U.S. Biofuel Subsidies Estimated at $92 Billion During 2006-2012

The Global Subsidies Initiative has updated its 2006 study of government support for ethanol and biodiesel in the United States. It is estimated that “under existing policies, the biofuels industry will, in aggregate, benefit from support worth over $92 billion within the 2006-2012 time frame.”

Energy provisions in the FY 2007 Farm Bill would add billions more, as would enactment of either President Bush’s 20 in 10 program (mandating 35 billion gallons of biofuel in the nation’s motor fuel supply by 2017) or the Senate energy bill’s mandate of 36 billion gallons by 2022.

23rd October 2007, Washington D.C. The biofuels industry is witnessing unprecedented growth in the United States, driving agricultural commodities prices to record levels and sparking a host of environmental and economic concerns.

This expansion is far from imputable wholly to market forces; rather, federal, state and municipal jurisdictions have been instrumental in driving up both the production and consumption of biofuels through sizeable subsidies and other incentives.

A new report by the Global Subsidies Initiative (GSI) and Earth Track, “Biofuels – At What Cost? Government Support for Ethanol and Biodiesel in the United States – 2007 Update”, revises an earlier report issued October 2006 and details the extent of current government support to biofuels in the United States.

The report also analyzes the potential impact of forthcoming legislation, namely the Energy and Farm Bills, which are poised to expand government support even further.

Under existing policies, the biofuels industry will, in aggregate, benefit from support worth over $ 92 billion within the 2006-2012 time frame.

The Global Subsidies Initiative is concerned that many of the policies currently in place are ineffective in achieving greater energy security and lower greenhouse gas emissions, the objectives which have officially been used to justify increasing subsidy levels. 

In light of the report’s findings, the GSI recommends that U.S. federal and state governments:

• desist from increasing mandatory consumption levels for biofuels and instead adopt a neutral policy position favoring all options to reduce reliance on petroleum in the transport sector;
• take into account the environmental effects of biofuels production and distribution cycles in the design of policies that affect biofuels;
• establish a transparent evaluation process to assess the cost-effectiveness of support policies at all levels of government in attaining the declared objectives behind U.S. biofuels policy.

The 2007 U.S. Update forms part of a series of reports by the GSI revealing the scale and shape of government support in the United States, the European Union, and other selected OECD countries.

Copies can be downloaded from the GSI’s website at www.globalsubsidies.org.