Biofuels - At what cost? - Government support for ethanol and biodiesel in the European Union

Oct 2007

This report examines public support for biodiesel and ethanol for road transportation in the European Union. It forms part of a multi-country effort by the Global Subsidies Initiative (GSI) of the International Institute for Sustainable Development (IISD) to characterize and quantify subsidies to biofuels production, distribution and consumption, as well as policies affecting prices of key factor inputs, based wherever possible on primary sources.
This report follows a standardized outline common to all the reports in this series. After a brief explanation of the framework used in GSI’s studies, Chapter 2 surveys the European biofuel industry and Chapter 3 offers an overview of the past and recent policy initiatives of the European Commission and its Member States.
Chapter 4 describes and quantifies the different elements of support for biodiesel and ethanol at the European level, and at the national level, to the extent that information could be obtained, for each of the Member States. The discussion is informed by a standard economic classification scheme, which proceeds from the most economically distorting (production-linked) to the least-distorting (expenditure on R&D) forms of support.
Chapter 5 presents summary estimates of total support to biofuels in the EU. In addition to expressing support in total euros and euros per litre, the chapter estimates the amount of support in terms of several indicators relevant to the question of its cost-effectiveness: subsidy per litre of gasoline and diesel equivalent, subsidy per unit of fossil fuel avoided, and subsidy per tonne of CO2-equivalent avoided.
Finally, Chapter 6 provides some concluding observations and recommendations.
The authors acknowledge that the description of supporting measures and their quantification can only be partial, due to the large number of countries that are members of the EU. Access to relevant information on biofuel policy in the EU is a challenge, given language barriers, the lack of up-to-date and available data in some Member States, and the difficulty of obtaining access to information on local measures to support biofuels. Nevertheless, this study provides the most extensive overview to date of public support provided to the biofuel industry in the EU.

By: G. Kutas, C. Lindberg, R. Steenblik (GSI)

 
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