Biodiesel on death bed in Germany because of taxes

The biodiesel industry in Germany is nearing a state of collapse because of a tax increase that kicked in at the first of the year, according to a report on Reuters.

Biodiesel refiners in Germany are only producing at 10 percent capacity, according to the Reuters story from a European biodiesel conference. That's down from 20 percent the year before. Because of the downturn, some biodiesel manufacturers are taking apart their factories and selling the equipment to manufacturers in the U.S. and Canada.

The problem? Like solar energy, biofuels still largely depend upon government support and subsidies. Biodiesel costs more than regular diesel. You don't have to dig deep wells in the ground to get at it, but making it largely requires growing crops and harvesting plant oils. Biodiesel can be made out of waste vegetable oil and animal fat, but there's not nearly as much of that around as you might think. (In the U.S., the deep fat fryers and slaughterhouses of this great land of ours could probably only provide a billion gallons of fuel each year, far below the 62 billion-plus gallons of diesel consumed here.)

To make biodiesel competitive, U.S. refiners get 50 cents a gallon (for used oil) to $1 a gallon (for virgin oil) in subsidies.

Not so in Germany. Instead, the government taxes biodiesel. The taxes began in 2006 because the government didn't want to give up the revenue. Thus, biodiesel isn't cost competitive there anymore. (Biodiesel provides around 11 percent less energy than regular diesel as well, which probably further hurts.)

Ironically, the E.U. is currently implementing many green technology initiatives and trying to come up with ways to reduce greenhouse gas emissions. Diesel cars are also far more popular there than in the U.S. Sales of biodiesel in Europe so far exceed sales in the U.S.

Although it taxes biodiesel, Germany provides sizable incentives for putting it solar panels. Several farmers in the past few years have pulled up fields and gotten rid of their animals in favor of solar panels. The farmers then sell the electricity to utilities at premium prices.