In recent months, many developments have led to questions about US energy policies, in particular those concerning biofuels. Globally, some commodity price reductions appear to be likely, but global food prices remain high, economic slowdowns threaten the recent growth of alternative energy markets, and there is as yet no global consensus on how to address climate change. In the meantime, the Doha Round remains unfinished business, and WTO rules do not appear to constrain high levels of domestic subsidies for biofuel feedstock production, with absent litigation resulting in a binding agreement to reduce them.
Domestically, US biofuel policies have also been revisited, with a new Farm Bill that perpetuates previous agricultural policies and energy legislation that adds incentives to produce both first- and second-generation feedstocks.
However, in the context of the challenges facing the US in terms of its overall energy policy, the documented impacts of US biofuel policies to date are discouraging.
Although investment in corn ethanol production using current technology has been extremely profitable for some investors, there is evidence that consolidation in the ethanol-producing sector has removed benefits from some of the rural communities that expected to profit from them. Livestock and poultry industries have been hard-pressed to compete with ethanol refineries for supplies of corn, a large part of animal diets. Ethanol production has also contributed significantly to food price increases in the USA, and it also carries additional costs. The infrastructure investment necessary to create dedicated transport, storage and distribution facilities for ethanol, including dedicated pipelines, will be considerable at a time when transport infrastructure improvements are also necessary in other areas.
The environmental effects of intensified corn production for ethanol have also become apparent, as many communities are finding that corn ethanol refineries are large users of scarce water supplies.
The US has not erected new trade barriers to alternative energy sources, and biofuel in particular, as much as it has continued old ones.
The ethanol and biodiesel blender credits, the ethanol tariff, and the level of subsidy for corn ethanol at state and federal levels have perpetuated a relatively protected market and have in effect protected a relatively inefficient technology. Some of this has come at the expense of global demand for food and feed.
The relevant US domestic and trade policies, and the WTO agreements and jurisprudence relevant to them, are analysed in this paper.

By: International Centre for Trade and Sustainable Development (ICTSD)

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