Biofuel Support Policies: An Economic Assessment

Governments in many OECD countries, as well as in a number of countries outside the OECD area, actively promote the production and use of alternative transport fuels made from agricultural commodities.   Canada, the EU, and the USA have supported their biofuel sectors through a large range of policy measures, to the tune of some USD 11 billion in 2006 – a figure that is estimated to grow to USD 25 billion per year by around 2015. In addition, new legislation has recently been enacted in the US and is proposed for the EU.

This report, jointly produced by the OECD and the IEA and drawing on information from a number of other organisations, analyses the implications of this support from various perspectives. The report shows that the high level of policy support contributes little to reduced greenhouse-gas emissions and other policy objectives, while it adds to a range of factors that raise international prices for food commodities.

The report concludes that there are alternatives to current support policies for biofuels that would more effectively allow governments to achieve their objectives. These alternatives include: additional initiatives to reduce energy demand and greenhouse-gas emissions and to improve energy efficiency; the opening of markets to allow freer trade in efficient sources of biofuels, including from tropical countries; greater use of biomass for the generation of heat and power; and further research on biofuels from more efficient feedstocks, such as cellulose and other biomass, to accelerate their commercialisation.

Executive Summary

- Introduction, Objectives and Scope

Chapter 1: Facts and Trends

- Market Developments
- Policy Developments
- Trends in Science and Innovation
- Biofuel Performance with Respect to Environmental and Other Criteria

Chapter 2: Quantitative Analysis of Biofuel Policies and Developments

- Model Based Analysis of Policy Effects on Agricultural Markets, Land Use, and Related Environmental Implications
- The Impact of Biofuel Support Policies
- The Potential Impact of "Next Generation Biofuels" Replacing Commodity-Based Biofuels
- The Impact of Alternative Crude Oil Prices
- Environmental Effects of Agricultural Land Allocation betweeen Bioenergy Crops and Food Feed Crops Using SAPIM

Chapter 3: Costs and Benefits of Biofuel Support Policies

- The Objective of GHG Mitigation - Impacts and Cost Effectiveness
- The Objective of Energy Savings - Impacts and Cost Effectiveness
- The Objective of Rural Development - Impacts and Cost Effectiveness
- Combined Assessment of Biofuel Support Policies in View of Underlying Objectives
- The Risk of Food Inflation - Implications for Food Prices and Food Security
- The Risk of Environmental Degradation - Impacts of Intensification and Land Use Changes

Chapter 4: Summary, Conclusions and Policy Recommendations

Annex A. Specification of Biofuel Markets in the Aglink Model
Annex B. Environmental Effects Covered in the SAPIM Application
Annex C. Economic and Enviornental Outcomes under Alternative Scenarios in the SAPIM Application

You can access Biofuel Support Policies: An Economic Assessment by choosing from the following options:

• Subscribers and readers at subscribing institutions can access the online edition via SourceOECD, our Online Library.
• Non-subscribers can purchase the PDF e-book and/or paper copy via our Online Bookshop.
• Government officials with accounts (subscribe) can go to the "Book tab on OLIS.
• Access by password for accredited journalists