The US should take a page out of Australia's book

Australia's long-term approach to phasing in biodiesel excise tax should teach the U.S. government a thing or two about the imperativeness of policy certainty for biodiesel growth
By Ron Kotrba | July 01, 2015

On June 17 the Australian government came to an agreement with Labor to implement the 2014-‘15 budget measures to gradually increase the excise payable on domestic biodiesel and ethanol. According to Australian Renewable Fuels Ltd. (ARfuels), a major biodiesel producer with three plants in Victoria, South Australia and Western Australia whose combined annual production capacity is 40 million gallons, this agreement alters the budget announcement of May 2014 that would have seen excise phased in over six years rather than 16 years as the new agreement requires. ARfuels announced that the continued viability of the biodiesel industry in Australia was doubtful under the six-year timeframe.

The Biofuels Association of Australia said the original excise legislation, introduced in 2011, was to see biodiesel remain excise-free until 2021, but this was overturned by the current Liberal government in their 2014 budget when Treasurer Joe Hockey announced that excise would be phased in from 2016-’21.

The new agreement phases in excise payable on biodiesel in equal increments over the next 16 years, beginning with a rate of 0 percent in 2015-’16 to a final rate of 50 percent in 2030-’31.

“Without this agreement, the domestic biodiesel industry faced the very real possibility of forced closure by 2018,” said the CEO of the Biofuels Association of Australia Gavin Hughes. “Now, Australian biodiesel producers are able to take a long-term view and plan their growth.”

The agreement also imposes an excise tax on imported biodiesel at the rate of 100 percent beginning today, July 1, which is .389 cents per liter ($1.47 a gallon). “This should effectively curtail the dumping of double-subsidized imported biodiesel, which has been occurring over the past few years,” ARfuels stated.

The decision “provides much-needed regulatory certainty,” the biodiesel producer said, adding that it “provides a sustainable and positive platform for the industry and ARfuels to develop and grow over the longer-term.”

Hughes said, “Momentum for the use of biofuels as an alternative to petrol and diesel is starting to shift once again around the country with the Queensland government planning to join New South Wales in mandating ethanol and biodiesel. Governments at all levels recognize the role that increased use of biofuels can have on creating the next generation of jobs, improving health outcomes through reducing harmful emissions, assisting in decarbonizing our liquid fuels and reducing our reliance on imported fuels.”

This is clearly great news for the biodiesel community Down Under, and the U.S. government should take a page out of Australia’s book here. Instead, the U.S. biodiesel industry is facing yet another year without a blenders tax credit (maybe it will be passed retroactively once again, and maybe it won’t—who knows?), a federal renewable fuel standard for 2014-’15 that will be finalized as we’re heading into 2016, and fast-tracked Argentine imports thanks to U.S. EPA’s decision to allow alternative feedstock tracking under RFS.  

The EPA’s proposed rule to grow the biomass-based diesel standard in RFS by 100 million gallons a year from 2015-’17 is clearly a step in the right direction, but more robust, long-term solutions on which the U.S. industry can rely and in which investment can grow are sorely needed. It’s good to see that Australia recognizes this. Nice job, mates.