How can Congress Support the U.S. Algae Industry

Given algae-based fuels’ near-term commercialization timeline, and their potential to fundamentally change our nation’s energy mix, Congress can help support the continued development of the algae industry by ensuring that algae, as a third-generation advanced biofuel feedstock, receive the same tax incentives and other financial benefits currently accorded to other biofuel feedstocks, including cellulosic materials. Algae should be given financial and regularity parity as well as parity within the Renewable Fuel Standard.

To that end:

  • The Renewable Fuel Standard (RFS) should be amended to include algae to the same extent as it currently does other advanced biofuel feedstocks. Currently, the RFS excludes algae-based fuels from nearly 80% of the 21 billion gallon advanced biofuels mandate, due to a 16 million gallon carve-out for cellulosic biofuels. Because algae are not cellulosic in nature, algae-based fuels do not qualify as a “cellulosic” for the purpose of meeting the RFS’s advanced biofuels mandate. Furthermore, while algae can be a feedstock for renewable biomass-based diesel and ethanol, algal biomass could also be utilized to produce aviation fuels and gasoline – both of which are excluded from the carve-outs. The ABO asks Congress to make the cellulosic biofuel carve-out technology neutral to ensure that algae-based fuels will achieve parity with other biofuels in the RFS, and take government out of the job of picking winners and losers in the biofuels realm.
  • All algae-based fuels should receive tax parity with incentives for biodiesel and cellulosic ethanol. There are three relevant tax incentives for the production of renewable fuels: Section 40A, which provides a tax credit of $1.00/gallon for the production of renewable biodiesel; section 40, which provides a tax credit for the production of ethanol, including a credit of $1.01 for the production of cellulosic biofuel; and section 168(l), which provides a special bonus depreciation deduction for production facilities that produce cellulosic biofuels. None of these tax incentives apply clearly and fully to the production of most algae-based fuels. The ABO asks Congress to help algae-based fuels achieve tax parity with cellulosic biofuels by supporting legislation in the House (HR 4168) and Senate (S 1250), which proposes amending the tax code to add algae-based fuels to current cellulosic biofuel tax credit provisions.
  • Low carbon fuels, such as algae-based fuels, should receive federal funding on par with funds set aside for other advanced biofuels. Federal funding has historically been allocated at the DOE and USDA to fund research and development of second generation biofuels. Recently, however, President Obama stated that his administration’s focus would be on commercialization of third-generation biofuels, such as those made from algae. The ABO asks Congress to make funding for the commercialization of low-carbon, third-generation, algae-based fuels a top priority, and ensure that funding parity is achieved with monies both previously and currently allocated to the development of second and first generation biofuels.

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