Introduction

Scarcely a day goes by without fresh media stories on some aspect of the biofuels industry. Indeed, whether reporting on business, the environment, trade or development, many journalists will likely have covered a story over the last year that touches on the growth in alternatives to petroleum-derived gasoline and diesel: respectively, bio-ethanol and biodiesel.

The tremendous growth of biofuels has been fueled in large part by government subsidies. Governmental authorities often portray those subsidies as a means to promote cleaner burning fuels and strengthen energy security. Yet the use of biofuels as a viable alternative to fossil fuels is coming up against a range of natural constraints. Although 27% of the U.S. corn crop is expected to be turned into ethanol fuels this year(1), biofuels currently account for only 2.6% of gasoline consumption on an energy equivalent basis(2). Even if up to half of the US's domestic corn supplies will, as expected, be used to produce ethanol in the next few years, biofuels’ potential to cover US transport fuel needs will remain marginal.

Meanwhile, the competition for agricultural land to cultivate corn for food is growing increasingly fierce, leading to sharp rises in the cost of corn-based foodstuffs and other additives. In the face of such facts, a growing chorus of voices warn that government subsidies could lock the world into a dependency on biofuels that is neither environmentally or economically sustainable.

For this month’s Subsidy E-newsletter, Doug Koplow, founder of Earth Track, an organisation dedicated to measuring and analysing energy subsidies, looks at the role that subsidies have played in the growth of biofuels, and a host of concerns that have emerged as a result.