Biofuel Industry Faces Bankruptcy As Subsidies Run Out

  • Date: 03/01/10

The Washington Post: An alternative fuel for diesel engines is off to a shaky start this year though it emits fewer pollutants and cuts down on petroleum use because it’s made from environmentally friendly waste and vegetable oil. A federal tax credit that provided makers of biodiesel $1 for every gallon expired Friday. As a result, some U.S. producers say they will shut down without the government subsidy.

Biodiesel’s woes come on top of a year of problems for the fledgling biofuel industry – an irony given the push to cut down on greenhouse gases and ease the nation’s need for foreign oil. A key driver for the alternative fuel – the high cost of oil – disappeared as diesel prices dropped 18 percent since the beginning of the recession. Then in March the European Union placed import-killing tariffs on biodiesel and other biofuels.

It was a huge hit for U.S. biofuel makers, with Europe taking 95 percent of all global exports.

Biodiesel, which is usually blended with traditional fuel, had over the past few years been the fastest growing fuel among fleet vehicles like buses, snow plows and garbage trucks.

Those fleets, however, can shift to traditional fuel, as some have, when the prices of diesel drops.

The biodiesel industry is now operating at only 15 percent of its potential capacity, according to the National Biodiesel Board, largely because the price of traditional diesel has collapsed.

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