From oil addicts to alcohol addicts: U.S. distorts the global biofuels market

Important news: the Environmental Law Institute in Washington warns against biofuels produced in the US, and fully supports the arguments brought forth by the Biopact. It seems like our message (see A Biofuels Manifesto) is being taken up by more and more organisations.

In its report entitled, Should the Clean Air Act Be Used to Turn Petroleum Addicts Into Alcoholics? [*.pdf], lead author Professor Arnold W. Reitze makes an important contribution to the hotly contested debate over the disadvantages of biofuels produced in the Northern hemisphere.

It says that subsidies under the US Clean Air Act have made ethanol production immensely profitable in the US even though it is more costly and performs worse than gasoline. Moreover, it says subsidisation in the US has "distorted the market for renewable fuels".

Biofuels produced in the US (so-called "lobby fuels") are based on feedstocks such as corn (for ethanol) or soya (for biodiesel). The resulting fuels have a very weak energy balance (some have found them to have a negative balance, which means you put more energy into making the fuel, than you get out of it). They are also very expensive to produce and do not contribute in any significant way to the reduction of greenhouse gases.

In contrast, biofuels produced in the global South, based on high yielding feedstocks such as sugarcane, cassava or sorghum, have a very positive energy balance. They can be produced at a cost competitive with petroleum fuels and their use contributes significantly to the reduction in greenhouse gases. Biofuels made in the US must be heavily subsidized in order to survive. Tax payers in the US literally pay billions for uncompetitive fuels, while farmers in the South are kept outside of the market and in poverty because of US subsidies.

Earlier the Global Subsidies Initiative made a sum of all the tax breaks, direct subsidies and other benefits American "lobby fuels" receive, and the results are staggering (earlier post). Prof. Reitze confirms the numbers and, in his paragraph on the US ethanol lobby, he concludes:

"These provisions represent a successful lobbying effort because the renewable fuels program is primarily designed to put money in the pockets of corn-based ethanol producers at high cost to consumers. To obtain this money, the ethanol lobby relies on political pressure and its contributions to lawmakers. To justify the program, various reasons have been advanced by ethanol’s proponents, and when they are discredited new arguments are found to convince the public to support corporate subsidies."

This distorted situation is untenable and totally irresponsible. As Claude Mandil, Chief of the International Energy Agency recently said (earlier post), the only way out is for the North to give up making biofuels themselves, and start importing them from the South, where their production makes sense from an environmental and economic perspective. Moreover, millions of poor farmers in the South can benefit from growing energy crops.

Reitze says that import barriers against countries with economically favourable conditions for producing ethanol, such as Brazil and other tropical countries, should be lowered. This would help to reduce agricultural surpluses adversely effecting the developing world, whilst also contributing to US energy security by diversifying supply:
ethanol :: biodiesel :: biomass :: bioenergy :: biofuels :: energy :: sustainability :: subsidies :: trade :: tariffs :: lobbies :: economic justice :: developing world :: US ::

From a political perspective, Reitze argues that the US ethanol programme has provided the illusion that the government is responding to increased petroleum prices.

But he says that, since ethanol production requires about as much fossil-fuel energy as is found in ethanol, its use does not reduce the nation’s demand for fossil fuels. “Until the technology is available to produce a significant net energy gain from using renewable fuels, their use will not be a viable way to deal with climate change.”

The only justification the author sees for the program was “the need to generate political contributions or to placate Midwest members of Congress seeking welfare for their constituents.”

Reitze concludes that “a renewable fuels program should be an important part of a national energy policy, but it must be sustainable, and it should not be based on long-term government subsidies.”