Monday, January 14, 2008

No Magic Bullet

. Monday, January 14, 2008

Complex issues, it seems, often lack simple solutions. Consider the EU's determination to mandate the use of biofuel in place of fossil fuel. It turns out that this effort won't necessarily reduce greenhouse gas emissions and may in fact have negative environmental and social consequences.

"In March last year, EU leaders agreed that 10 percent of transport fuels should come from biofuels by 2020, a goal the commission is now turning into concrete legislation. But even before making the legislation public, several expert reports have highlighted the possible negative consequences of the target. Last Friday, a group of 17 NGOs - including Oxfam and Friends of the Earth - sent a letter to EU energy commissioner Andris Piebalgs, asking him to introduce much tougher standards for biofuel production or give up mandatory transport biofuel targets altogether.

They argued that the existing draft legislation does not provide protection for important ecosystems, such as savannas or permanent grasslands "that may be threatened by expanding agriculture to meet the EU's biofuel target." "Destruction of these carbon sinks would lead to large emissions of carbon into the atmosphere, thereby reducing or neutralising the benefits from growing biofuels. Neither does the draft text provide any safeguards to protect water and soil resources," they said in a statement.

They also noted that "large scale biofuel production can cause negative indirect or knock-on impacts such as increasing food and feed prices and increasing water scarcity which would lead to negative impacts on the world's poor."

The limited positive impact and potential negative externalities are in turn accentuated by this: Consequently, at crude oil prices of about USD 60 per barrel, public support [SUBSIDIES] is required in the order of USD 0.15-0.55 per most OECD countries to make biofuel production based on agricultural crops profitable. With crude oil prices having recently reached levels around USD 90 per barrel, net gasoline and diesel prices have increased to above USD 0.70 per litre, but as crop prices have increased sharply at the same time, the basic economics of biofuel production have not changed significantly.

And this: "It is estimated that the costs per ton of CO2 that is saved through the production and use of biofuels are in the order of USD 500 (about EUR 350), and even higher in many cases. This compares to prices for emission rights in the European Emission Trading Scheme (ETS) peaking at around EUR 30 per ton in March 2006, and currently hovering around EUR 24 per ton for 2008 futures.

To summarize, biofuels have a limited impact on GHG emissions, create negative environmental consequences, require substantial public subsidies to be profitable, and are 10 times more costly than an available alternative, Emission Trading Schemes. And yet, the EU wants to mandate their use. Why?


No Magic Bullet
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