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An Examination of U.S. and EU Government Support to Biofuels: Early Lessons
By Charlotte Hebebrand and Kara Laney*
EXECUTIVE SUMMARY
U.S. and EU policies that shelter domestic agriculture risk limiting efforts to expedite cost-effective and sustainable uses of biofuels.
Although energy demand is increasing most rapidly in emerging economies, the United States and the European Union remain by far the largest energy consumers. The transport sectors in these economies rely on oil, but this comes with the price of high greenhouse gas emissions. Biofuels, produced from agricultural feedstocks, have come to the forefront of the energy agenda on both sides of the Atlantic as a means of decreasing reliance on oil. However, because biofuels are more expensive than fossil fuels, their utilization in the United States and the EU depends upon government incentives. While these policies should promote biofuels that have an economic and environmental comparative advantage, the political reality is that domestic agricultural interests want policies that support the use of domestic feedstocks, regardless of energy efficiency or environmental sustainability. The objective of promoting domestic production, therefore, may undermine efforts to rapidly develop the most efficient, sustainable energy resources.
The absence of internationally agreed and scientifically valid biofuels standards will further increase the disproportionate focus on domestic production. Moreover, a lack of clarity about whether and, if so, how international trade obligations apply to the biofuels sector could strengthen this tendency. An overemphasis on domestic production by the United States and the EU risks trumping their policy objectives to improve energy efficiency, increase energy security, and reduce environmental degradation. Additionally, given the size of their economies, the ramifications of insular policies could have significant ripple effects worldwide, particularly for food and feed
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