MILWAUKEE – US biofuel policies will fail to achieve the intended environmental, energy and agricultural goals, warns an article in the journal Applied Economics Perspectives and Policy (AEPP).
"A key feature of biofuels policy is the combination of mandate and subsidies that cause severe adverse effects," said Harry de Gorter, co-author of the article and Professor in the Department of Applied Economics and Management at Cornell University. "The analysis of biofuel policies is shown to be unique compared to all other environmental policy analysis and has implications for biofuels policy worldwide and also for renewable electricity policy. Throughout the world, countries use complicated combinations of mandates and subsidy programs to promote biofuels and the renewable electricity sector." Because these combinations are so complicated, they can often have unintended consequences.
Authors de Gorter and David Just, Associate Professor in the Department of Applied Economics and Management at Cornell University, argue that regulations that mandate an increase in the amount of biofuels incorporated into current energy supplies are superior to all other policies, yet as soon as policies are combined, there can be negative economic interactions. For example, adding a biofuel subsidy with a consumption mandate fails to increase ethanol consumption but instead subsidizes oil consumption. A more effective policy would rely on specific taxes and subsidies targeted directly at achieving specific environmental, energy and agricultural policy goals, according to the study.
Notes to Editors
Contact: Kristin Agard, Executive Director, Kristin@aaea.org
The full text of this article, "The Social Costs and Benefits of Biofuels: The Intersection of Environmental, Energy, and Agricultural Policy" will be available at www.aepp.oxfordjournals.org from Monday, February 15. The article will be published in Volume 32, Issue 1 of AEPP and is available here: http://aepp.oxfordjournals.org/content/32/1/4.full.
A companion podcast has also been produced featuring an interview with de Gorter available here: http://www.oxfordjournals.org/our_journals/aepp/podcast_episodes.html.
For additional background on this topic, see Harry de Gorter and David R. Just 2009. "Why Sustainability Standards for Biofuel Production Make Little Economic Sense." Cato Institute Policy Analysis No. 647, Washington D.C. http://www.cato.org/pubs/pas/pa647.pdf
Applied Economics Perspectives and Policy is a journal of the Agricultural & Applied Economics Association and aims to present high-quality research to a broad audience of agricultural and applied economists, policy-makers and consumers. AEPP is published by Oxford Journals (www.oxfordjournals.org).
The Agricultural & Applied Economics Association is the nation's largest professional association of agricultural and applied economists. AAEA strives to enhance the skills, knowledge and professional contribution of economists who help society solve problems related to agriculture, food, resources and economic development. Members work in various capacities including universities, private industry and government agencies. For more information, please visit www.aaea.org.