The High Costs of Biofuels

Although biofuels continue to have strong political support, they may not be a smart way to address global warming or wean countries off of oil. A new report from the Organisation for Economic Co-operation and Development (OECD), a respected international group with 30 member countries, including the United States, warns that increased use of biofuels will cause high food prices, won’t do much to offset petroleum consumption, and is an extremely expensive way to reduce carbon-dioxide emissions.

The idea that as farmers grow more crops destined to become fuel, rather than food, food prices will increase, isn’t new. The report adds that biofuels aren’t worth the cost. For various reasons, biofuels will only account for 13 percent of liquid fuels by 2050, doing little to offset petroleum consumption. What’s more, there are cheaper ways to reduce carbon-dioxide emissions. To achieve one ton of carbon-dioxide reductions costs more than $500 in subsidies in the Unites States. In contrast, a businessperson wishing to offset carbon emissions from airline flights can do so for less than $15 a ton. (Such offsets use efficiency measures, reforestation, and various renewable sources of energy to reduce carbon emissions.)

What, then, should be done about carbon-dioxide emissions from vehicles? Private offset programs will probably only take us so far. More-efficient gasoline and diesel cars, as well as electric vehicles and plug-in hybrids, can help. (See “Electric Vehicles 2.0.”) Biofuels can still play a role, but government investment should focus on research on second-generation biofuels (for example, ethanol from grass and agricultural waste), since these could have a far greater impact on carbon emissions than, say, the ethanol from corn grain produced today. Ultimately, instead of mandating the use of biofuels–or any particular technology, for that matter–the government should instead put a price on carbon-dioxide emissions, and let the market sort out the best strategy.