By Jamie Martin
The biofuel industry in the US is currently on edge. With the expiration of a key tax credit in January, producers of biodiesel and renewable diesel are urgently awaiting guidance on the new 45Z Clean Fuel Production Credit established by the Inflation Reduction Act. This credit is crucial as it directly influences the profitability of producing biofuels, which are primarily derived from soybean oil.
Brad Wilson, President of Western Iowa Energy, highlights the dire situation. "You’re going to be selling at a huge loss and just rolling the dice, hoping when the final guidelines come out from Treasury the credit value is enough to cover the loss,” he explained. This sentiment is echoed across the industry, with many fearing substantial losses if the guidance is not issued promptly.
The impact of this delay extends beyond the plants themselves. The Clean Fuels Alliance America notes that biofuels add approximately $1.30 in value to a bushel of soybeans.
However, with potential shutdowns looming, this value boost is at risk, potentially affecting soybean oil demand significantly. Estimates suggest that a 25% industry reduction could lead to a loss of 250 million pounds of unprocessed soybean oil.
The importance of timely guidance from the Treasury cannot be overstated. The industry is pushing for "safe harbor" regulations that would allow them to estimate their carbon intensity scores and potential credit values, thus enabling more secure financial planning.
Monte Shaw of the Iowa Renewable Fuels Association underscores the gravity of the situation, noting that the industry could see a substantial number of plants idling soon if the Treasury does not act. This would not only mean lost income for farmers but also missed opportunities for carbon reduction and higher consumer prices.
As the industry awaits a response, the pressure mounts on the Treasury to provide the needed guidance to prevent a significant downturn in the biofuel sector and its broader economic impacts.
Photo Credit: photo-credit-vista-mipan
Categories: National