Subsidies contribute to muddying of biodiesel instead of boosting the industry
The WSJ reports today:
The U.S. taxpayer forks over a $1 subsidy for every gallon of biodiesel that is blended in the U.S. for export later. The idea was to give a nudge to the U.S. biofuel industry. But it is boomeranging, as the Guardian reports today in the latest installment on biodiesel “splash-and-dash.”
Increasingly, traders ship biodiesel from Asia or Europe to U.S. ports, where it is blended with a “splash” of regular diesel, the paper reports. That qualifies the shipment for U.S. export subsidies. Then it is shipped back to Europe where it is also subsidized. European biofuels organizations talk about between $30 million and $300 million in U.S. subsidies being exported that way to Europe.
The result? Biofuel’s already-tarnished environmental reputation comes under more fire, because round trips across the Atlantic add unnecessary transport emissions to the mix. And Europe’s own biodiesel industry has been shutting plants, despite its own efforts to ramp up production to meet political mandates. Imports are undercutting local producers on price.
The Christian Science Monitor has more details:
If the ship holds roughly 9 million gallons, it takes only about 9,000 gallons of traditional diesel (0.1 percent of the total) to make the entire load eligible for the blenders tax credit.
The U.S. importer of the load applies to the Internal Revenue Service for the credit — a dollar for each of the 9 million biodiesel gallons, Mr. Baize calculates. The next day the tanker can set sail — dash — for Europe. There, the U.S. importer resells the biodiesel, taking advantage of European fuel-tax credits that, in effect, keep biodiesel prices above US prices.
April Fools! Oh, wait, no. It just sounds too absurd to be true. They say, “You can’t make this stuff up” — and it turns out you really can’t.