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Biofuel Support Policies: An Economic Assessment

image of Biofuel Support Policies: An Economic Assessment

Governments in many OECD countries, as well as in a number of countries outside the OECD area, actively promote the production and use of alternative transport fuels made from agricultural commodities. This report, jointly produced by the OECD and the IEA and drawing on information from a number of other organisations, analyses the implications of this support from various perspectives. The report shows that 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. It concludes that there are alternatives to current support policies for biofuels that would more effectively allow governments to achieve their objectives.

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Quantitative Analysis of Biofuel Policies and Developments

To analyse the implications of support policies for biofuel supply and demand, as well as for agricultural commodity markets and land use, the OECD medium-term simulation model for world agricultural markets Aglink has been employed, complemented by the FAO-developed Cosimo model to cover a large set of developing countries. Aglink-Cosimo is a partial equilibrium model of domestic and international markets for major temperate-zone agricultural commodities, with detailed mapping of policies affecting these markets. In preparation of this analysis, the combined model has been extended to include the markets for sugar and other sweeteners. Furthermore, a specific module representing biofuel markets in major producing and consuming regions has been developed. At the same time, the FAO has developed biofuel modules for 13 developing countries.

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