Daily Tech has good article on the biodiesel market and the effect of ending subsidies.  Basically, as the US government ends it’s $1/gallon subsidy on biodiesel it has become uneconomical to produce.   Biodiesel producers, big and small, are shutting down.  There are several ways to look at this: Silly, knee-jerk free market types will say “good riddance, if it’s a good product then it makes sense without subsidies”.   Although I generally agree that markets are generally effective, it is also true that allowing markets to move without regulation or oversight can cause big swings in pricing, allow monopolies, bubbles and crashes.  On the other hand, subsidies, favored by many in the  environmental movement, can have the effect of picking a winner. Let’s suppose someone had a way of synthetically manufacturing net-zero-carbon fuel, that was just slightly more expensive than oil, but burned in regular cars, and was compatible with our current infrastructure.  Seems like a winner, right? Maybe not.  Right now, the Obama administration seems to be investing a ton of money in electric vehicles and battery technology. It’s possible that massive investments could make one idea the winner, even if it weren’t the superior one based on technology or environmental benefits. Depending on subsidies and government programs, and who can afford good lobbyists, ideas that don’t make much sense (corn ethanol?) can receive tons and tons of government assistance. (Corn ethanol.)   Arguing with myself, many ideas are very expensive to develop and commercialize, and without government assistance, a lot of technology we use every day wouldn’t exist.    From small SBIR grants to multi-billion dollar DARPA programs, we have benefited greatly from government involvement. My best guess for a solution?  Incentives that promote a particular result, not a particular technology.  If lower CO2 is the goal, then provide incentives and funding for programs that reduce CO2.

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