Tuesday, July 22, 2008

Biofuels the wrong approach

Biofuels are "costly and ineffective" says the OECD and columnist Paul Hanley.

Governments in Canada, Europe and the U.S. currently provide about $11 billion a year in various forms of support to the biofuels industry. Direct and indirect support is expected to rise to about $25 billion in five years.

The stated reasons for this market intervention are to lower greenhouse-gas emissions, to reduce the need for imported fossil fuels and to stimulate the rural economy. But according to the OECD, the biofuels policy is both "costly and ineffective" at reducing emissions and fossil fuel use. In fact, despite the heavy spending, biofuels reduce net GHG emissions from transport by less than one per cent. Fossil fuel use is also reduced by less than one per cent for most transport sectors.

OECD's Economic Assessment of Biofuel Support Policies concludes that public money spent on biofuels would be much better spent on much less costly and much more effective energy conservation measures.

The OECD report also tells us that
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.

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.

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