Biofuel policies in OECD countries costly and ineffective, says report
Source: Organisation for Economic Co-operation and Development

Government support of biofuel production in OECD countries is costly, has a limited impact on reducing greenhouse gases and improving energy security, and has a significant impact on world crop prices, according to a new study of policies to promote greater production and use of biofuel in OECD countries.

OECD’s Economic Assessment of Biofuel Support Policies says biofuels are currently highly dependent on public funding to be viable. In the US, Canada and the European Union government support for the supply and use of biofuels is expected to rise to around USD 25 billion per year by 2015 from about USD 11 billion in 2006. The report estimates that biofuel support costs between USD 960 to USD 1700 per tonne of greenhouse gases (carbon dioxide equivalent) saved.

Support policies include budgetary measures, either as tax concessions or direct financial support for biofuel producers, retailers or users. Blending or use mandates require that biofuels represent a minimum share of the transport fuel market and result in increased fuel costs to consumers due to the higher production costs of biofuels. Trade restrictions, mainly in the form of import tariffs, protect the domestic industry from foreign competitors but impose a cost burdon on domestic biofuel users and limit development prospects for alternative suppliers.

The report calls on governments to refocus policies to encourage lower energy consumption, particularly in the transport sector. It also calls for more open markets in biofuels and feedstocks in order to improve efficiency and lower costs. The report recommends a clear focus on alternative fuels that maximise the reduction of fossil fuel useage and greenhouse gas emissions. Further, research to accelerate development of second generation biofuels that do not require commodity feedstocks is suggested.

+ Full Report (PDF; 1.4 MB)

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