Economic Contributions
Biodiesel’s Contributions to the U.S. Economy
Biodiesel significantly contributes to the U.S. economy in multiple ways,
according to economic analysis completed in September 2006 by John M.
Urbanchuk of LECG.
Aggregate Economic Benefit:
• America’s biodiesel industry will add $24 billion to the U.S. economy
between 2005 and 2015, assuming biodiesel growth reaches 650 million
gallons of annual production by 2015.
• Biodiesel production will create a projected 39,102 new jobs in all sectors
of the economy.
• Additional tax revenues from biodiesel production will more than pay for
the federal tax incentives provided to the industry. It will keep $13.6 billion
in America that would otherwise be spent on foreign oil. This total impact
of biodiesel on the economy includes the temporary impacts of
construction, the permanent impacts of annual production and the direct
value of biodiesel and co-products (glycerin).
Economic Contribution of Biodiesel by Industry
2006-2015
Impact
Spending GDP Earnings Employment
Industry (Mil 2005$) (Mil 2005$) (Mil 2005$) (Jobs)
Construction $807 $1,519 $849 11,720
Annual Operations
Feedstocks $6,413 $13,539 $4,557 23,715
Industrial chemicals $589 $1,085 $418 1,624
Electric, natural gas, water $276 $448 $181 685
Maintenance and repair $57 $84 $54 282
Business Services $47 $97 $42 210
Earnings paid to households $259 $332 $168 866
Subtotal $8,448 $17,104 $6,268 39,102
Plus Value of biodiesel output
Biodiesel $6,738
Co-products (glycerin) $159
Total $24,001 $6,268 39,102
Benefits to the U.S. Treasury: The additional tax revenues generated by a
profitable U.S. biodiesel industry will be significantly larger than the value of the
federal tax incentives provided to the industry. Assuming that the biodiesel tax
credit of one dollar per gallon for agri-biodiesel and 50 cents per gallon for
biodiesel from other sources is extended past 2008, this program would cost a
total of $3.5 billion by 2015. The industry will generate $8.3 billion of new revenue
for the Federal Treasury for a positive net balance of $4.8 billion.
Oil Dollars Stay in America: The biodiesel industry will play a significant role in
improving America’s energy security. Expansion of the biodiesel industry as
estimated will displace 242 million barrels of crude oil between 2006 and 2015.
Since the U.S. is a net importer of oil, this means that less oil will need to be
imported. As a consequence, $13.6 billion (2005 dollars) will remain in the
American economy instead of being sent abroad to finance oil imports.
Permanent Impacts: The ongoing annual operation of biodiesel plants offers the
most significant impact from biodiesel production on the U.S. economy. The
biodiesel industry will add $15.6 billion (2005 dollars) to America’s Gross
Domestic Product (GDP) as it spends $7.6 billion (2005 dollars) on goods and
services between 2006 and 2015.
Construction Investments: Biodiesel producers will invest nearly $810 million
(2005 dollars) by 2015 to build new biodiesel plants and expand existing
facilities. This spending will increase gross output by $2.8 billion (2005 dollars) to
gross output, adding $1.5 billion to America’s Gross Domestic Product (GDP).
Biodiesel construction will create as many as 11,700 jobs in all sectors of the
economy.
Benefits to Farm Prices: The additional demand for soybean oil used to produce
biodiesel will increase demand for soybeans, raise soybean prices and revenue
for soybean growers, and keep land in soybean production. Analysis published
by the U.S. Department of Agriculture indicates that every 50 million gallons of
biodiesel raises soybean prices one percent. Consequently, the 498 million
gallons of biodiesel that will be produced between 2006 and 2015 will increase
farm level soybean prices nearly 10 percent by 2015. Using the USDA 2006 Long-
Term Baseline forecast for soybean prices as a starting point, soybean farmers
can expect increased biodiesel demand to increase average soybean prices
$0.58 per bushel by 2015.
