently introduced by Congressman Kenny Hulshof of Missouri. The Renewable Fuels and Energy Independence Promotion Act would remove the sunset provisions for the ethanol and biodiesel incentives accompanying the Volumetric Ethanol Excise Tax Credit (VEETC). VEETC went into effect January 1, 2005, and is currently set to expire in 2008.
“Federal policy should strive to reduce our dependence on foreign oil,” Hulshof said. “Domestically produced renewable fuels must play an integral role in a plan to promote energy independence. If renewable fuels are to displace significant amounts of petroleum as transportation fuel, we must take bold, aggressive steps to achieve this end. Expanded use of biodiesel will help make America more energy independent and the nation as a whole will reap the benefits.”
The incentive’s purpose is to help lower the cost of biodiesel to those who pay road taxes (i.e., truckers) or are in tax exempt markets (i.e., school districts). The incentive is credited with stimulating new biodiesel plant construction, creating more biodiesel jobs, and leading to the sustained growth of biodiesel use.
“Every gallon of renewable, domestically produced fuel we use is a gallon we don’t have to get from other countries,” said Hulshof. “History has shown us that the tax incentive works, and a long-term commitment to federal policy that supports renewable fuels will help provide stability, promote growth, and lessen our dependence on foreign oil.”
Modeled after the ethanol tax credit, which provides a $0.51-per-gallon general business income tax credit, the biodiesel tax credit provides a $0.50-per-gallon tax credit for biodiesel made from recycled oils. In addition, a $1.00-per-gallon credit is granted for agri-biodiesel, a fuel made from corn, soybean, sunflower, canola, or flaxseed oil.
“Making the biodiesel tax incentive permanent would be a powerful signal for U.S. energy policy,” said National Biodiesel Board CEO Joe Jobe. “It would encourage Americans to use less petroleum. Biodiesel is a renewable energy source that works with current and future diesel engines using the nation’s existing liquid fuel infrastructure, so it has great potential to immediately help address our energy concerns.”