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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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Summary, Conclusions and Policy Recommendations

Production and use of biofuels – mainly ethanol based on cereals and sugar crops, and biodiesel based on vegetable oils such as rapeseed or canola oil – have grown rapidly over the past few years and are expected to further double in the decade to come. The United States and Brazil remain the largest ethanol producers while biodiesel production is particularly relevant in the European Union, but a large number of other countries have begun or are considering promoting biofuel production and use.

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