Some of the assets to consider in order to reduce the dependence on fossil fuels are the alternative sources of fuels, like electricity and biofuels. Biofuels, in particular, not only are very cost effective, but they have a benign impact on environment. In fact they contribute positively in terms of emissions, in the context of global warming and fighting food waste.
What is biofuel made of?
Biofuel can be classified as a bioproduct derived from industrial waste. It originally comes from animal or vegetable substances. The matter involved in the production process is called biomass. Basically the main advantage is that the biomass can be quickly regenerated, whereas the formation of fossil fuel is a very slow geological process, implying the decomposition of buried dead organisms.
Today there are mainly two type of biofuels used. They are known as the first generation of biofuels: ethanol and biodiesel. Ethanol is made up with plant starches, sugar beet, sugar cane, cereal crops, wheat or maize. Biodiesel is made up of vegetable oils, like rapeseed sunflower or soybean oil, and animal fats.
How the tax extensions can affect the use of biofuel
Can Tax Credits Tackle Climate? This is the question from the Rhodium Group study. The Rhodium Group is a research provider that, through the combination of economic data analytics and policy insight, produces useful studies used by firms, investors and policymakers all over the world. When it comes to decarbonization and cutting carbon dioxide emissions, the tax credit extension package plays a central role. It can really help to make progress toward a new pathway. The analysis of the Rhodium group takes into account different sectors where the tax credit can be applied, such as electric-vehicles, carbon capture and storage, and biofuels. The study pointed out how replacing diesel and gasoline fuels with low-carbon substitutes can boost the reduction of transportation emission. At the present ethanol is the most economically convenient and effective option, covering 88% of the total biofuel market. However, since biofuels are very expensive to produce, they have struggled to penetrate the market. Currently they make up less than the 1% of the total US liquid-fuel demand. For this reason, having a market incentive could really help biofuels producers stay in operation.
The example of California market and national level solutions
California is a significant example of how multiple policies can boost the market of biofuels, which in that state has doubled over the past five years. The graph below shows how different revenue sources blended together can enhance the total revenue streams on average.
Unfortunately at a national level, the biofuels market has not reached such a success because the inconsistency of the price signals from federal policy, like the tax credit and the Renewable Fuel Standard. One of the solutions suggested by the Rhodium group is for the federal government to extend the suite of current advanced biofuels tax credits for five years, in order to obtain a lifeline and a more reliable policy environment.
“Another option that could provide the same incentive to a wider array of fuels,” says the analysis, “involves consolidating all advanced biofuels tax credits into a single low-carbon transportation fuel credit with a value based on the lifecycle carbon intensity of the fuel relative to fossil fuels. This technology-neutral approach could enable the development of a more robust competitive low-carbon fuels industry needed to decarbonize the energy system in the long run.”
Tax credit extensions are being considered in congress right now. It’s important for all people who are concerned about climate change to ask our legislators to support the Green Energy Act, which includes all tax credits that support the environment and fight climate change. Here at Ipsun, we’re especially concerned with the extension of the 30% federal solar tax credit (ITC). Tell your legislators to extend the ITC today- everyone’s voice is needed.
If you have questions about the 30% solar tax credit, or want to talk about how you can join the renewable energy revolution, give us a call at 703-249-6594!