Thursday, October 11, 2007

OECD: Biofuels Subsidies not efficient

From the EU Energy Policy blog:

Farmers who receive the generous subsidies love biofuels or agrofuels – and so do politicians who can count on their votes. But aside from these two groups, everybody else is worse off with the current rush of subsidies to produce biofuels. That, in a nutshell, is the conclusion of a recent report by the Organization for Economic Cooperation and Development (OECD).

With rising price of oil and concerns about over-dependence on imports from politically unstable Middle East, governments in the US and Europe offer significant incentives to farmers to grow biofuels, which can be used as fuel additives or converted to ethanol. OECD estimates that the US alone will spend upward of $7 billion this year to produce ethanol. Europeans are probably spending similar sums.

Under an optimistic scenario, biofuels may cut emissions in industrial countries by 3%, if that. But this small reduction comes at an alarming cost – as much as $500 for a tonne of CO2 in the US, according to OECD, and perhaps 10 times higher in Europe. It is money poorly spent, to put it mildly.

Using more diplomatic language, OECD report says, “The current push to expand the use of biofuels is creating unsustainable tensions that will disrupt markets without generating significant environmental benefits.” It recommends a phase out of biofuel subsidies while introducing – surprise – “technology-neutral” carbon taxes that allow the market to find the most efficient ways of reducing greenhouse gases.

Not the sort of news corn farmers in the US Midwest want to hear...MORE