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Biofuels Policy Primer

August 12, 2014
Author: Stan Parton

To become long-term, viable options to fossil sourced energy and materials, renewable fuels must offer a cost-effective solution. One of the roles of government is to provide economic and policy assistance to spur the development of nascent industries, like biofuels and bioenergy, that are in the broader public interest. This assistance is sometimes provided through direct subsidies like those in the Farm Bill.

In the most recent iteration of the Farm Bill, the portion of funding related to bio-carbon is a mere $115 million annually - 0.01% of the $956 billion total. The $115 million - which the House Appropriations Committee has already voted to reduce - represents a $57 million reduction from the 2012 spending level. The Significant energy programs include :

Bioenergy Program for Advanced Biofuels

The Advanced Biofuels Program was established to support and expand the production of advanced biofuels manufactured from renewable biomass. This program will receive $15 million in annual mandatory funding to deliver production payments for advanced biofuels producers. The number of awards and the amount of each award will vary per the number of qualifying participants.

Biorefinery Assistance Program

Renamed the Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program, the program will continue to offer loan guarantees for renewable energy projects such as the construction and retrofitting of refineries to develop and produce advanced biofuels. The new bill expands the program to assist the promotion of renewable chemicals and biobased manufacturing production facilities. Funding for this program is discretionary, with $75 million in funds set aside through 2018.

Rural Energy for America Program

Designed to encourage agriculture producers and business owners in rural areas to invest in energy efficiency and renewable energy, the program will receive $50 million in mandatory funding annually.

Biomass Crop Assistance Program

Providing financial assistance to owners and operators of agricultural and non-industrial private forest land who wish to cultivate biomass feedstock for sale to energy producers, the program is set to receive $25 million in mandatory funding annually. Up to 50 percent ($12.5 million annually) will go towards matching payments for the harvest and transportation of biomass residues. The program offers financial assistance for crop establishment and for collecting and delivering biomass material to production facilities. It also provides annual payments for energy crop production.

Unlike these four direct subsidies, which typically have a specific financial amount or are in place for a specific period of time, indirect subsidies are often imbedded into the tax code and continue to survive well beyond the conditions which existed at the time they were put in place. At one point in our history, the fossil carbon industry required and received such assistance, and many of those assistance measures remain in place today.

A brief published by the Environmental and Energy Study Institute (EESI) - a non-profit organization dedicated to finding innovative and environmental and energy solutions - examined these ongoing subsidies.

In Fossil Fuel Subsidies: A Closer Look at Tax Breaks, Special Accounting, and Societal Cost, the EESI examined cases of indirect subsidies, provided historical context for each, and estimated their financial benefit to the fossil carbon industry. The brief notes the fossil carbon industry continues to derive benefit from such indirect subsidies, the magnitude of which far exceed any direct subsidies. The result is default financial support for fossil carbon, which makes renewable carbon sources appear uneconomical.

In light of the record profits of companies participating in the fossil fuel sector, there have been calls to reduce or eliminate these unneeded economic benefits. If these subsidies were reduced or eliminated, the economic playing field between fossil carbon and above ground carbon would start to level off, thereby allowing the above ground carbon sector to compete economically. And the magnitude of the economic adjustment would far exceed the level of direct support provided in the Farm Bill.

Their existence creates an unlevel economic playing field in which the emerging bio-carbon industry must compete with the well- established, economically successful companies in the fossil fuel sector.

Bioenergy, Biofuels & Biochemicals Project Support

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