Should there be a tariff on foreign biofuel?

Apparently, the consensus of the 25x’25 biofuels working goup I spoke of over the weekend was an illusion based on the fact that the opponents had not spoken up and we had moved on to other subjects.  We’re currently discussing the subject over email, and I thought my rationale for opposing a tariff was worth posting here:

1. Why a tariff on foreign biofuel would not be effective at raising the price for domestic biofuel:
The primary competition for domestic biofuels is not foreign biofuels: it is petroleum.  Petroleum will remain the primary competitor in a 25x’25 world (after all, it will have around a 75% market share.)  The price of both foreign and domestic biofuels will be set in competition with gas and diesel, the most commonly available substitutes.  To raise the price of domestic biofuels, a tariff would have to be placed on foreign oil, not just foreign biofuels.

2. Why a tariff on foreign biofuel would be counter to the 25x’25 goal:
Potential builders of distribution infrastructure for biofuels (pipelines, retail pumps, Flex Fuel Vehicles, etc) want to know that there will be a reliable supply before they build distribution.  While some might argue that a tariff would not impact supply (an argument which, if true, would re-enforce point #1), it is very difficult to argue that it would not negatively impact the perception of the availability of reliable supply.  It is the perception of reliable supply that will help get the distribution infrastructure we need built.


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