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Biofuels are not even vaguely a silver-coloured bullet

By Simon Upton - posted Monday, 3 December 2007

OECD economies are spending more than $11 billion a year helping biofuel producers gain a toe-hold in the market for liquid fuels. As if that were not enough, rafts of already announced intentions are being developed in government ministries around the world. A mixture of open-ended, demand-driven payments and mandatory minimum blended fractions will see that figure soar.

Based on the current policy drivers we foresee support for biofuels the OECD region reaching at least $20 billion by 2010 and anywhere between $30-60 billion by 2020.

With taxpayers being asked to throw sums like these on the table, you’d think someone had stumbled on an environmental and energetic jackpot. Biofuels are being touted as offering benefits for agricultural policy, rural development, farm-subsidy reform, employment, greenhouse gas reductions and energy security. In some quarters they are being touted as the means to completely change the terms of trade between poor tropical countries and the rich, oil dependent North.


Not only is it a good cause: biofuel, it is claimed, will very soon become self-sustaining. Fully commercial, unsubsidised “green” fuel lies just around the corner with a triple dividend for energy security, environmental security and development in some very disadvantaged countries.

There are good reasons to believe none of these outcomes is likely to be achieved any time soon, if ever. Behind the hype, the facts are less reassuring.

In the first place, it is highly unlikely that the planet can produce biofuels on the scale likely to be required by future projected demand for mobility. Biomass grown for conversion into liquid fuels is in competition with biomass grown for food and fibre. There is only so much of the planet we can appropriate without causing loss of species on a calamitous scale together with the degradation of the so-called “ecosystem services” that flow from the biologican and geo-chemical processes that make this planet liveable and living.

The best estimates suggest an upper limit for biofuel production of about 20 per cent of liquid fuel demand (including from so-called second generation fuels) in 2050 - scarcely enough of a margin to provide energy security for those condemned to import their oil. And nowhere near enough to back off skyrocketing emissions from fossil fuels, even if sourced from cropping systems with the best well-to-wheels life cycle analysis.

But even this level may prove beyond reach because biomass harvested for biofuel is not available for other uses such as food or fibre production, or wildlife. There is a contest for the by-products of photosynthesis on which we rely for our survival. Strong economic growth throughout Asia and elsewhere has already put a floor under the prices received for a wide range of agricultural commodities. Start to inject significant levels of demand for some of those commodities as biofuel feedstocks (which subsidies are doing right now) and a tight situation becomes tighter still. Very simply, without subsidies, biofuels may never be competitive.

This hasn’t stopped all manner of technological optimists arguing that the pressures are transitional - and with them, the subsidies. Leaving aside those evidently self-interested investors who have gambled on a lavish taxpayer-funded transition to this nirvana, this question must be asked of the rest: why should biofuels receive such royal treatment when a host of alternative technologies that both supply energy and minimise its use are also to hand? Every policy has an opportunity cost and $11 billion a year represents a significant opportunity.


None of this is to argue that biofuels do not have a role to play. Of course they do. Depending on particular regional settings - lots of sun, soil productivity and water with all sorts of co-benefits and co-products can make a world of difference. Countries like Brazil can do very nicely. But there are environmental limits even there.

The point is that biofuels are so far from being an even vaguely silver-coloured bullet that they cannot be allowed to corner such fabulous resources without more thorough questions being asked.

We all have our own pet solutions. If it were up to me, I’d be throwing other people’s money at large scale carbon capture and storage and the direct harvest of solar energy (rather than the pale, low density version represented by photosynthesis). But there’s the rub: it is other people’s money. Those who propose to spend it should be able to account to taxpayers for why they believe their policies will yield the best returns.

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About the Author

Rt. Hon. Simon Upton is a member of the Global Subsidies Initiative’s High-Level Advisory Group.

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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