The Congressional Budget Office recently completed a study of biofuel tax credits that aimed to determine if existing tax credits favor one type of biofuel over another and estimate the costs of those credits on U.S taxpayers. The study, titled "Using Biofuel Tax Credits to Achieve Energy and Environmental Policy Goals," was prepared by the CBO at the request of the Chairman of the Senate Subcommittee on Energy, Natural Resources and Infrastructure.
Although the $1 per gallon biodiesel tax credit expired in December 2009, the CBO included it in the analysis. According to the report, this was done to provide policymakers with information on the value of the credit, should they choose to reinstate it in the future. In addition to the biodiesel tax credit, the report includes data related to tax credits for corn and cellulosic ethanol.
The CBO's main findings included the following:
-The incentives provided by the tax credits differ between the three fuels. When adjusted to reflect the different energy contents of the biofuels, as well as the petroleum fuel used to produce them, the CBO found that corn ethanol producers receive 73 cents for each quantity of ethanol that contains the energy equivalent of one gallon of gasoline. On the same basis, the incentives for cellulosic ethanol and biodiesel were a respective $1.62 and $1.08 per volume of energy equivalent fuel.
-The cost to taxpayers to use corn ethanol to reduce gasoline consumption by one gallon is $1.78. The same cost for cellulosic ethanol is $3 and the cost for biodiesel was found to be $2.55. According to the CBO, these cost estimates depend on the size of the tax credit for each fuel, changes in federal revenue streams that result from the difference in excise taxes collected on the sales of gasoline and biofuels, and the amount of each biofuel that would have been produced if the credits had not been available.
-The costs to taxpayers of reducing greenhouse gas (GHG) emissions through the tax credits was $750 per metric ton of carbon dioxide equivalent (CO2e) for corn ethanol, $275 per metric ton of CO2e for cellulosic ethanol, and $300 percent metric ton of CO2e for biodiesel.
Imperium Renewables Inc. called the CBO's report "fatally flawed" in a statement issued July 20. According to Imperium, the study is misleading because it accounts for only taxpayer costs, and does not address the many benefits these tax credits create for taxpayers. Furthermore, Imperium states that the report is flawed in that it does not apply the same types of analysis to conventional petroleum fuels. The report underestimates the benefits of biofuels, said Imperium, while hiding the significant existing costs to taxpayers of our reliance on petroleum fuels.
"This report is like a cost-benefit analysis, without the benefit analysis," said Imperium Founder and CEO John Plaza. "First, the CBO completely ignores the cost to taxpayers of the current petroleum industry…Second, the CBO report ignores the reality that these incentives are really investments in the long-term development of a domestic and renewable energy supply, something the federal government has a deep history of providing…The CBO also ignored data showing that every dollar of subsidy invested in biofuels returns more than two dollars in increased Gross Domestic Product and state and federal tax revenue."
"We call on the CBO to revise this report to include the known benefits to taxpayers resulting from the biofuels industry, and more importantly, to conduct a similar investigation of the cost to taxpayers of petroleum fuel," Plaza said. "Until then, policymakers cannot reasonably rely on this report when evaluating the continued federal investments in clean, domestic and renewable fuels."
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