Biofuel for thought

Published: July 8 2008 22:30

You can run a G8 conference on caviar, but not use it as biofuel for your car. One outcome of this week’s meeting of world leaders in Japan should be an end to subsidies for biofuels of uncertain environmental merit but definite harm to some of the world’s poorest people. Subsidising the use of crops as fuel is no substitute for putting a price on carbon emissions.
This week, Robert Zoellick, the president of the World Bank, called for more focus on growing food rather than biofuels. In Britain, a government agency proposed that the European Union should rein back its biofuel targets. Both are right and deserve a wider audience.

It was originally assumed that biofuels would be distilled from farm waste and residues, and fuel crops would be grown on marginal land. But growing fuel crops on land previously farmed for food and turning US corn into oil have both pushed up the cost of food. The world’s poorest people would always have suffered from increased food prices this year; the development of biofuels has added to their misery.
The process of growing biofuels instead of existing vegetation also means that their carbon abatement benefits are dubious. As well as replacing existing farmland, biofuels have contributed to deforestation in Africa, South America and Asia. Fuel crop production is reducing biodiversity and may even add to net carbon emissions.
Yet there should be no surprise about the problems caused by the biofuel schemes. The increase in biofuel production has been achieved through vast subsidies that make fuel production more attractive than producing food. These subsidies are an attempt to encourage one technology for carbon reduction rather than another. This has never worked before; the world will not reduce carbon emissions with dirigisme.
The only way to fight climate change effectively is to charge emitters of carbon and compensate carbon abaters. There should be no special tariffs and schemes for different technologies, and no polluters should be left out. This will create incentives for the private sector to find efficient solutions.
Piecemeal schemes to encourage biofuels, as with other special incentives to insulate houses or improve energy efficiency, are not the right way to fight climate change. Summiteers in Hokkaido, wrestling with this dilemma over their sushi, must not try to plan production and they must not try to pick technological winners. They must introduce a carbon price and then let the private sector do its business.
Copyright The Financial Times Limited 2008