A carbon fee is best understood as a fossil carbon fee.
Since the CO2 released from biofuels was in the atmosphere last year, it is not fossil carbon. While there are unresolved land-use and particulate issues with some biofuels, much of their carbon impact comes from fossil fuels burned in production, and thus their prices will already be rising due to the carbon tax.
So, to subject biofuels to a carbon fee is to double-tax them. This is unfair, especially since from a pure climate change perspective, biofuels are substantially better than coal, oil, or natural gas.
Pricing fossil fuels already puts carbon-intensive biofuels at a disadvantage. Issues with particulate emissions and land-use are significant, and must be dealt with. If they remain unresolved, this will put biofuels at a disadvantage to other technologies long-term, and the market or subsequent legislation/regulation will render them uncompetitive. But on the point of carbon emissions, they hold a clear advantage over fossil fuels, and so should not be subject to a carbon tax.
Frequently Asked Question:
Question: Should biofuels be subject to the tax?
Answer: The largest GHG contributions of biofuels are due to fossil fuels used in manufacturing them, and so the worst offenders from a pure climate change perspective would already be covered, and should not be double-taxed.