Massachusetts Suspends Biofuel Mandate

Published August 3, 2010

The state of Massachusetts has suspended a biofuel mandate which was set to take effect on July 1. State officials found the costs prohibitive and biofuel availability to be minimal.

The mandate, backed by some environmental activists and championed by the renewable energy industry, would have required all diesel and home heating oil sold in the Bay State contain at least 2 percent biofuels. By 2013 that mandate would have increased to 5 percent.

Implementation Too Difficult
When initially passing the mandate, legislators put off filling in the law’s details until a later time. But they faced too many complications when they tried to work around the unforeseen complications. The mandate was part of the Clean Energy Biofuels Act of 2008, and the legislature has now decided not to implement the law.

“[Lifting the rule] was the best way to go, unfortunately,” Massachusetts Department of Energy Resources commissioner Philip Giudice told the Boston Globe. Instead, the 2 percent quota will remain voluntary until and unless lawmakers write a workable regulation.

Federal Tax Credits Debated
Suspension of the mandate came just months after the expiration of a federal tax credit that subsidized the blending of biofuels into oil products. Congress is still debating whether to extend the subsidy.

“Biofuels cost more, which is why they need subsidies or mandates to compete, and given the tight economic times, it’s tough to justify these costs to the consumers,” said Ben Lieberman, senior policy analyst for energy and the environment at The Heritage Foundation. “With the federal tax credit gone, it’s certainly more noticeable to consumers.”

No Natural Biofuels Market
There’s no real demand for biofuels beyond the seven billion gallons the federal Environmental Protection Agency phased out in the early 2000s, says William Yeatman, an energy policy analyst at the Competitive Enterprise Institute in Washington, DC.

“Beyond that,” Yeatman said, “there is no demand save that mandated by the government.”

For instance, he notes, Congress in 2007 approved an ethanol production quota requiring 36 billion gallons of biofuel be blended into the nation’s stocks by 2022.

“That’s a lot of unnatural demand,” Yeatman said. “Unfortunately, this is the future of biofuels in America. We’re producing about 10 billion gallons a year now, and that ramps up quite quickly in the near future. Of that 36 billion gallons, 15 billion can come from corn-based ethanol, and 21 billion gallons must come from advanced biofuels.”

The problem, Yeatman said, is that advanced biofuels are nonexistent. Implementing this requirement will prove costly, and it’s the taxpayers who will bear the brunt, he added. The exact cost of compliance is unknown, however, “because, again, the stuff doesn’t yet exist,” Yeatman said.

Seeking Government Favoritism
For biofuel makers, however, the mandate could bring financial gain.

“Biofuel manufacturers also enjoy generous federal subsidies, primarily in the form of a 45-cents-per-gallon tax credit, on top of an equal tariff on biofuel imports that protect domestic producers,” Yeatman said.

Without hefty government subsidies and tariffs, biofuel producers would be forced to rely on natural demand, and the industry would contract, he said. But the return to a more truthful biofuels market is not likely to come any time soon “because biofuels are supported by some of the most effective lobbyists in the country,” Yeatman said.

Cheryl K. Chumley ([email protected]) writes from Northern Virginia.