US subsidizies biodiesel sold to Europe

Houston Chronicle:

Federal subsidies to the U.S. biodiesel industry were supposed to help wean the nation from foreign oil, and a new law in 2009 will bolster the effort, but the money has fueled a controversial side business.

Domestic producers of the renewable fuel have been selling huge quantities of biodiesel in Europe and in other foreign markets, where prices are often better, and then receiving a $1-per-gallon tax credit from Uncle Sam.

Biodiesel, made in the U.S. mostly from soybean oil or recycled cooking oil from restaurants, is blended at low levels with petroleum diesel to reduce emissions and reliance on fossil fuels.

Today, American exports of biodiesel represent more than half of domestic output.

Biodiesel's $1-per-gallon subsidy, known as the "blender's tax credit," is available to U.S. companies that blend biodiesel with petroleum diesel and was intended to boost biodiesel production and encourage diesel marketers to buy the fuel.

Exports have helped some biodiesel companies survive a difficult period in recent years, when high costs and a weak U.S. market forced firms to close plants.

But exporting has been criticized as an abuse of a federal subsidy that was presented to the American public as a down payment on a future in which the U.S. would rely less on fossil fuels.

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This looks like a screw up by the Democrats in Congress. Diesel is still more expensive than regular gasoline even with the subsidy which doesn't make a lot of sense on the face of it. For a long time it sold for less, before the recent increases in the cost of fuel in general.