German Biofuel Industry Collapsing Under New Taxes

Not everyone wants to save the planet. This is a sad, but true fact. Yet everyone who lives and works within a capitalist economy loves saving money. So it’s good for the planet that, in many cases, saving money and green initiatives go hand in hand by providing an increased economic benefit while lessening environmental impact. Many of these benefits come directly from the government, such as tax exemption status or tax credits for using alternative fuels in vehicles.

And as the German biofuel industry is showing us, taking away those economic benefits can lead to the utter collapse of what looked like a maturing faucet of biofuel.
Germany is a leading producer of biofuel in Europe. Or maybe it is better to say they were. Since repealing the tax exempt status for biofuels, demand for biofuels has fallen by half. Germany started taxing biofuels to the tune of 9 cents per liter (about 35 centers per gallon) back in January of 2008. Taxes have increased in 2009 to 15 cents per liter, and will go as high as 45 cents per liter in 2012…or about $1.71 per gallon. Ouch.

At its peak, Germany was producing anywhere from 800 million to 1 billion gallons of biofuel annually. Now though, some experts think that many German biofuel plants might be packed up and shipped overseas as demand for biofuel plummets. Germany made the move because they estimated that by not taxing biofuel, they were missing out in $3 billion in tax revenue. At one time, biofuels made up over 7% of all fuel sales in the country; that share has since fallen to 5%, and will probably go even lower.

I’m no economist, but it feels like Germany pretty much murdered its own biofuel industry before it had a chance to mature.

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