Ethanol and Biofuel Subsidies

Monday, Mar 21, 2011

Additional biofuel production may have resulted in at least 192,000 excess deaths and 6.7 million additional lost DALYs in 2010. These exceed WHO’s estimated annual toll of 141,000 deaths and 5.4 million lost DALYs attributable to global warming. Thus, policies intended to mitigate global warming may actually have increased death and disease in developing countries.

Could Biofuel Policies Increase Death and Disease in Developing Countries?, Indur M. Goklany, Ph.D., Journal of American Physicians and Surgeons Volume 16 Number 1 Spring 2011, http://www.jpands.org/vol16no1/goklany.pdf.

The FAO Cereal Price Index averaged 254 points in February, up 3.7 percent from January and the highest since July 2008. The increase in February mostly reflected further gains in international maize prices, driven by strong demand amid tightening supplies, while prices rose marginally in the case of wheat and fell slightly in the case of rice.

Food and Agriculture Organization of the United Nations, March 3, 2011, http://www.fao.org/worldfoodsituation/wfs-home/foodpricesindex/en/.

The United States spends about $6 billion a year on federal support for ethanol production through tax credits, tariffs, and other programs. Thanks to this financial assistance, one-sixth of the world’s corn supply is burned in American cars. That is enough corn to feed 350 million people for an entire year... As a result of official policy in the US and Europe, including aggressive production targets, biofuel consumed more than 6.5% of global grain output and 8% of the world’s vegetable oil in 2010, up from 2% of grain supplies and virtually no vegetable oil in 2004.

Biofuels were initially championed by environmental campaigners as a silver bullet against global warming. They started to change their minds as a stream of research showed that biofuels from most food crops did not significantly reduce greenhouse gas emissions – and in many cases, caused forests to be destroyed to grow more food, creating more net carbon-dioxide emissions than fossil fuels.

Today, it is difficult to find a single environmentalist who still backs the policy. Even former US Vice President and Nobel laureate Al Gore – who once boasted of casting the deciding vote for ethanol support – calls the policy “a mistake.” ... It is refreshing that Gore has now changed his view in line with the evidence. But there is a wider lesson. A chorus of voices from the left and right argue against continued government support for biofuel. The problem, as Gore has put it, is that “it’s hard once such a program is put in place to deal with the lobbies that keep it going.”

Government support for biofuel is only one example of a knee-jerk “green” policy that creates lucrative opportunities for a self-interested group of businesses but does very little to help the planet. Consider the financial support afforded early-generation renewable-energy companies. Germany led the world in putting up solar panels, funded by $75 billion in subsidies. The result? Inefficient, uncompetitive solar technology sitting on rooftops in a fairly cloudy country, delivering a trivial 0.1% of Germany’s total energy supply, and postponing the effects of global warming by seven hours in 2100.

At least one group is already sold: presidential contenders. In Iowa last month, possible Republican candidate Newt Gingrich derided “big-city attacks” on ethanol subsidies. And, in what must be music to the industry’s ears, an Obama administration official declared that even amidst the highest food prices the world has seen, there is “no reason to take the foot off the gas” on biofuel.

A Race to Hunger, Bjørn Lomborg, March 10, 2011, http://www.project-syndicate.org/commentary/lomborg70/English.