Subsidies

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Bioenergy > Issues > Subsidies

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Information about biofuels and bioenergy and subsidies.

• Note: Also see the page on the Volumetric Ethanol Excise Tax Credit‎, which addresses a specific biofuels subsidy program in the United States.

Contents 1 Resources 2 News 3 Reports 4 Events

Resources

• Global Subsidies Initiative - The Global Subsidies Initiative (GSI) of the International Institute for Sustainable Development "is a project designed to put the spotlight on subsidies and the corrosive effects they can have on environmental quality, economic development and governance."

News

• Ethanol industry lurches in wake of lost subsidy, oversupply, 28 February 2012 by Minnesota Public Radio: "After predicting they would survive the end of a major federal subsidy without problems, it looks like officials at the nation's ethanol producers may have been too optimistic."
  • "Since the subsidy ended Dec. 31, ethanol profit margins have declined sharply, even slipping into negative territory. Experts see no quick turnaround in sight...."
  • "The loss of the 45-cent-per-gallon federal tax break marks a major change in the economics of ethanol. It also created a double whammy beginning with the closing months of last year, when ethanol producers saw a rush of buyers for the last of a subsidized product."[1]

• Senate keeps ethanol subsidies, 14 June 2011 by Politico: (United States) "The Senate on Tuesday rejected, 40-59, a symbolic attempt to strike ethanol tax subsidies as Democrats are working on a deal to hold at least one vote on ethanol next week."
  • "The amendment from Sen. Tom Coburn (R-Okla.) fell well short of the necessary 60 votes to invoke cloture and limit debate. Five Democrats supported the amendment and 12 Republican ethanol backers, largely from the Midwest, opposed it."
  • "Coburn’s amendment would have repealed a 45-cent-per-gallon tax credit to blend ethanol in gasoline that is set to expire at the end of the year. It is estimated that the tax credit would be worth upwards of $6 billion if it continues the whole year. The amendment also would have repealed a 54-cent-per-gallon tariff on ethanol imports."
  • "About a dozen senators, led by Thune and Klobuchar, are proposing to immediately — starting July 1 — end the existing blender tax credit and replace it with a variable blender tax credit linked to the price of crude oil through 2014."[2]

• The energy emperor's ethanol wardrobe looks mighty bare , 6 March 2011 by Washington Examiner: "Anyone looking at the ethanol subsidy program should be reminded of the childhood story of the emperor's new clothes."
  • "While those who support the program put forth various reasons for their support -- that ethanol will reduce greenhouse gases or curb our reliance on foreign oil -- in reality, it is merely a wealth transfer program from the general taxpayer to corn producers."
  • "If we admitted that, and just gave corn producers a check, we would be better off. We would avoid the misallocation of resources and the unintended consequences of the current program, such as higher food prices, that are a result of making the subsidy indirect rather than direct."
  • "The environmental reasons for using ethanol are at best controversial. Former Vice President Al Gore has recently said about the ethanol subsidy, 'It is not good to have these massive subsidies.' Producing ethanol from corn and distributing it emits more greenhouse gases than producing gasoline from crude oil and distributing it."
  • "If the use of corn ethanol were economically efficient, the ethanol industry would not need subsidies, taxes on the use of competitive fuels, and a government requirement that its product be used."[3]

• Malaysia's once-vaunted biofuel industry grinds to halt, 6 September 2010 by AFP: "Malaysia's once-vaunted biofuel industry has seen production grind to a halt since a March announcement that the government's mandatory switch to the green energy will be delayed to June 2011."
  • "Malaysian Biodiesel Association vice-president U.R. Unnithan said...Malaysian biofuel cannot compete in international markets as many countries have protectionist measures and subsidies in place."[4]

• New CBO Report Examines Biofuels Tax Incentives, 16 July 2010 by Mackinnon Lawrence: "CBO releases report this week assessing biofuel incentives. Study finds that biofuel subsidies, costs associated with reducing petroleum use and GHG emissions vary by fuel."
  • "First, after making adjustments for the different energy contents of the various biofuels and the petroleum fuel used to produce them, the report finds that producers of ethanol made from corn receive 73 cents to provide an amount of biofuel with the energy equivalent to that in one gallon of gasoline. On a similar basis, producers of cellulosic ethanol receive $1.62, and producers of biodiesel receive $1.08."
  • "Second, the report finds reducing petroleum use costs taxpayers anywhere from $1.78 – 3.00 per one gallon of gasoline, again, depending on the type of fuel."
  • "Third, the costs to taxpayers of reducing greenhouse gas emissions varies from $275 per metric ton of CO2e for cellulosic, $300 per metric ton for CO2e for biodiesel, and about $750 per metric ton of CO2e for ethanol . NOTE: the CBO estimates do not reflect any emissions associated with land use change (direct or indirect)."
  • "Domestic Fuel reports this week that the Renewable Fuels Association (RFA) asserts the report provides no comparison to other technologies or types of biofuels against the destruction that goes hand in hand with fossil fuel production."[5]
    • Read the full report here: Using Biofuel Tax Credits to Achieve Energy and Environmental Policy Goals (PDF)

• EDITORIAL: Stop 'Big Corn', 5 April 2010 by the Washington Times: "The Environmental Protection Agency wants to dump more corn into your fuel tank this summer, and it's going to cost more than you think."
  • "The agency is expected to approve a request from 52 ethanol producers known collectively as "Growth Energy" to boost existing requirements that gasoline contain 10 percent ethanol to 15 percent. The change means billions more in government subsidies for companies in the business of growing corn and converting it into ethanol. For the rest of us, it means significantly higher gasoline and food prices."
  • "It's time that this shameless corporate welfare gets plowed under....Big Corn's advocates claim that forcing Americans to use this renewable fuel would reduce dependency on Mideast oil and lead to cleaner air. It's just as likely, however, that they want to get their hands on the $16 billion a year from the 45-cent-per-gallon "blender's tax credit" - in addition to the various state and federal mandates giving us no choice but to pump their pricey product into our fuel tanks."
  • "According to the University of Missouri's Food and Agricultural Policy Research Institute, the ethanol tax credit increases corn prices by 18 cents a bushel, wheat by 15 cents and soybeans by 28 cents. That means higher prices for most food items at the grocery store and restaurants."[6]

• The Case Against Biofuels: Probing Ethanol’s Hidden Costs, 11 March 2010 opinion piece by C. Ford Runge in Yale environment360: "Despite strong evidence that growing food crops to produce ethanol is harmful to the environment and the world’s poor, the Obama administration is backing subsidies and programs that will ensure that half of the U.S.’s corn crop will soon go to biofuel production. It’s time to recognize that biofuels are anything but green."
  • President Obama "and his administration have wholeheartedly embraced corn ethanol and the tangle of government subsidies, price supports, and tariffs that underpin the entire dubious enterprise of using corn to power our cars. In early February, the president threw his weight behind new and existing initiatives to boost ethanol production from both food and nonfood sources, including supporting Congressional mandates that would triple biofuel production to 36 billion gallons by 2022."
  • "Yet a close look at their impact on food security and the environment — with profound effects on water, the eutrophication of our coastal zones from fertilizers, land use, and greenhouse gas emissions — suggests that the biofuel bandwagon is anything but green."[7]

• (U.K.'s largest power station) Drax suspends plan to replace coal with greener fuel, 19 February 2010 by Times Online: "Britain’s biggest power station has suspended its plan to replace coal with greener fuel, leaving the Government little chance of meeting its target for renewable energy."
  • "The power station, which is the country’s largest single source of CO2, has invested £80 million in a processing unit for wood, straw and other plant-based fuels, known as biomass."
  • "Drax is also one of dozens of companies delaying investments in new biomass power stations because of uncertainty over the Government’s policy on long-term subsidies. Hundreds of farmers growing biomass crops may now struggle to sell their produce."
  • "The Renewable Energy Association said that plans for more than 50 biomass projects, totalling £13 billion of investment, had been suspended because of uncertainty over policy."[8]

• Biofuels for the poor, 23 March 2009 opinion piece in The Jakarta Post: "After being criticized for being slow to develop the local biofuel industry, the Indonesian government has finally issued two important policies; first, a decree issued last year obliging industries and the transportation sector to use biofuels; and second, its recent decision to provide subsidies for sales of the fuel."[9]

• UK 'should end biofuel subsidies', 26 August 2008 by BBC News: The UK "government should stop funding biofuels and use the money to halt the destruction of rainforests and peatland instead, a think tank has said."
  • The RTFO [Renewable Transportation Fuel Obligation] is designed to cut up to three million tonnes of CO2 emissions each year, but Policy Exchange said investing in the protection of peatland or rainforests could result in a '50 times greater amount of avoided emission'".
  • Download the Policy Exchange report, The Root of the Matter: Carbon Sequestration in Forests and Peatlands (PDF file)

• Facing criticism, biofuels industry forms new lobby group to influence lawmakers, 25 July 2008 by mongabay.com: "Under attack by politicians, aid groups, and environmentalists for driving up food prices and fueling destruction of ecologically sensitive habitats, some of the world's largest agroindustrial firms have formed a lobby group to influence consumers and lawmakers to support continued subsidies for biofuel production in the United States".
  • "The group, known as the Alliance for Abundant Food and Energy, was created by Archer Daniels Midland Co, DuPont Co, Deere & Co, Monsanto Co and the Renewable Fuels Association".
  • "The group will promote genetically modified crops to improve crops yields as a solution to meeting global food needs. It does not aim to curtail biofuel production and will lobby Congress to keep subsidies for ethanol and biodiesel production in place".

• US and EU urged to cut biofuels, 7 July 2008, BBC World News: "World Bank President Robert Zoellick has called for reform of biofuel policies in rich countries, urging them to grow more food to feed the hungry."
  • "The US and Europe also need to take action to reduce mandates, subsidies and tariffs benefiting grain and oil seed biofuels that take food off the table for millions," he said.
• U.N. Chief to Prod Nations On Food Crisis, 2 June 2008 by the Washington Post: "U.N. Secretary General Ban Ki-moon will issue an urgent plea to world leaders at a food summit in Rome on Tuesday to immediately suspend trade restrictions, agricultural taxes and other price controls that have helped fuel the highest food prices in 30 years, according to U.N. officials....The United Nations will also urge the United States and other nations to consider phasing out subsidies for food-based biofuels -- such as ethanol".
  • The article notes that a "World Bank analyst estimated that biofuel production has accounted for 65 percent in the rise of world food prices, while the IMF has concluded that biofuel production is responsible for 'a significant part of the jump in commodity prices.'"[10]

• Europe, Cutting Biofuel Subsidies, Redirects Aid to Stress Greenest Options, 22 January 2008, The New York Times: "Governments in Europe and elsewhere have begun rolling back generous, across-the-board subsidies for biofuels, acknowledging that the environmental benefits of these fuels have often been overstated....But as they aim to be more selective, these governments are discovering how difficult it can be to figure out whether a particular fuel — much less a particular batch of corn ethanol or rapeseed biodiesel — has been produced in an environmentally friendly manner."
  • The article notes that "Several countries — including Australia, Britain, France, Germany, the Netherlands, Switzerland, as well as parts of Canada — have removed or are revising incentives for farmers, biofuel refiners and distributors."

Reports

• Biofuels — At What Cost? Government support for ethanol and biodiesel in selected OECD countries (PDF file) - September 2007, by the Global Subsidies Initiative. From the description:

"Government support for biofuels has soared in recent years as policy makers have sought ways to reduce reliance on fossil fuels, especially petroleum. However, up to now the full extent of this support has not been documented. Yet informed public debate over the cost-effectiveness and impacts of biofuel policies is impossible without such information."[11]

This report "is a synthesis of individual country reports which are being released over the course of 2006 and 2007."[12]

Events

• 14 September 2010, Washington, D.C., USA: Classifying Biofuel Subsidies: Farm Bill and WTO Considerations. (Themes: subsidies, trade, WTO)

	Economics	edit
Investment in biofuels | Subsidies | Trade

	Bioenergy issues	edit
Agriculture (Land use) | Climate change | Economics (Green economy/Green jobs) Environment | Social (Poverty) | Trade Controversies: Food versus fuel | Net energy | Carbon debt

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