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The production of first-generation agro-fuels does not only have questionable environmental and social effects but it is also a very expensive way of trying to deal with the climate change effects of transport.

European public support for first-generation biofuels is not a cost-effective way to reduce greenhouse gas emissions, according to a new report by the Global Subsidies Initiative presented in the European Parliament on 3 October.

EU countries spent at least 3.7 billion euros on subsidies for biofuels in 2006 but this figure might be seriously underestimated, says the report, as transparent information on these subsidies is very hard to obtain. The authors of the report question the rationale behind these subsidies:

The cost of obtaining a unit of CO2-equivalent reduction through biofuel subsidies, for example, is estimated to be € 575 to € 800 for ethanol made from sugarbeet, around € 215 for biodiesel made from used cooking oil, and over € 600 for biodiesel made from rapeseed. Governments could achieve far more reductions for the same amount of public funds by simply purchasing the reductions in the marketplace. For the price of one tonne of CO2 reduction through EU biofuel subsidies, more than 20 tonnes of CO2-equivalent offsets could be purchased on the European Climate Exchange“. 

Here are the report’s key recommendations to EU and national policy makers:

  • avoid instituting new consumption mandates for biofuels;
  • eliminate all tariffs on imported fuel ethanol;
  • resist providing new specific subsidies to the industry, and move to re-instate fuel-excise taxes on biofuels where this has not already been done;
  • improve the information available on government support provided to the biofuels industry, as well as
    enhance transparency on the effects of such support on production, capacity and trade in biofuels;
  • put in place an evaluation process that can thoroughly assess the cost-effectiveness of each Member State’s support policies in attaining all three of the objectives underlying the EU biofuels policy.”
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