Asking the wrong question - biofuels

I don't want to do a full scale critique of biofuels - not least because that would be to enter an already crowded field [see Biofuelwatch and Global Subsidies Initiative, for example]. But it's worth looking at how narrowly-focussed, bottom-up policy-making now means we have somehow put the most financial support into the worst ideas...

Instead of asking how to reduce transport emissions from road fuel substitution, we should be asking how to make use of land to tackle climate change in the most effective way possible. In coming up with the biofuels targets, policy-makers have asked, and answered, the wrong question. It's not hard to see why... transport policy-makers have to find transport policies. The results: waste, damage and lost opportunities to do better...

There are two main problems with biofuels:
(1) they are a very expensive way of saving carbon, compared to the alternatives (at least 10x the going rate in the EU ETS)- see chart and click to view in detail;
(2) there are substantial negative 'sustainability' impacts, arising from changes in land use for biofuel production - for example deforestation, water impacts or land shortages. Beyond rhetoric, we appear almost indifferent to these.

Despite these weaknesses, we now have extremely powerful and expensive policy instruments devoted to promoting biofuels. These are ambitious targets set at EU level (EurActiv and appendix below) and the Renewable Transport Fuel Obligation introduced in the UK to meet the EU targets (DfT RTFO pages).

Expensive emissions reductions. I've drawn the chart above from data from the government's UK Biomass Strategy [Working Paper 1 - Economic analysis of biomass technologies, Table 30 /spreadsheet /XLS]. It shows that the RTFO is focussed at the most expensive end of the range of biomass options. In fact, these are at the expensive end of all carbon abatement technologies - perhaps 10 times the going rate in the EU Emission Trading Scheme. But the RTFO is supposed to save 3.6 million tonnes of CO2 (1 MtC - see Energy White Paper 7.31) by displacing 5% of petrol and diesel sales... that's about 2.5 billion litres of fuel.

Huge subsidies. Normally with these obligations, you would expect the consumer to pay any premium cost associated with meeting the obligation as the supplier just passes higher costs through. The subsidy system that underpins the RTFO will cost about 30p/litre in 2010-11... of which 20p is carried by the taxpayer (does the polluter pay? Er... no) through a discount of fuel duty and the rest will be passed on to consumers (see Transport FAQ]. 30p subsidy on 2.5 billion litres is a lot: £750 million per year - £500m from the taxpayer. No wonder the farmers like it.

Ludicrous carbon costs. The implied carbon price in the RTFO is over £200/tonne CO2 (higher than the figure in the chart above). That same £750m/year spent through the EU ETS at a future price of £20/tonne CO2 would realise savings of about 10 times as great as the RTFO. Also, as the chart shows, you would also get much better value for money from almost any other biomass investment. So our biggest instrument is pointing in the wrong direction - and it is extremely inefficient and wasteful.

How has this happened? Why, you might well ask, is the government acting so irrationally? Forcing very large sums into inefficient policy instruments for little environmental gain. I think this illustrates an important failing of climate policy. Obviously this has its origins in the EU (in which the UK is an accessory to poor decisions taken by the Council), where the biofuel targets have been set at arbitrarily high levels. I suspect the idea of biofuels targets have come from policy-makers asking the question: “how do we reduce the emissions from transport?”. They conclude that fuel substitution is one of the best options they have then designed a mechanism to make that work - but by indiscriminately subsidising a change of land-use in Europe and beyond. Perhaps they feel an implicit sectoral burden sharing regime at work... that transport must somehow take its "fair share" of the reductions compared to power station, chemical plant and homes. Of course, the climate is indifferent to burden sharing... it doesn't care where the reductions come from. Reading the Energy White Paper [Transport section], you can feel the implicit burden sharing in the text:

For transport to reduce its climate change impacts we need to enable smarter, more energy efficient use of transport and we need to reduce carbon emissions by bringing about changes in the types of vehicles and fuels we use.

The biomass strategy goes further [UK Biomass Strategy p7]- it recognises that transport biofuels sit at the expensive end of a hierarchy of biomass options, but then concludes it would be simplistic to think about it like that...

... despite their higher cost of carbon, transport biofuels are essential to carbon savings in the transport sector for which there are few other options in the short to medium term.

But this is the simplistic thinking... we should get the emissions reductions where lowest cost and least damaging overall. The issue is that no-one has the policy brief to optimise these resources: but there is plenty of muscular transport policy-making going on - trying to do the wrong thing well, and establishing a meaningless policy priority.

Land grab. The effect of this is that transport-related climate policy lays claim to a big expanse of agricultural land, in Europe and beyond, to grow the necessary crops supported by huge subsidies passed through to grateful/greedy farmers. This brings about land-use changes and the various forms of collateral damage that flow from that. But this is completely the wrong way to determine this sort of policy: the real question should be how do you get the best climate change result from the land use policy? Because the current policy starts from the silo of meaningless transport priorities, it ends up doing the wrong thing with land. Start from land-use and you may do much better for the climate overall, even if that means lower emissions reductions from transport. But what is the aim...? It's the climate!

Using land in a way that reduces carbon dioxide emissions more cost effectively would either reduce the land-take and agricultural impacts for a given result, or it would allow for a greater beneficial impact on the climate for the same land take. Not only is it an important economic objective to to get the economics of climate change right, it is important for the environment.

Grow forests instead...? An excellent articulation of this idea appeared in August in the journal ‘Science’ [article][bootleg PDF] discussing alternative uses for land and challenging biofuels subsidies. They argue that using land for forestry can be far more effective than growing biofuels in carbon terms over 30 years.

It points out: “As land is the limiting resource, the appropriate basis for comparison is a function of land area (Mg C ha^-1 year^-1)” and concludes that growing or protecting forests on the same land would give a much better climate change result over 30 years:

In all cases, forestation of an equivalent area of land would sequester two to nine times more carbon over a 30-year period than the emissions avoided by the use of the biofuel. Taking this opportunity cost into account, the emissions cost of liquid biofuels exceeds that of fossil fuels.

But could they get cheaper if we invest now...? the stand-by excuse of technology-promoting scoundrels everywhere is that we need big subsidies now to prepare for the brave new dawn tomorrow. I agree you need an innovation system - but it's not obvious that you get to cheap second-generation biofuels via lavish subsidies for a very large uptake of expensive dead-end first generation biofuels. For now, the best transport responses are fuel efficiency and changes in driver behaviour. Longer term it's about mobility demand and the physical layout of our lives.

Conclusion
It is probably better to grow or regrow forests and ensure that they aren't cut down than rush into biofuels. It is better to use land for almost any other biomass technology than biofuels. More generally, we should see land as one of the resources available to address climate change and build the optimum approach from land-use policy, not let imaginary imperatives in transport policy cause arbitrary and inefficient land grabs. We do not have an adequate system for asking the right questions about biomass, biofuels and land-related carbon policy - and that needs to change.

Appendix ... Related posts...
Escaping the reckless RU renewables targets - Aug 2007
Renewable energy targets - why is the EU involved? - Feb 2007

Related graphic...