Grow it Here, Make it Here

by Jim Lane (Biofuels Digest) ...In Michigan, US Senator Debbie Stabenow expanded her “Grow it Here, Make it Here” initiative into a $5 billion proposal designed to dramatically expand bio-based manufacturing and job creation, funded through what she described as reductions in subsidization of the oil industry.

• a 30 percent tax credit for manufacturers that install equipment to produce bio-based products.
• Increasing the labeling opportunities for bio-based products
* An expansion in access to the USDA Biorefinery Loan Guarantee program to include companies focused on bio-based products
* Added focus on bio-based product commercialization in the US government’s biomass R&D efforts

In describing her funding offset, designed to ensure that the provisions are deficit neutral, Stabenow said the time had come to transfer supports given to the oil industry to newer job-creating industries.

... The Digest's Take ... Of course, these are opportunities that are important to all countries, especially those who are highly dependent on imported oil, and we encourage the Congress and Administration to consider the role that the Foreign Agriculture Service can play in fostering the transfer of US technology to US allies and friendly developing nations – good for US technologies, good for nation rich in bio-based feedstock and committed to democracy and stability around the world.

...The market risk (and the policy risk, in the lack of long-term policy to address the problems of volatility), is what chills the financing of bio-based industry at scale.

A simple, flexible tax provision could change all this. US income taxes are progressive – those doing well, pay more, those less well off pay less. Yet fuel taxes are fixed. Why not make them progressive?

When markets create crush spread conditions that favor bio-based industry – such as in the 2005-07 ethanol boom market, why can’t bio-based industries pay a higher tax rate? When market conditions are unfavorable, why can’t fuel taxes be lower, or even reverse into tax credits?

Over time, as bio-based industry gains stability, technological advancement, and oil continues to become more volatile and expensive, the long-term tax outlook would be stronger. The nation would earn more, in the long-run, from fostering a strong industry that can pay higher rates in the favorable conditions that are generally expected over the long-term. Meanwhile, while industry is at small-scale, and that long-term advantage for bio-based over fossil-based has not yet fully emerged, the industry would benefit from a tax advantage.

...Now, one of the difficulties of these systems is that the costs become uncertain – no one could say for sure how long the credits would run and cost, because no one can accurately predict future oil prices, and hence the advantage that bio-based production would have over fossil-based fuels and products.

So, another possibility is to provide time-denominated tax futures. READ MORE and MORE (MLive) and MORE (Biofuels Digest update) and MORE (CBS Detroit) and MORE (DomesticFuel.com)