Biofuels a high-cost means to reach renewable transport fuel targets in Germany and the UK

Under the EU's Renewable Energy Directive, 10 per cent of transport fuels used in the EU must come from renewable sources by 2020. Member states are placing large bets on biofuels to meet that target.

The role that biofuels should play in Europe's transport policy is being hotly debated. The benefits potentially include greater greenhouse gas (GHG) reductions, localized production and greater energy security. However, biofuels have also been criticized for generating GHG emissions from the clearing of forests, loss of biodiversity and increased food prices that ripple through international markets.

Two reports, by GSI and FiFo, examine the economic costs of meeting the EU's renewable transport fuel targets by using biofuels.

The reports find that U.K. consumers will likely pay between £1 and £2 billion per year (approx. €1.6 to €3.2 billion) in higher transport fuel prices by 2020. In Germany, consumers are expected to pay €1.4 to €2.2 billion per year.

Meeting the renewable transport fuel target also entails significant cost to government coffers. The U.K. and German governments, together with the EU, provide a range of subsidies to encourage biofuel production, including excise tax duties, grants and support to infrastructure and payments to farmers.

The research finds that a growing portion of agricultural subsidies are going to farmers who produce biofuel stock under the EU's Single Payment Scheme (SPS). While SPS payments to farmers in the U.K. for growing biofuel stock are relatively low, they are growing rapidly and have more than doubled in the two-year period ended April 14, 2011 from April 15, 2009. SPS payments to German farmers growing biofuel stock amounted to €372.25 million in 2009.

Despite these costs to taxpayers and consumers, 90 per cent of transport fuel will still come from oil. "Even if the targets are met, the impact is fairly small in terms of the overall picture," said Peter Wooders, senior economist at IISD and a co-author of the U.K. report.

"We encourage governments to explore alternatives and assess these against biofuels," Wooders said.

Please see the reports: Biofuels – At What Cost? Mandating ethanol and biodiesel consumption in the United Kingdom and Biofuels – At What Cost? Mandating ethanol and biodiesel consumption in Germany. -end-

For more information, please contact Peter Wooders at pwooders@iisd.org or Damon Vis-Dunbar, IISD's GSI communications coordinator, at +41 22 917-8848 or dvis-dunbar@iisd.org.