Summary:

Grain-based biofuels are costing governments billions in subsidies and achieving almost no emissions reductions, the Organization of Economic Cooperation and Development said today in a new report. The report estimates that the U.S., EU and Brazil will spend about $25 billion a year by 2015 on […]

Grain-based biofuels are costing governments billions in subsidies and achieving almost no emissions reductions, the Organization of Economic Cooperation and Development said today in a new report. The report estimates that the U.S., EU and Brazil will spend about $25 billion a year by 2015 on biofuel supports, up from $11 billion in 2006, to reduce emissions by no more than 0.8 percent. Talk about your long-term ROIs.

The report adds to the growing chorus calling for serious reform in global biofuels policies. The OECD’s Economic Assessment of Biofuel Support Policies recommends an end to the current subsidy system and an opening up of global markets to allow the most efficient biofuels to find new markets. Specifically, the U.S. and EU should rethink their own biofuel subsidies and mandates and the U.S. should drop its 54-cent tariff on imported biofuels, a measure that blocks Brazilian ethanol.

Here’s a breakdown of the report’s big numbers:

  • Per distance driven, U.S. corn ethanol reduces emissions 10 to 30 percent as compared to gasoline.
  • Per distance driven, Brazilian sugar ethanol reduces emissions by at least 80 percent as compared to gasoline.
  • Biofuel support costs between $950 and $1,700 for every ton of CO2 emissions reductions.
  • Current biofuel support will increase wheat prices by about 5 percent, maize by around 7 percent and vegetable oil by about 19 percent over the next 10 years.

The report adds to the growing food-vs.-fuel debate, an issue that has pitted the West’s thirst for fuel against the developing world’s starving masses, but the two sides can’t agree on the scope of biofuel’s impact. The U.S. National Biofuels Board said this week that “[B]iofuels-related feedstock demand has limited impact on global food supply and pricing.”

And the world’s poor aren’t the only ones paying more. High fuel prices have caused a surge in consumer prices in the U.S. Economists from the Federal Reserve Bank of St. Louis published a paper this week that says reducing America’s tariff on ethanol could not only reduce fuel costs but also alleviate the ethanol’s effect on global food prices.

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By Craig Rubens

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