Rocking the Biofuels Boat with a Publicity Stunt

By Robert Vierhout | May 15, 2013

After being accused of driving up food prices, grabbing land in Africa, nongovernmental organizations (NGOs) are now claiming that biofuels are costing society too much money.

A group of green NGOs recently hired the services of the International Institute for Sustainable Development to trigger a debate on the economics of EU biofuels. It is not the first time that IISD published such a report. IISD has been hitting at biofuels for several years. The process is strongly influenced by people close to the Organization for Economic Cooperation and Development and funded by those who don't like us. Last year a similar report was issued then financed by food company Nestle. Now it is the NGOs. Is this coincidence? Is there some sort of unholy alliance here?

The latest report, “Biofuels―At What Cost?,” claims that in 2011 EU governments provided around 10 billion euros ($13 billion) to the biofuels industry.  A relatively high number compared to the 2012 IEA World Energy Outlook, which said that in 2011 total global biofuels subsidies were $24 billion, or less than 10 percent of global oil subsidies. Whether the 10 billion euro figure is correct is neither here nor there as long as there is a high figure, easy to remember. It is all about easy publicity.

Those taking the trouble to study the report can only conclude that the number is the creation of researchers and reviewers with an imaginative mindset but no practical knowledge of the subject matter. The report has severe methodological errors, often contradicting IISD's own methodology and/or previous research, next to the array of material factual errors.

Maybe it's a predictable result knowing that the report was peer reviewed by those with the same ideological biases and no academic qualifications in industrial and agricultural sciences. The authors expressly prevented review by industry experts with appropriate academic credentials, on the pretext that industry reviewers would have leaked the report to the press. So much for an honest peer-review process.

The major flaw with the IISD report is that it is almost entirely about excise tax exemptions, a subsidy paid to fuel suppliers. With the introduction of the renewable energy directive, known as RED, member states now overwhelmingly use mandates to achieve their binding renewable transport energy obligations. Interestingly enough, those mandates did not result in higher fuel prices at filling stations.

So, if EU member states decide to pay fuel suppliers to buy biofuels through excise tax exemptions (such exemptions being a policy tool appropriate for the voluntary biofuels blending policies of the past and simply redundant in the face of a binding mandate) then it's fuel suppliers who are skinning governments and consumers.  That’s why only a minority of member states have such excise tax exemptions today and why those exemptions are quickly disappearing, facts conveniently omitted from IISD’s report. Indeed, if all excise tax exemptions disappeared tomorrow, the EU biofuels industry would see its market stay the same as it is today.

But do tax exemptions result in the high costs as pictured by this report? It doesn't seem to be in line with a very recent study carried out by Price Waterhouse Coopers (PwC) that looked into the socio-economic impact of the fuel ethanol sector in France. The study found that jobs were created directly and indirectly and that in 2010 the value added to the French economy was 815 million euros. In addition, the French government made a net profit of 305 million euros thanks to additional tax income as a direct and indirect result of 158 million euros of tax exemption to the oil industry for using biofuels. 

The PwC study is in sharp contrast to the IISD study. Even though the PwC study is limited to ethanol and France, the numbers are so distinct from what IISD is claiming that I consider the latter a cheap publicity stunt, carefully planned and timed to rock the biofuel boat once more.

Author: Robert Vierhout
Secretary-general, ePURE
Vierhout@epure.org