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Biofuel Support Policies: An Economic Assessment


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Production and use of biofuels - alternative transport fuels made from agricultural commodities - are promoted and supported by governments in many OECD countries, as well as in a number of countries outside the OECD area. In 2006 this support came to around USD 11 billion – a figure that is estimated to grow to USD 25 billion per year by around 2015.

However, the high level of policy support contributes little to reduced greenhouse-gas emissions and other policy objectives, while it adds to a range of factors that raise international prices for food commodities.

This report concludes that there are alternatives to current support policies for biofuels that would more effectively allow governments to achieve their objectives. These alternatives include:

  • Additional initiatives to reduce energy demand and greenhouse-gas emissions and to improve energy efficiency;
  • Opening of markets to allow freer trade in efficient sources of biofuels, including from tropical countries;
  • Greater use of biomass for the generation of heat and power;
  • Further research on biofuels from more efficient feedstocks, such as cellulose and other biomass, to accelerate their commercialisation.


This report is jointly produced by the OECD and the IEA, drawing on information from a number of other organisations.


Table of contents




Executive Summary

- Introduction, Objectives and Scope


Chapter 1: Facts and Trends

- Market Developments
- Policy Developments
- Trends in Science and Innovation
- Biofuel Performance with Respect to Environmental and Other Criteria


Chapter 2: Quantitative Analysis of Biofuel Policies and Developments

- Model Based Analysis of Policy Effects on Agricultural Markets, Land Use, and Related Environmental Implications
- The Impact of Biofuel Support Policies
- The Potential Impact of "Next Generation Biofuels" Replacing Commodity-Based Biofuels
- The Impact of Alternative Crude Oil Prices
- Environmental Effects of Agricultural Land Allocation betweeen Bioenergy Crops and Food Feed Crops Using SAPIM


Chapter 3: Costs and Benefits of Biofuel Support Policies

- The Objective of GHG Mitigation - Impacts and Cost Effectiveness
- The Objective of Energy Savings - Impacts and Cost Effectiveness
- The Objective of Rural Development - Impacts and Cost Effectiveness
- Combined Assessment of Biofuel Support Policies in View of Underlying Objectives
- The Risk of Food Inflation - Implications for Food Prices and Food Security
- The Risk of Environmental Degradation - Impacts of Intensification and Land Use Changes


Chapter 4: Summary, Conclusions and Policy Recommendations

Annex A. Specification of Biofuel Markets in the Aglink Model
Annex B. Environmental Effects Covered in the SAPIM Application
Annex C. Economic and Enviornental Outcomes under Alternative Scenarios in the SAPIM Application


How to access this publication




You can access Biofuel Support Policies: An Economic Assessment as follows:

  • Subscribers and readers at subscribing institutions can read and download the online edition at the OECD iLibrary
  • Non-subscribers can buy the PDF e-book and/or paper copy via our Online Bookshop.
  • Government officials with accounts (subscribe) can go to the Books tab on OLIS.
  • Journalists with accreditation can access this book at our Access by password for accredited journalists


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