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7.1 Biodiesel

Biofuels have been around as long as cars have. At the start of the twentieth century, Henry Ford planned to fuel his Model Ts with ethanol, and the original diesel engine designed by Rudolph Diesel used peanut oil–based fuel. Discoveries of huge petroleum deposits kept gasoline and diesel at a low cost for the twentieth century, and biofuels were largely forgotten. However, with the rise in oil prices, along with growing concern about global warming caused by carbon dioxide emissions from conventional fuels, biofuels have been regaining popularity recently. Gasoline and diesel are actually ancient biofuels. They are known as fossil fuels because they are made from decomposed plants and animals that have been buried underground for millions of years. Biofuels are similar except that they are produced from plants grown today.“Biofuels: The Original Car Fuel,” National Geographic,

Biodiesel is a product that is derived from a renewable energy source, such as soybeans. The renewable energy source could also be other crops, such as corn, although corn is more typically made into ethanol for use by gasoline engines. It could also be recycled grease that comes from commercial fryers. Biodiesel produced from recycled oils and grease is considered a second-generation biofuel, whereas the soybean would be, if it was grown as a virgin product specifically for it, considered a first-generation biofuel. There also are third-generation biofuels based on algae.For more information on BioHeat and related products, see “Alcohol Can Be a Gas,”

The greenhouse gas (GHG) emission reduction from using biofuels is not 100 percent when compared to fossil fuels. Carbon savings are partially offset by the energy that is needed for cultivation, harvesting, processing, and transportation of biofuels. This can represent a substantial fraction of the total energy released from processed biofuels and varies significantly between crops. In the worst-case scenario, the production process may actually take more energy than can be produced when the biofuels are used, which undermines the potential environmental benefits.“Biofuels—The Net Energy Debate,” SyntecBiofuel,

Second, there may be carbon emissions associated with changing the usage of land to biofuel crop cultivation. For instance, if areas that have not been previously cultivated, such as forest land, are converted to produce biofuels, then there may be significant immediate releases of carbon stored in the existing plant life and in the soil and also damage to biodiversity and the ecosystem. These land use–change effects may prevent biofuel plantations from generating an overall reduction in carbon emissions until many decades of crops have been produced.

Public Policy Impact on the Market

The biofuel industry is subsidized by the federal government, like most other US energy markets, such as oil and natural gas. There is a $1 per gallon “blenders’” credit for companies that produce pure 100 percent biofuels and then blend in 0.1 percent heating oil or diesel fuel to produce B99.9 made from either first-, second-, or third-generation sources. This blending triggers the credit and allows the product to be competitive with traditional fossil fuels.

The biofuel industry is significantly impacted by changing public policies due to the highly politicized nature of discussions about climate change and the human influence on climate change in the United States. This has made it difficult to develop a business in the industry. For example, the blenders’ credit was repealed in early 2010 and it took almost nine months for it to be reenacted in the US Congress. During this period, many biodiesel factories were either in temporary shut down or in foreclosure, and this resulted in significant job loss in the industry.Brett Clanton, “New Year, New Troubles: Biofuel Plants Idled by Loss of Tax Credit,” Houston Chronicle, December 31, 2009,