Biofuels and Rationality

... and I'm grateful to Ron Steenblik of the Global Subsidies Institute for pointing out his group's new study in of biofuel subsidies in the US, which was launched at on 23 October at a seminar hosted by the German Marshall Fund. Written (as was the original study) by subsidy expert and long-time critic of subsidies to the oil-industry, Doug Koplow, President of Earth Track, the update is almost as long as the original report, published in October 2006. Besides providing revised estimates of government support for ethanol and biodiesel in the United States, it analyses in-depth some of the proposals for expanding support to the industry that are currently before Congress.

"The report's conclusion? Support for the industry looks set to exceed a cumulative of $90 billion for the 2006-2012 period -- without a new RFS. With a new, expanded RFS, support levels beyond that period would continue rising into the 2020s."

In light of the report's findings, the GSI recommends that U.S. federal and state governments:

"desist from increasing mandatory consumption levels for biofuels and instead adopt a neutral policy position favouring all options to reduce reliance on petroleum in the transport sector; take into account the environmental effects of biofuels production and distribution cycles in the design of policies that affect biofuels; and establish a transparent evaluation process to assess the cost-effectiveness of support policies at all levels of government in attaining the declared objectives behind U.S. biofuels policy."

As Martin Wolf says in Finanical Times:

"Policy is extraordinarily complex. It can also be highly irrational. Brazil is, for example, the most efficient supplier of bioethanol, but confronts tariffs of at least 25 per cent in the US and 50 per cent in the European Union. A smaller example is the advantage given to production of “flexible-fuel vehicles” in US corporate average fuel-efficiency standards. Because the fuel-economy credit is biggest for the least energy-efficient models, manufacturers concentrate on sport utility vehicles and light trucks. Yet almost all the drivers of these vehicles use ordinary petrol. The result is greater consumption of petrol, not less."

Complex, the idea of trying to get a handle on all of the aspects of biofuels policy makes me want to bang my head on the desk. My colleague, John Richardson, is slightly more forthright in his view of biofuels... he takes a more quantitative approach in his Asian Chemicals Connections Blog: that the biofuels business is driven by idiocy and hypocrisy. I think that is a little strong, just as I tend not to sign up to conspiracy theories (on the basis that the people who would have to be behind them would not have enough time available in their lives to pull the stunts off or would have to be at least 150 IQ points brighter than your average James Bond villain) and I don't think the business is being driven by hypocrisy. People do see biofuels as being a good thing and are trying their best to mitigate the effects of using gasoline. They also see biofuels as a way of raising farm gate prices and therefore political support in key consituencies. But, it seems to me that often people's views are partial as is their information. Martin Wolf is right when he uses the word irrational, later in his piece and also when he adds later in his column that there is a hidden cost to apparently costless mandates

"eliminate increasingly popular (because apparently costless) mandates to use specific quantities of biofuels, since these shift all the risk of fluctuations in demand and supply of foodstuffs on to their use as food..."

That kind of change is tricky because the connection is not always obvious, at least at first... It may take 20 years to deplete and aquifer and you may not realise until you're half way through the last year that you are running out of water.

Originally published at The Big Biofuels Blog

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Science policy

By Simon Robinson

science policy,

petroleum

policy

rationality

biofuel

science policy

future energy

subsidies

consumption

Biofuels and Rationality

By Simon Robinson

There were several studies on biofuels issued last week, while I was away...

science policy,

petroleum

policy

rationality

biofuel

science policy

future energy

subsidies

consumption

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Electrify America: The Founders Were Right, Let's Look to France!