J. Craig Venter, synthetic biology pioneer and the private hand behind the Human Genome Project, created quite a stir two months ago when he labeled biofuels "dead" without a comprehensive carbon tax:

It doesn't matter what the scientific breakthroughs are, there's no way to ever beat oil. In fact, oil's not even an issue right now because of all the new natural gas discoveries. So there's no way economically for a new fuel made out of renewables to ever be able to compete with something an oil company can do, without sharp federal regulations and a sharp carbon policy that says, you can't keep just taking carbon out of the ground, burning it and putting it in the atmosphere. Until we do that, there is no biofuel industry.

Let's just not forget that Dr. Venter has a lot riding on the future of the industry and would have plenty to gain from a carbon tax. Synthetic Genomics, his privately held company, created a partnership with ExxonMobil (XOM -0.05%) in 2009 to develop a chemical and fuel platform powered by photosynthetic algae. Exxon alone has pledged over $300 million to finding new microbial strains of DNA, genetically engineering strains, and building pilot and demonstration-scale facilities.

Would a carbon tax help level the playing field for renewable fuels? Absolutely. Are advanced biofuels dead without a comprehensive carbon tax? That's very unlikely, as it is not the only way to be competitive. Let's discuss several reasons why I think Venter is wrong.

Uncle Sam goes long
While the government may balk at even drafting a carbon tax bill, it has already enacted legislation that is transforming the way we fuel our vehicles: the Renewable Fuel Standard (RFS). Without this important mandate the United States would have needed to import an additional 768 million barrels of oil in 2011 – or 2.10 million barrels per day. That's not the only red, white, and blue stamp on biofuels.

The Department of Defense is heavily invested in the future of renewable energy. Synthetic biology pioneer Amyris (AMRS -62.50%) is currently working on the Living Foundries contract with DARPA. The project aims to speed the development of biological platforms, which currently take a painfully long seven years or more. If DARPA's past successes – the Internet, GPS, seismic sensing technology, radar stealth – are any guide, then perhaps the breakthrough needed for a game-changing synthetic biology platform is in the works.

The Navy is perhaps the most ambitious military branch, which is attempting to generate 50% of its total energy needs from renewable energy by 2020 (link opens PDF). Fostering the use of domestic, renewable fuels has obvious strategic advantages in a war-time setting. That hasn't stopped critics from pointing out the lofty price tags on initial fuel quantities.

Renewable oil producer Solazyme (TVIA), which played a key role in early demonstrations of the Green Strike Group, received the brunt of the criticism. That may be a bit unfair, as the $26 per gallon figure included costs for new equipment and has yet to factor in commercial scale production. It's a Catch-22. Navy research dollars will play an important role in scale-up, which will need to progress to attract more funding. In addition to Solazyme and Amyris, dozens of private companies, such as Joule Unlimited, are building platforms that could produce up to 15,000 gallons of diesel per acre.

A recent U.S. Senate vote gave the Department of Defense the green light to continue purchasing green fuels. Navy Secretary Ray Mabus stated that advanced biofuels can be competitive with petrol fuels by 2016 if the Navy reaches its goals. In the end, military investment may prove to be the single most important development in the advanced biofuels timeline.

Don't discount science
The fact that Venter, one of the world's leading faces of science, berated the lack of scientific advancements in his rant leads me to believe he was either having a bad day or knows he has something to gain from a carbon tax. The truth is we don't know when the next breakthrough will arrive. Few people predicted the current energy renaissance in shale oil and gas as recently as 10 years ago, which was spurred by scientific advancements in horizontal drilling.

Similarly, advanced biofuels have so much game-changing potential they should not be taken lightly.

Some of the most promising technologies are being bankrolled by the most unlikely sources. Take Cool Planet Energy Systems for example, which is supported by Google and GE. The company has developed a modular system that uses pressure, heat, and catalysts to process biomass into gasoline, diesel, and jet fuel. Cool Planet claims each system can create between 10 million and 53 million gallons of fuel each year by using any biomass within a 50 kilometer radius.

Better yet, the only byproduct is a fertilizer called biochar, which naturally sequesters CO2 and aids soil in water and nutrient retention. The result? A true carbon neutral – or even carbon negative – fuel. I don't believe in long-term predictions, but the company believes it can produce up to 10% of the world's fuel within 20 years. Google and General Electric agree. Take that, Venter.

Foolish bottom line
The calls for a carbon tax have become louder as advanced biofuels struggle to break down the wall of obstacles erected by science. A carbon tax would create more incentives for these uneconomical fuels, supporters say. I would argue that it is not necessarily the industry's fault, but instead the unrealistic expectations set by the government in RFS targets. For instance, fuel blenders are required to purchase 1 billion gallons of cellulosic ethanol in 2013. That will be mighty difficult given the virtually nonexistent capacity going into the year.