Biofuels Policies Costly, Ineffective, Inflationary
More bad news for ethanol emerged today via the OECD’s Economic Assessment of Biofuel Support Policies. The report adds to the growing body of evidence that government support of biofuel “is costly, has a limited impact on reducing greenhouse gases and improving energy security, and has a significant impact on world crop prices.”
The report estimates that biofuel support costs between $960 to USD 1700 per tonne of greenhouse gases (carbon dioxide equivalent) saved.
The reduction of greenhouse gas emissions is a primary reason for current biofuel policies but the savings are limited, the OECD says. Ethanol from sugar cane reduces greenhouse gas emissions by at least 80 percent compared to fossil fuels. However, biofuels produced from wheat, sugar beet or vegetable oil rarely provide emission savings of more than 30 to 60 percent while savings from corn (maize) based ethanol are generally less than 30 percent.
Overall, the continuation of current biofuel support policies would reduce greenhouse gas emissions from transport fuel by no more than 0.8 percent by 2015.
Current biofuel support measures alone are estimated to increase average wheat prices by about 5 percent, maize by around 7 percent and vegetable oil by about 19 percent over the next 10 years.
The report recommends:
- Governments refocus policies to encourage lower energy consumption, particularly in the transport sector, a much less costly way of reducing greenhouse gases.
- More open markets in biofuels and feedstocks in order to improve efficiency and lower costs.
- A clear focus on alternative fuels that maximise the reduction of fossil fuel usage and greenhouse gas emissions.
- Further research to accelerate development of second generation biofuels that do not require commodity feedstocks is suggested.
Taking into account the 2007 US Energy Independence and Security Act and the proposed EU Directive for Renewable Energy, 13 percent of world coarse grain production and 20 percent of world vegetable oil production could shift to biofuel production in the next 10 years, up from 8 percent and 9 percent in 2007, respectively.
The challenges facing US corn-based ethanol producers are documented in a report from NPR’s All Things Considered. Despite higher gasoline prices, ethanol producers are struggling as a result of sharply higher corn prices. The report cites a biofuels deathwatch map from earth2tech.com that identifies 18 US biofuels plants that have either been put on hold or cancelled.
You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
