OECD: Biofuels Subsidies not efficient
October 11th, 2007 by Fereidoon Sioshansi, EEnergy InformerFarmers who receive the generous subsidies love biofuels or agrofuels – and so do politicians who can count on their votes. But aside from these two groups, everybody else is worse off with the current rush of subsidies to produce biofuels. That, in a nutshell, is the conclusion of a recent report by the Organization for Economic Cooperation and Development (OECD).
With rising price of oil and concerns about over-dependence on imports from politically unstable Middle East, governments in the US and Europe offer significant incentives to farmers to grow biofuels, which can be used as fuel additives or converted to ethanol. OECD estimates that the US alone will spend upward of $7 billion this year to produce ethanol. Europeans are probably spending similar sums.
Under an optimistic scenario, biofuels may cut emissions in industrial countries by 3%, if that. But this small reduction comes at an alarming cost – as much as $500 for a tonne of CO2 in the US, according to OECD, and perhaps 10 times higher in Europe. It is money poorly spent, to put it mildly.
Using more diplomatic language, OECD report says, “The current push to expand the use of biofuels is creating unsustainable tensions that will disrupt markets without generating significant environmental benefits.” It recommends a phase out of biofuel subsidies while introducing – surprise – “technology-neutral” carbon taxes that allow the market to find the most efficient ways of reducing greenhouse gases.
Not the sort of news corn farmers in the US Midwest want to hear – nor a strong endorsement of the European Union’s plan to obtain 10% of its transport fuel from biofuels by 2020. Mr. Lalonde, a former French environment minister was quoted in Financial Times (13 Sept 07) saying, “… you cannot ask nature to do everything. You cannot feed people and soak up carbon and protect biodiversity and fuel cars.”
The topic has turned out to be controversial, to say the least. Stavros Dimas, the EU’s environment minister has been warning that biofuels are not a panacea for climate change. Andris Piebalgs, the energy commissioner, sounded resigned saying, “We are carrying out the mandate given to us by European leaders.” He could have added – whether it makes any sense or not.
F.P. Shioshansi
This post is extracted from EEnergy Informer, October 2007 issue.
October 12th, 2007 at 10:20 am
I support the OECD’s theory and strongly believe that all the money that is being poured into bio-fuels should be invested to improve technology for solar energy harvesting since that alone can save us from this mess.Nuclear Energy is good but as long as it is in the hands if a few nations ,it would not create an impact.I am a student of IITDelhi and we are the best brains of India.But of late everyone including me will be joining Finance jobs.We can be harvested big time and I think we will produce really good results,but there has to be an incentive to do that,either monetary or popularity wise.
June 1st, 2008 at 10:32 pm
In the past years, the trend has been to promote the development of biofuels through subsidies. They took various forms according to the different public policies, but it appears they were decided without all the information and the figures necessary regarding several key points: the use of farmlands to produce biofuels, the environmental impact of the utilization of biofuels and the real CO2-emitted reduction and fossil fuels displacement.
The last surveys tend to suggest that the gains in CO2-emitted reduction and fossil fuels displacement are relatively small in comparison to their subsidy cost. Therefore, public policies should maybe consider more cost-efficient ways of reducing greenhouse gases emissions. In the USA, the $500 subsidies per ton of CO2-equivalent reduced through the production and use of ethanol could purchase more than 30 tons of CO2-equivalent offsets on the European Climate Exchange for instance. Besides, even the form of these subsidies is controversial: the existing fixed-rate subsidies are now being opposed to variable-rate subsidies that would decline as oil prices rise (a reduction of biofuel subsidies had been expected in the USA with the rise in oil prices). Meanwhile, the potential for unintended consequences is huge. As producing biofuels may require lots of non-renewable inputs, the situation is very complex. The use of farmlands to produce biofuels can also be partly responsible for a rise in basic food product prices. Subsidies to liquid biofuels are therefore being injected into an already distorted agricultural economy and an energy market itself distorted by subsidies and subject to considerable volatility. To cope with this problem of competition with food crops are now considered the options of cellulosic biofuels (coming from non food crops) and of algae fuels, whose displacement ratios are besides markedly better than those for corn-based ethanol or biodiesel. Many existing subsidies are justified on the grounds that they are paving the way for a cellulosic ethanol industry.
So, even though the production and use of biofuels have been widely promoted until now – the European Union in its biofuels directive has set the goal that each member state should achieve in 2010 at least 5.75% biofuel usage of all used traffic fuel – a better understanding of their real impacts is necessary, as well as a need to quantify them. A comparison with other ways of reducing greenhouse gases would therefore be possible, and appropriate subsidies could be decided. At the same time, enhancing the technologies linked to biofuels and their cost-efficiency seems necessary if biofuels have to remain a conceivable solution.
August 10th, 2008 at 6:53 pm
Interesting bu why not just use algae in stead of having farmers grow the fuel and take away from food stores? Algae can be generated from any water source relieving farm lands from this burden.
April 18th, 2009 at 12:26 pm
Algae fuels
Nowadays, it is currently admitted and proved that the first and second generations of biofuels aren’t as interesting as they were thought to be in the past. Indeed, the production of biofuels thanks to farm industry (using colza, sunflower …) emits a lot of CO2. For instance, the use of soya emits 70% more CO2 than traditional fuels, and it is even worse as the use of fertilizer (like NO2) is 300 times more dangerous for the environment (these results are derived from a study made by Paul Joseph Crutzen, a chemist, are taken seriously). Moreover, the use of farmlands to produce biofuels is in competition with food crops, and has therefore serious consequences on the food prices.
On the other hand, microalgae are able to absorb CO2 (thanks to the photosynthesis) and they could also be used to produce a third generation biofuel. As those algae are less in competition with classical food crops, this solution is seriously studied. Moreover, the culture of algae is far more interesting than soya or sunflower plantations, as it is possible to use salted water, keeping the fresh water for traditional culture.
According to experts, microalgae can produce 25.000 litres of biofuels, whereas colza can only produce 1.500 litres (950 for sunflower and 446 for soya). In fact, microalgae are far more efficient than other solutions:
| Efficiency (l/ha) | Required surface (Mha)
Corn | 172 | 1540
Soya | 446 | 594
Microalgae (1st type) | 13690 | 2
Microalgae (2nd type) | 58600 | 4.5
In addition, the culture of microalgae has a lot of advantage:
- There is no need of fertilizer (to be more precise, some fertilizer should be used, but they could be found later in the process and reused).
- It is possible to absorb CO2 thanks to photosynthesis (2kg of CO2 is absorbed by 1kg of algae, making possible the recycling of industrial effluent).
- In order to produce biofuels with microalgae more efficiently, wastes could be added (and this allows also a better reprocessing of wastes).
However, it should be born in mind that even if the use of microalgae for biofuels emits 30% less CO2, the cost of this technology is yet 60% higher than traditional diesel.
Finally, those results are still uncertain. Indeed, experts are still studying this solution, and no real huge plant has been made to test the efficiency of this process.