A Tax Boost for Advanced Biofuels

March 16, 2014 |

erickson

By Brent Erickson
EVP; Head, Industrial & Environmental Section,
The Biotechnology Industry Organization

Advanced biofuels companies are in the process of constructing first of a kind cellulosic biofuel facilities this year.

Fortunately, the Administration’s budget for 2014 contains a proposal for a nearly 10-year extension of the advanced biofuel tax credit, which was first adopted by Congress in 2007. By contrast, the budget proposal from the chairman of the House Ways and Means Committee seeks to repeal the tax credit.

While the tax credit has had limited use and cost over its history, because advanced biofuels are still moving toward commercial scale, it is a necessary and useful policy instrument that helps young companies attract capital investment. Now is not the time to abandon this important policy. As Congress moves to extend tax credits that expired at the end of 2014, it should consider providing a multiyear renewal of this important tax credit.

Advanced biofuel developers have reached a critical stage in their efforts to commercialize new fuels. They’ve made great strides in developing first-of-a-kind technologies and in reducing the costs of production. They have achieved technology milestones even while facing the challenge of raising capital in the wake of a severe economic downturn.

Tax credits are needed to level the playing field for new energy projects trying to attract private investment and bring technologies to cost-competitive commercial status.

The oil industry has received preferential tax treatment for exploration, drilling and other production activities for many decades. In 2014, U.S. oil subsidies are expected to total $3.9 billion, according to the White House’s budget request for the year.

And that is after both the White House and the House Ways and Means Committee Republicans proposed extensive cuts to the petroleum tax subsidies. The advanced biofuel tax credit’s expiration has the potential to severely chill new construction and associated jobs and economic growth.

Many other countries already offer competitive tax incentives for advanced biofuels and biobased products and, in fact, are attracting construction of new biobased facilities – and associated jobs. The Brazilian government incentivizes ethanol production, which qualifies for the advanced pool within the Renewable Fuel Standard. The United States must continue to offer production tax credits to help domestic producers create jobs here in the United States.

Protecting the Renewable Fuel Standard is also necessary. This policy works in tandem with the tax credit, and it is the model of the kind of long-term, forward thinking policy support that is needed for new renewable fuel sources. While the tax credit levels the playing field for investments in new facilities, the RFS ensures that advanced biofuel companies can get their product to market when it reaches commercial scale.

From the start, Congress recognized that a diverse portfolio of programs would be necessary to encourage development of advanced biofuels. A long-term extension of the tax credit would give investors confidence about the future next generation biofuels. Additionally, this investment will allow advanced biofuel companies to better meet the production goals outlined in the RFS.

These production tax credits would level the playing field for innovative technologies that can drive employment opportunities and economic growth in rural areas here in the United States.

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