Study: Biofuels 14x to 31x More Costly than Raising the Gas Tax

Could the cost-efficacy and net benefit of biofuels be worse than we thought?

A study released by Oregon State University (OSU) economists late last year indicates that the biofuels currently mandated and under production in Europe and the United States ¨barely reduce fossil fuel use and. . .likely increase greenhouse gas emissions.¨ They´re also 14 to 31 times more costly than taking other measures to reduce greenhouse gas emissions.

Bad news for biofuels or faulty analysis?

Well, let´s make sure we know what we´re talking about: the term ´biofuels´doesn´t actually mean anything to most people except that is has something to do with corn ethanol. But it´s pretty well established that corn ethanol is an overall net polluter and because it´s made from an edible crop is probably worse than using gasoline. While corn ethanol has been the largest player in this debate (the 30-year subsidy for corn ethanol just expired), we’ve always been hopeful for next-generation or so-called ´advanced biofuels´ like cellulosic ethanol made from switchgrass.

OSU´s study examined both first-generation biofuel crops like corn ethanol and soybean biodiesel produced in the US, rapeseed biodiesel produced in Europe, sugar-cane ethanol produced in Brazil for export, as well as ´second-generation´cellulosic ethanol produced from switchgrass in the United States. Bill Jaeger, lead author of the study and professor of agricultural and resource economics at OSU, came to some pretty depressing conclusions:

“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.”

Why so bad? Some of it´s obvious and has been covered before: using petroleum-based fertilizer to grow corn, which is sprayed with petroleum-based pesticides and then shipped using fossil-fuel based transport (before and after it´s turned into ethanol), doesn´t make a lot of sense. This is also a problem with sugarcane ethanol exported from Brazil and soybean biodiesel produced in the US. Add to this standard issues like displacement of agriculture onto previously unused land, which contributes to carbon dioxide emissions when the land is cleared, and things start to get messy.

None of this comes as any big surprise, except that the study seems to suggest that even non-food based direct substitutes like switchgrass-based cellulosic ethanol are a bad idea. But I’m going to go out on a limb here to suggest that´s not really what the study is telling us, just that using switchgrass-based ethanol to decrease greenhouse gas emissions will be more expensive than other options. At this point, I haven´t seen enough of the actual data to be convinced that switchgrass based ethanol is a net GHG polluter.

Jaeger´s anaylsis looked at several alternatives to decrease fossil-fuel use and greehouse gas emissions including raising taxes on gasoline, implementing carbon sequestration techniques like ´forest carbon sequestration´(planting trees), as well as low-cost energy efficiency improvements to buildings. All of them, (sort of) obviously, are cheaper alternatives to producing the biofuels listed above.

Reducing consumption has always been weapon number one when combating resource use, but it´s only part of a three-pronged approach: 1) Reduce consumption, 2) Increase efficiency, 3) Develop direct substitutes. What Jaeger really focused on was the relative cost of GHG emission reductions, and it makes sense that reduction and efficiency are going to prove more cost-effective.

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