Global Subsidies Initiative Criticizes U.S. Biofuels Subsidies

New report brings to question the U.S. government's biofuel subsidy policies.

Published on: Oct 27, 2006

The Global Subsidies Initiative of the International Institute for Sustainable Development released a report Thursday bringing to question the amount of subsidy the U.S. government uses to support biofuels.

The report, called "Biofuels: At What Cost?" is the first of six country studies that will be released by the GSI in the coming months, cataloguing hundreds of government programs throughout various stages of ethanol and biodiesel production and consumption.

The report makes its verdict clear: GSI believes the U.S. system of government subsidies for biofuels is flawed.

"Many of these subsidies are poorly coordinated and targeted," says Simon Upton, director of the GSI. "All indications are that subsidies are being piled on top of one another without policy makers having a clear idea of their potential impact on the environment and the economy. Yet the potential for waste on a grand scale and some spectacularly perverse environmental outcomes is large."

The report estimates that biofuels receive between $5.5 billion and $7.3 billion in subsidies annually. GSI predicts the figures will rise significantly under current policy as biofuel output continues to grow.

Government subsidies to biofuels in the U.S. are widely promoted as a way to simultaneously address concerns related to the environment, energy security, and rural development.

Nevertheless, the report sees biofuels as a solution with too much cost and not enough benefit. According to the report, it costs about $500 in federal and state subsidies to reduce one metric ton of CO2-equivalent through the production and use of corn-based ethanol.

GSI wants to make sure that the widespread support for biofuels does not overshadow other energy alternatives. In the meantime, "we suggest that the U.S. Congress and the States declare a moratorium on programs that would increase or extend subsidies to liquid biofuels, with a view to developing a plan for phasing out subsidies to all transport fuels as quickly as possible," says Upton.