OECD: Biofuels Ineffective at Curbing Global Warming

The OECD is the Organization for Economic Cooperation and Development based in Paris, which defines itself as "a unique forum where the governments of 30 democracies work together to address the economic, social and environmental challenges of globalization."

The continuation of current biofuel support policies would reduce greenhouse gas emissions from transport fuel by no more than 0.8 percent by 2015, according to the OECD report, "Economic Assessment of Biofuel Support Policies," released on Wednesday.

The production and use of biofuels - mainly ethanol based on cereals and sugar crops, and biodiesel based on vegetable oils - has grown rapidly over the past few years and is expected to further double in the decade to come. With today's record oil prices, the future of biofuels, produced from plant materials, is of keen interest worldwide.

Ethanol production, Crescent, Illinois (Photo by Tom Atwell)

The United States, with 48 percent of global ethanol output, and Brazil, with 31 percent, are the largest ethanol producers, while the European Union accounts for about 60 percent of global biodiesel production.

Biofuels are currently highly dependent on public funding to be viable, finds the report, authored by Martin von Lampe, an agricultural policy analyst in the OECD Trade and Agriculture Directorate.

In the United States, Canada and the European Union, government support for the supply and use of biofuels is expected to rise to around US$25 billion per year by 2015 from about US$11 billion in 2006.

The report estimates that biofuel support costs between US$960 to US$1700 per metric tonne of greenhouse gases 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.

Environmentalists have been making some of these same points for years. Friends of the Earth UK says on its website, "Biofuels are a false solution to climate change and are doing much more harm than good."

The European Union is proposing a binding target to increase biofuels use to 10 percent of road fuels by 2020, in the proposed EU Directive for Renewable Energy.

Friends of the Earth is calling on the EU to scrap the target. "Instead we want measures that will double the fuel efficiency of new cars, a real climate change solution," the advocacy group says.

"This massive increase in Europe's demand for biofuels will have a devastating impact on the world’s poorest countries by destroying communities, damaging wildlife, and pushing up food prices," says Friends of the Earth.

The OECD 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 maximize the reduction of fossil fuel useage and greenhouse gas emissions.

A Noble Group ethanol and sugar production facility in Sao Paulo state, Brazil (Photo courtesy Noble Group)

Research to accelerate development of second generation biofuels that do not require commodity feedstocks is suggested in the OECD report.

Second generation biofuels use the non-food parts of food crops, such as stems, leaves and husks, as well as other crops that are not used for food purposes, such as switchgrass and cereals that bear little grain, and also industry waste such as wood chips, and skins and pulp from fruit pressing.

The reduction of greenhouse gas emissions is a primary reason for current biofuel policies, but the savings are limited, the report finds.

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-based ethanol are generally less than 30 percent.

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, says the OECD in its report.

"Current biofuel support measures alone are estimated to increase average wheat prices by about five percent, corn by around seven percent and vegetable oil by about 19 percent over the next 10 years," the report states.

Taking into account the 2007 U.S. Energy Independence and Security Act and the proposed European Union 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

In 2007, eight percent of world coarse grain production and nine percent of world vegetable oil production was used for biofuel production.

The OECD member countries are - Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey the United Kingdom and the United States. The European Commission also participates in the work of the OECD.

Copyright Environment News Service (ENS) 2008. All rights reserved.