Iowa Legislature extends fuel tax incentive for biodiesel blends

The Iowa State Legislature has voted to extend a fuel tax incentive for diesel sold in the state containing at least 11 percent biodiesel, a move praised by the Iowa Biodiesel Board.

Originally enacted in 2015, the successful policy has increased the number of retailers carrying biodiesel in Iowa almost threefold, improving availability for consumers while contributing to the state’s economy, including hard-hit farmers.

The provision would have sunset this month without legislative action, noted Grant Kimberley, IBB executive director.

“We applaud the state legislature for prioritizing this bill as they return to address key legislation, COVID-19, and finalize the state’s budget,” Kimberley said. “It underscores just how strong a grasp our state leaders have on how important biodiesel is to Iowa, providing thousands of jobs, supporting our battered farm economy, and improving the environment.”

The fuel tax differential amounts to a 3 cent-per-gallon reduction in the cost of fuel tax for blends of 11 percent biodiesel (B11) or higher. The legislature passed the provision along with a fuel tax increase five years ago.

The bill now goes to the governor for her consideration and signature.

About 47 percent of on-road diesel fuel gallons sold in Iowa contain B11 or higher, according to a report from the state department of revenue. The same report shows 771 retailers carried biodiesel in 2018, the most recent year available, almost triple the number in 2010. In 2019, Iowa remained the nation’s leading biodiesel producer, at 345 million gallons.

A study by ABF Economics shows biodiesel supports about 3,875 full-time equivalent jobs and contributes $489 million to the state’s gross domestic product annually.