Pennsylvania to consider biodiesel incentives as state production levels collapse

Grainnet.com reports on the woes of the Pennsylvania biodiesel industry, where two plants have shut down and production has dropped to 5% of capacity. The source of the trouble is reported to be financial incentives of $1.00 per gallon offered by Indiana and up to $1.50 per gallon offered by Iowa to their instate producers.

A proposed bill to create a $1 per gallon biodiesel incentive is under consideration by the Pennsylvania legislature, but the bill if passed is not expected to become law until at least the end of the year.

The situation in Pennsylvania raises the question of the use of state incentives for biofuel production. Although the incentives are welcome in helping to create an industry and wean the nation off fossil fuels, the fact that 24 states have incentives leaves industry in the other 26 states open to predatory competition from subsidized producers. A national incentive system that supercedes the state programs is unlikely to become popular with non-producing states, and yet the experience of Pennsylvania suggests that incentives are strong enough to create major market distortions that may not reward the best competitors, but rather the richest state treasuries, with ownership of the biofuels industry.

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