U.S. Government Axes “Renewable Diesel” Tax Credit


Yesterday the U.S. Senate voted to renew a one year extension for renewable energy tax credits worth $18 billion dollars. Absent from the package was a tax credit aimed at helping food giant Tyson and oil giant ConocoPhillips turn a profit by converting fats leftover from Tyson’s processing of beef to the so-called “renewable diesel” that ConocoPhillips blends with regular diesel (for a look at what renewable diesel is, check out Jason Burroughs comment below).

The legislation enacts a $1 per gallon credit for biodiesel production, but the “renewable diesel” made from waste fat, or tallow, would only be eligible for a 50 cent per gallon credit. According to Tyson and ConocoPhillips, without the $1 per gallon credit for making “renewable diesel” from tallow, their proposed project is a no go.

Apparently, the major opposition to the Tyson-ConocoPhillips provision was from soap and detergent makers who depend on the tallow to make their products. They claim that the price for tallow has already risen so dramatically in the last year from demand due to biodiesel production that their products risk becoming unprofitable.

Other arguments presented against the Tyson-ConocoPhillips credit came from biodiesel producers who say that the purpose of the credit was to help develop biodiesel projects that face significant start-up costs — costs which they say Tyson and ConocoPhillips don’t have.

On the other hand, Tyson and ConocoPhillips say that their “renewable diesel” is better than biodiesel from crops because it doesn’t drive up food prices — although the claim that biodiesel from oilseed drives up food prices is highly debatable.

Personally I don’t think that biodiesel from crops drives up the cost food by much, but I do think that it’s silly to kill a project like this because soap and detergent makers are upset about the price of tallow — certainly there are better ways to deal with that issue.

What do you think? Should we be promoting production of all types of domestically renewable biofuels? Do giants like Tyson and ConocoPhillips deserve this type of government subsidy? Do things like this create unfair competition?

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Image Credit: Michael (mx5tx)‘s Flickr photostream under a Creative Commons license.

Source: CNNMoney (via Biofuels Digest)

Nick Chambers

Not your traditional car guy.