Why biodiesel is the next boom

Ethanol hogged all the limelight on the renewable stage last year, but biodiesel is an up and coming star, set to play a major role for soybean farmers in the next two years.

There's a few compelling reasons for such optimism. First is simple economics. If everyone is planting more corn this spring for ethanol, soybean prices will go up. And up.

Meanwhile biodiesel production, which started at a mere 500,000 gallons in 1999 (mostly for testing purposes), tripled to 75 million gallons in 2005. Joe Jobe (left), National Biodiesel Board (NBB) chief executive, estimates that may have tripled again last year to 225 million gallons.

Still nowhere close to ethanol's 4 billion gallons. But enough to stop calling it a boutique fuel.

Another reason why biodiesel is ready for primetime: stringent self-governing regulatory standards set up and enforced by the industry itself to ensure that biodiesel doesn't get into the marketplace only to disappoint users. Here's an example of an industry doing the dirty work behind the scenes before rolling out its product.

The biodiesel industry is expected to add 58 cents per bushel to the value of soybeans by 2015, according to a recent economic study on the growth of the industry. It also has one heck of a performance track record: For every one unit of energy used to produce biodiesel, 3.2 units are gained, or a 320% positive energy balance. "That is the highest positive energy balance of any liquid fuel,•bCrLf says Jobe.

I interviewed Joe for a web exclusive appearing on FarmFutures.com. Read the entire interview under Web Exclusives (you just have to register first).

It's no wonder then that the biodiesel industry, along with U.S. soybean farmers, were delighted last week when legislation to make the biodiesel tax incentive permanent was Introduced on the first day of the new 110th Congress.

The legislation would make the federal excise tax credit for biodiesel permanent. If adopted, the move would likely lead to dramatic and sustained growth of biodiesel use.

The tax credit took effect in 2005 and is currently set to expire in 2008. The NBB, which played a key role in getting the original incentive passed and extended, praised the Representatives.

"Introducing this legislation is a positive message to policymakers, the biodiesel industry and all Americans that biodiesel has an important role to play in U.S. energy policy,•bCrLf says Jobe. "A permanent tax incentive gives confidence for continued biodiesel industry growth.•bCrLf

Right now there are 88 biodiesel plants in the nation. Each one of them do their part in weaning America off its mideast oil habit, and making U.S. agriculture more vital.

 Here's a story we can all agree on for once. What do you think? Please comment below.

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