Biofuels – At what cost? (Government support for ethanol and biodiesel in selected OECD countries)

Sep 2007

This paper provides an overview of policy measures currently applied to support the production and consumption of biofuels. It also discusses how the different policies supportive of biofuels interact with broader agricultural, energy, and environmental policies, and the relative effectiveness of biofuels in achieving objectives in these areas. The paper makes several recommendations for further research and concludes with a series of recommendations for policy makers.
In order to assist policymakers in gaining a better understanding of the magnitude, direction and coherence of government policies supporting liquid biofuels, the Global Subsidies Initiative (GSI) — a new programme under the International Institute for Sustainable Development — embarked in 2006 on a series of studies on support policies in selected OECD and non-OECD economies. This report represents an overview of the results of the OECD country studies (Australia, Canada, the EU, Switzerland, and the United States). By adopting a common analytical framework, this has allowed cross-country comparisons to be made.
Chapter 2 provides an overview of the liquid biofuels industry, while Chapter 3 surveys the nature of government support to the industry in the countries covered by this study, highlighting similarities and differences. In general, the sources for the information contained in this chapter are the country studies themselves (see Reference section). To keep the text from being smothered by footnotes, we have therefore not included citations to the original sources; interested readers may find these in the individual country reports.
Chapter 4 presents aggregated information on the scale of subsidisation in the economies under investigation and some of the non-fiscal costs that result from the enhanced production and consumption of biofuels, most notably impacts on related markets and on the environment. Thereafter follows a discussion of some of the questionable assumptions that, inadequately scrutinized, are used to justify support for biofuel support policies. This allows, in turn, for a discussion of how biofuels perform against the key policy objectives in support of which their greater use is often advocated.
Finally, Chapter 5 provides some recommendations to policy makers which centre on the need for a moratorium on new measures, during which existing policies should be carefully re-examined for both their cost effectiveness and environmental impact.

By: D. Koplow (Earth Track, Inc.)

 
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