OECD warns against biofuels subsidies

The Financial Times ^ | 9/10/2007 | Andrew Bounds

[bruinbirdman]

Governments need to scrap subsidies for biofuels, as the current rush to support alternative energy sources will lead to surging food prices and the potential destruction of natural habitats, the Organisation for Economic Co-operation and Development will warn on Tuesday.

The OECD will say in a report to be discussed by ministers on Tuesday that politicians are rigging the market in favour of an untried technology that will have only limited impact on climate change.

“The current push to expand the use of biofuels is creating unsustainable tensions that will disrupt markets without generating significant environmental benefits,” say the authors of the study, a copy of which has been obtained by the Financial Times.

The survey says biofuels would cut energy-related emissions by 3 per cent at most. This benefit would come at a huge cost, which would swiftly make them unpopular among taxpayers.

The study estimates the US alone spends $7bn (€5bn) a year helping make ethanol, with each tonne of carbon dioxide avoided costing more than $500. In the EU, it can be almost 10 times that.

It says biofuels could lead to some damage to the environment. “As long as environmental values are not adequately priced in the market, there will be powerful incentives to replace natural eco-systems such as forests, wetlands and pasture with dedicated bio-energy crops,” it says.

The report recommends governments phase out biofuel subsidies, using “technology-neutral” carbon taxes instead to allow the market to find the most efficient ways of reducing greenhouse gases.

”Such policies will more effectively stimulate regulatory and market incentives for efficient technologies,” it said.

The study, prepared for the OECD’s round table on sustainable development, will be discussed in Paris on Tuesday and on Wednesday by ministers and representatives of a dozen governments, including the US. Also attending will be Ángel Gurría, the OECD secretary-general, scientists, business representatives and non-governmental organisations.

The survey puts a question mark over the European Union’s plan to derive 10 per cent of transport fuel from plants by 2020. It says money saved from phasing out subsidies should fund research into so-called second-generation fuels, which are being developed to use waste products and so emit less CO2 when they are made.

Today, only three kinds of biofuels are preferable to oil, the study says: Brazilian sugar, which converts easily to ethanol, the by-products of paper-making, and used vegetable oil.

The EU has said only biofuels that meet as yet undefined standards for sustainability will count towards its target to get a tenth of transport fuel from plants by 2020. Tariff discrimination on sustainability grounds is illegal under World Trade Organisation rules and the authors call for talks at the WTO to set up a global certification scheme.

Adrian Bebb, biofuels campaigner with Friends of the Earth said: “The OECD is right to warn against throwing ourselves headfirst down the agrofuels path.”

[texastoo]

The OECD will say in a report to be discussed by ministers on Tuesday that politicians are rigging the market in favour of an untried technology that will have only limited impact on climate change.

Will this be Baptist or Methodist ministers?Where are the free traders?Now the free traders are going to tell us what we can do with a corn cob. Oh well, so much for freedom.

[djxu456]

biofuel cuts the ragheads out of the deal.

[taxed2death]

Texas oil men too.

[roaddog727]

Interesting how when they refer to biofuels, they totally neglect biodiesel - which can actually be made from either non-food sources, or food detritus sources.

Biodiesel is highly efficient (much more so than ethanol).

From an economic perspective, ehtanol is NOT the way to go, for a whole host of reasons. Biodiesel, OTOH if very attactive as an alternative fuel source.

[q_an_a]

This week the price of eggs was nearly double the price of one year ago - more oatmeal please. The ethanol from corn is killing the farm industry, it will make them like all the crack folks in the innner city - willing to sell anything for a fix. The midwest is now addictied to farm aide and higher prices. We will never have a sane government as long as 20 farm states, and 40 senators, cry for ethanol and aide from the tax payer.

[NRG1973]

“”Texas oil men too.””

Not really!!! Biofuels require a lot of diesel fuel to till the fields, plant the crops, fertilize the crops, harvest the crops and transport the crops to the processing factory. Thats why you don’t hear Big Oil complaining about biofuels...they’ll make their money selling the diesel fuel to the people who grow and make the biofuels instead of selling gasoline to the final customer.

[theBuckwheat]

Biofuel subsidies always have unintended economic consequences, the first being that it makes people pay twice for fuel: once through the taxes levied to pay the subsidies and again in higher food prices when the subsidies allow energy needs to compete with food needs for the same raw materials.

Here in the US, the subsidy on ethanol is *the better part of one dollar per gallon*, not only because of a direct subsidy of 51 cents but the tax subsidies and various tax abatements and direct grants being offered to investors to build ethanol refineries.

Another unintended consequence of ethanol is that it takes approximately 3 gallons of water to refine one gallon of ethanol. This was the topic of a recent front page article in the WSJ, where ethanol refineries in the Midwest are now competing with corn farmers for allocation of the finite ground water supply.

[Red Badger]

I don’t like “subsidies” of any form. Welfare is a form of subsidy. The free market, if it exists anymore, will decide what kind of fuel(s) we use in the future. This ethanol thing is being pushed by people in government and industry who are well aware of the negative energy content of ethanol, and the positive money to be made off of it. ADM, CON-Agra, among others, are eying the huge “farm subsidies” they can reap, not the “benefits” of the ethanol itself. They don’t like biodiesel for the very reason that it can be made from things other than food based agricultural products and more miles per gallon means less money for them. I am very surprised that he United Mine Workers are not banging down the doors of the DNC, RNC and Congress to sing the praises of Coal-to-Liquids (CTL) Diesel aka Fischer-Tropsch (FT) method. If anybody is to benefit from more coal use, it’s them..............

[Red Badger]

The price of Milk here is hovering around $5 per gallon. Meat and cheese is becoming a luxury item. The effects of this "ETHANOL MADNESS" has finally reached the store checkout counter. Cooking oil, cosmetics, leather goods, medicines and anything remotely attached to corn is going up faster than we can sow replacement cornfields. At some point, and soon I hope, the consumer will get angry and start looking for answers. Everytime I hear someone at the checkout complain about the high grocery prices, I tell them it's all because of the "ETHANOL MADNESS" of money infused corn subsidies. The light in their eyes seems to go on immediately. It's easy to understand and readily grasped by even the most uneducated shopper. TRY IT! Spread the word. Perhaps if enough people get the message that this is ridiculous, burning our food for fuel will cease!................Trying to stretch your fuel supplies by adding ethanol is like trying to stretch your ground beef supplies by adding filet mignon.............

[Red Badger]

Rest In Peace, old friend, your work is finished.......

If you want on or off the DIESEL ”KnOcK” LIST just FReepmail me........

This is a fairly HIGH VOLUME ping list on some days......

[I_be_tc]

later

[Ancesthntr]

“...they totally neglect biodiesel - which can actually be made from either non-food sources, or food detritus sources.

Biodiesel is highly efficient (much more so than ethanol).”
__________________

Exactly. Biodiesel can be made from used veggie oil (as mentioned), from peanuts that are unsuitable for human consumption (and which grow in lousy soil, so as not to take away from food acreage), and from a plant called Jatropha that is also unfit for human consumption and also grows in lousy soil. http://www.jatrophabiodiesel.org/

Further, biodiesel itself is less costly to manufacture, is more energy dense and operates in more efficient engines than ethanol. We are INSANE to be using corn to make ethanol.

[NVDave]

If you think it is all due to ethanol, you’re wrong.

Did you think farmers, who use 8% of all diesel fuel used in the US, were simply going to absorb the increased costs of:

- diesel used directly in their operations?
- diesel used in transportation of crop outputs?
- natural gas spikes, used in grain dryers and nitrogen-based fertilizers?
- increased steel, copper, grease, oil/lube prices?

and keep food prices right where they were?

No. Don’t be silly. Farmers have to pass these things on too.

Too many consumers have been completely insulated from the rapid inflation in commodities for far too long. They like to point to ethanol subsidies, but they’re completely ignorant of what it is like to run a business where your input costs, and I mean nearly *every* input cost, has gone up in the last five years. In some cases, inputs have more than tripled - off-road diesel fuel used to be about $0.70/gal. Today I’m paying about $2.58/gal for *off road* diesel fuel. I still use about 1,000 gal per 125 acres of hay. No subsidy effect here. Hay has gone from about $100/ton for feeder hay to $145/ton.

And next year, it will go higher, if I have anything to say about it.

[roaddog727]

Agreed. Subsidies are just plain wrong and Big business is getting too big. Looking very much like the classical definition of Oligopoly from Macro 101.

[q_an_a]

To right!! It is too bad that farm state Republicans have sold out and carried a number of fellow members with them - this means that they won’t do what you are doing - pointing out the folly of corn based ethanol.

[MSF BU]

I don’t know if it is related, but even here in New England I am noticing many formerly abandoned fields...nothing growing on them since the seventies or eighties...are now full of corn. Given their reliance on horsepower, the Amish must really be cleaning up!

[Dan Evans]

A Reuters article on the same study:

http://today.reuters.com/news/articlenews.aspx?type=businessNews&storyID=2007-09-11T162914Z_01_L11879479_RTRUKOC_0_US-BIOFUELS-OECD-REPORT.xml&pageNumber=0&imageid=&cap=&sz=13&WTModLoc=NewsArt-C1-ArticlePage2

[djxu456]

where do you get this crap from?
ethanol —> ragheads and oil refineries
are cut out of the deal.

for every 1.3 gallons of ethanol produced, the equivalent
of one gallon of gasoline,
one-tenth gallon of liquid fuel is used.
I’ll post the link to the Argonne lab study,
if anyone is interested.

[Tolerance Sucks Rocks]

If bio-butanol can be made from non-food sources in a cost-effective manner, that would actually make a good substitute for gasoline. Forget stinkin’ ethanol.