Rural employment will benefit but taxation needed to generate subsidies will cause job losses elsewhere.
• Economic benefits and costs:
Even with the most favorable combination of assumptions the economic costs of biofuels far exceed their benefits.
The World Bank (2008b), in joining the debate, called for a return to a level playing field for biofuels given that the dependence on subsidies distorts market behavior and hides real costs. However, the US Department of Energy (2008b) disagreed that ethanol pollutes more than gasoline and that rainforests will be destroyed for biofuels. Moreover, the US Agricultural Secretary denied that ethanol is having a major impact on food prices and downplayed calls to make changes to biofuel programs (Reuters, 2008). Thus the US looks set to maintain its policy of tariff protection and heavy subsidies for biofuels unless the administration of President Obama has a different view.
Europe has maintained its overall policy of increasing the contribution of renewable energy. However, the European Parliament (2008) made some major modifications to targets that acknowledged the social costs and GHG uncertainties of renewables. Ten percent of road transport fuels must come from renewable sources by 2020, but 40 percent of this must come from more sustainable sources, including second generation biofuels, than from traditional biofuels. In 2015 the target is 5 percent of road transport fuel from renewable sources and 1 percent from sources that do not compete with food production. In addition, transport biofuels must save at least 45 percent of greenhouse gases compared with fossil fuels; from 2015 the saving must be 60 percent.
Many countries had already had second thoughts on the benefits of their biofuels programs. Australia, Britain, France, Germany, the Netherlands and Switzerland, as well as Quebec, had removed or are revising incentives for farmers, biofuel refiners and distributors (New York Times, 2008).
Given the perverse incentives associated with the subsidization of biofuels that are produced mainly by annual crops, our examination now turns to the scale of the contribution that forests could and should make to the generation of transport fuels, presently and in the future.
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