Brussels, 17/07/2008 (Agence Europe) - In a report published on 15 July, the OECD concluded that public expenditure for biofuel production in rich countries is expensive, not successfully reducing green house gas emissions or improving energy security and is having repercussions on wolf prices in plant products. According to the OECD, biofuel viability is largely dependent on support from public coffers for green fuel production and consumption. In the US, Canada and EU, public funding is expected to be around USD 25bn by 2015, as opposed to 11bn in 2006. The report estimates that biofuel support (budgetary measures, tax relief and direct aid to producers, distributers and consumers) costs between USD 960 to USD 1700 per tonne of greenhouse gases saved. 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 burden on domestic biofuel users and limit development prospects for alternative suppliers. The OECD 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 use and greenhouse gas emissions. Further, research to accelerate development of second generation biofuels that do not require commodity feedstocks is suggested.
The reduction of greenhouse gas emissions is a primary reason for current biofuel policies but the OECD concludes that the savings are limited. It notes that Ethanol from sugar cane - the main feedstock used in Brazil - reduces greenhouse gas emissions by at least 80 percent compared to fossil fuels. But emission reductions are much smaller from biofuels based on feedstocks used in Europe and North America. Biofuels produced from wheat, sugar beet or vegetable oil rarely provide emission savings of more than 30 to 60 percent while savings from corn (maize) based ethanol are generally less than 30 percent. Overall, the continuation of current biofuel support policies would reduce greenhouse gas emissions from transport fuel by no more than 0.8 percent by 2015.
Finally, the OECD notes that the impact of current biofuel policies on world crop prices, largely through increased demand for cereals and vegetable oils, is significant but should not be overestimated. 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. The OECD report is available at: http://www.oecd.org/tad/bioenergie. (E.H./trans/rh)