Economic study questions cost-effectiveness of current biofuels and their ability to cut fossil fuel use; gas tax and energy efficiency improvements found more effective
A new study by economists at Oregon State University questions the cost-effectiveness of current biofuels and says they would barely reduce fossil fuel use and would likely increase greenhouse gas emissions. The researchers focused on the major mandated and currently used biofuels worldwide: corn ethanol, soybean biodiesel, cellulosic ethanol from switchgrass grown in the United States, canola biodiesel produced in Europe, and sugarcane ethanol produced in Brazil and exported to the US or Europe.
|US costs and scope for reducing fossil fuel use and GHG emissions with alternative interventions. Jaeger and Egelkraut. Click to enlarge.
They evaluated the biofuels in terms of their contribution to reducing fossil fuel use and greenhouse gas emissions. They also compared their costs and effectiveness to two alternative policies: an increase in the gas tax and the implementation of energy efficiency improvements.
Their results indicated that all of the biofuel crops were much less cost-effective than the two alternative policies in terms of reducing greenhouse gas emissions and fossil fuel use.
Our results suggest that existing biofuel policies have been very costly, produce negligible reductions in fossil fuel use and increase, rather than decrease, greenhouse gas emissions. Each dollar spent on energy improvement programs would be 20 times more effective in reducing fossil fuel use and greenhouse gas emissions than a similar cost for the corn ethanol program. Likewise, a gas tax increase would be 21 times more effective than promoting cellulosic ethanol.—Bill Jaeger, lead author
Overall, it was estimated that US-produced biofuels would cost between 20 and 31 times more than energy efficiency improvements that would reduce gas consumption by 1%. The study also reported that combining a gas tax increase with energy efficiency improvements could reduce US fossil fuel use by more than 15% (or cut petroleum fuel use by more than 35%).
Next, the researchers looked at how much it would cost to achieve governmental targets for biofuel use and what the impact would be on fossil fuel use. In the US, the Renewable Fuel Standard calls for 15 billion gallons of conventional biofuel sources such as corn ethanol; 1 billion gallons of biomass-based diesel; 16 billion gallons of advanced cellulosic biofuels; and 4 billion gallons of other advanced biofuels to be used in transportation fuel by 2022. US corn ethanol production has already reached 13 billion gallons, Jaeger said, but cellulosic ethanol is not yet widely produced in the US.
The researchers concluded that all of these biofuel mandates combined would reduce fossil fuel use by less than 2.5%, or the same amount that a gas tax increase of 25 cents per gallon could achieve, but at an estimated cost of $67 billion compared with a cost of $6 billion with a gas tax.
To directly compare the cost-effectiveness of the biofuels with the two alternative approaches, part of the researchers’ analysis evaluated the biofuels in combination with forest carbon sequestration practices so that they would produce the same mix of reductions in fossil fuel use and greenhouse gas emissions as a gas tax increase.
The study did not take into account the effect that increased production of biofuels might have on water use, pollution and food prices, all of which raise additional concerns about the merits of promoting biofuels, according to Jaeger.
Jaeger, William K. and Egelkraut, Thorsten M. (2011) Biofuel Economics in a Setting of Multiple Objectives & Unintended Consequences