From the Des Moines Register:
A leading biodiesel producer, Renewable Energy Group of Ames, is appealing to a key House Democrat to pass a bill that would revive the industry's lapsed tax subsidy.
In a letter to the House Ways and Means Committee Chairman Sander Levin of Michigan, Renewable Energy Group said the loss of the $1-a-gallon subsidy has cost "full-time, green-collar" jobs.
Renewable Energy Group has laid off 45 percent of its Iowa work force since the tax credit expired Dec. 31, the letter said. Twenty-two company workers at plants in Newton and Ralston lost their jobs last week. Cuts at Washington and Farley were made earlier.
I'd like to make two points:. First, I'm calling "broken windows" on this. The subsidy probably leads to some gross jobs creation, but what are the unseen effects? A $1-a-gallon subsidy is paid for by taxes of an equal amount and/or by borrowing. Taxes discourage jobs creation in other sectors and public borrowing tends to crowd out private investment, which also discourages jobs creation. So the taxes and/or public borrowing creates a simultaneous offset to any jobs created by the biodiesel subsidy.
Second, if your good meets the definition of a private good (it is excludable and it is rival) and needs a subsidy to exist, it probably isn't worth all that much to society in the first place. In other words, the resources necessary to produce biodiesel have higher value in other industries. That's why we have a plea made to government using a currently-sexy political term - "green collar jobs" - and not a proposal given to private investors about what a great product biodiesel is to private citizens. It may turn out that biodiesel is the bee's knees, but I doubt it.