The US Biofuel Policy

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The U.S. Biofuel Policy
One of the policy issues related to emerging energy economics is the US Biofuel policy. There have been major national initiatives to general renewable fuels from organic matter which have taken shape in the country to minimize the dependency of foreign oil and also to achieve reduction of greenhouse gases. The Department of Energy (DOE) is one of the key stakeholders when it comes to formulating energy policies hence this report is addressed to the Secretary of DOE. The growing concerns of environmental quality and energy consumption have led to the evolution of policies relating to Clean Air Act to mandate the large-scale use of alternative fuels aimed at minimizing the reliance on imported oil. It also aims at providing a larger market for various agricultural products like soybeans and corn and reducing the emission of GHG from the US transport sector. The policy has emphasized on ethanol and biodiesel. The US has tried to develop the viable biofuel industry in two different ways. They include imposing quantity-based restraints on the productions of biofuels and offering the producers of biofuels financial packages of tax-related incentives.
The Congress passed various energy legislations to put in place Renewable Fuels Standards. The standards require production and blending of various classes of biofuels, ultimately requiring thirty-six billion gallons of biofuels per year to be blended with petroleum fuel by 2022 (Adusumilli and Leidner 64).

Since the time the Biofuels policy was implemented, the industry has called for strong policy support from the Congress. The reliance of the biofuel industry on the current federal policy and the far-reaching effects on the market besides other consequences has changed various views about biofuels. There are those who are opposed to biofuel policy while there are others who strongly advocate for it. The policy is characterized by various efforts since 2006 aimed at promoting the domestic biofuel industry. The policy interventions range from various mandates, targeting particular production quantities of biofuels as well as the biofuel-related products to financial incentives like tax incentives and direct payments and restrictions associated with the emission of greenhouse gas. The policy has been formulated at the federal level in conjunction with environmental laws and farm bills. Various states in the US have also amplified the federal effort by initiating their state-specific policies regarding biofuels.
Implications of the US Biofuel Policy
It is vital to note that commercialization of biofuels may be a major hurdle considering their costs in relation to petroleum-based fuels. The price of raw materials and lower density makes biofuels relatively more expensive. The higher the contents of the biofuel, the lower density of the energy, thus the energy efficiency. Therefore, while implementing policies relating to biofuels, there is need to consider providing various incentives to make it possible to implement the policy. There is also the need to consider providing subsidies that will offset the extra cost incurred in producing biofuel relative to petroleum-based fuels. A vital aspect that most businesses consider is the return on investment. It is the amount of energy that resides in the finished products compared to the energy that was consumed during its production. The return on investment takes into account the production, distributing and consuming the energy source which directly impacts the prices, rates of adoption, environmental benefits, and economic development. In December 2017, the White House held a meeting with representatives of the “oil refining industry” to deliberate on the biofuel program of the nation. The meeting could be a center stage for possible legislation regarding Biofuels. Such laws require the refiners to blend higher amount of biofuels such as ethanol into the country’s gasoline every year.
The refiners have always been opposed to such legislation since it cuts into their market share of petroleum-based fuel. They also argue that the requirements of blending usually cost them millions of dollars. On the contrary, Environmental agencies are the group of people who have been advocating for such policies. Biofuel policy impacts directly business decisions in many ways. For instance, it may lead to increased crop and food prices. The land-use conversion that is meant for cultivating biofuel crops, as well as diversion of corn for ethanol production, may translate into higher food prices in the globe. The effect of implementing the policy without government intervention may increase the market prices by 9% for coarse grains such as wheat, corn, and sorghum in the US (de Gorter and Just 4). Therefore, the implementation of biofuel policy calls for government intervention to cushion the citizens from increases in prices for food and other basic commodities. Increase in tax-based incentives and food prices will constitute substantial costs for US taxpayers. It is vital to note that despite the point that biofuel policy is aimed at achieving cleaner environment; the current policies promoting the production of biofuels may also have particular negatives on the environment. For instance, it accelerates the depletion of water resources. It also has an impact on the water quality, air quality, and biodiversity why can be regarded as irony as far as biofuel is concerned.
There is the need to take into account the cost-benefit analysis before implanting the biofuel policy. The efficacy of biofuel policies aimed at realizing environmental, agricultural and energy goals are best assessed through cost-benefit analysis (de Gorter and Just 4). The cost-benefit analysis here also entails the environmental benefits which are the main reason behind the implementation of this policy. Consequently, it is possible that lower domestic demand, as well as lack of relaible export markets, may reduce the revenue for the biofuel. However, more emphasis on the biofuel policy may increase the demand. There are already various incentives for biofuel production. They include imposing import duty on ethanol, providing tax credits for blenders of biofuels and direct payments to facilities towards buying biomass. I would recommend other ways to promote biofuel policies considering the hurdles as well as opposition from various stakeholders. First, I would recommend the elimination of import tariffs levied against ethanol that is imported from other countries.
Various studies have reported that lifting the import tariff will contribute towards improving the environment since ethanol produced from ethanol minimizes the emission of GHG compared to that from corn. Tax exemption may also be a useful tool in promoting biofuels. It is vital to note the implementing biofuel policy is a gradual process that takes time. Various stakeholders also need to be brought on board to come up with acceptable policies and to minimize resistance. Therefore, Trump’s strategy to meet with multiple refiners was a good step as far as involving various stakeholders is concerned. It is vital to note that biofuel policies are also motivated by multiple political concerns which are related to minimizing dependence on oil to improve agricultural incomes and environmental safety.
Work Cited
Adusumilli, Naveen, and Andrew Leidner. “The U.S. Biofuel Policy: Review Of Economic And Environmental Implications.” American Journal of Environmental Protection 2.4 (2014): 64-70. Web.
de Gorter, H., and D. R. Just. “The Social Costs And Benefits Of Biofuels: The Intersection Of Environmental, Energy And Agricultural Policy.” Applied Economic Perspectives and Policy 32.1 (2010): 4-32. Web.