11/07/2013 - 03:59

Vested interests impede biofuels progress

I would like to devote my final Roundtable essay to examining the reasons that biofuels are not being adopted as widely as they deserve to be.

In the transportation sector, biofuels are the only renewable alternative to fossil fuels that will be widely available in the short term. They can make a significant contribution to mitigation of climate change. They can reduce rural poverty by establishing new markets for agricultural products, and can help developing countries advance both economically and technologically. They can also moderate fossil fuel prices by providing competition.

Despite all these advantages, biofuels have not yet reached their market potential. Political constraints are the major reason for this, and much political opposition is motivated by a desire on the part of market incumbents—those who profit from petroleum—to protect their economic positions.

It is easy to see why biofuels elicit strong opposition from those with a stake in fossil fuels. Transportation fuels are an enormous market, and still a growing one, but the lion's share of today's transportation fuel comes in just two forms—gasoline and diesel. These are produced from just one feedstock—petroleum. And because cars and trucks circulate frequently among countries, fuels must be produced according to universal specifications. So transportation fuels are essentially a fungible commodity, with little to distinguish them from the customer's perspective. For those who profit from petroleum, the possibility that biofuels might begin to displace fossil fuels must seem a pressing danger. Transportation fuel would become like electricity—a commodity that, derived from many sources and distributed across countries and regions, allows for free competition.

A transition from fossil fuels to biofuels would produce many winners, and some losers too. The losers would include not just corporations and individuals but nations as well. As in many such situations, the winners—no matter how numerous—are likely to be quiet. The losers may be few but will be extremely vocal.

The wrong direction. The European Commission recently proposed setting a new cap on the share of renewable transportation fuels that can be accounted for by food-based biofuels (as opposed to cellulose-based fuels). This proposal's fate in the European Parliament is uncertain, but political uncertainty does little to encourage investment in biofuels or allow societies to take advantage of biofuels' benefits. Meanwhile, a recent report by the Food and Agriculture Organization of the United Nations dedicated significant attention to sweet sorghum as a feedstock for biofuels; others tout feedstocks such as jatropha and algae. Promoting these raw materials, though, only perpetuates the dominance of liquid fossil fuels because it diverts attention from the feedstocks—such as sugarcane and palm oil—that truly have the potential to compete.

Unfortunately, interest in biofuels seems to be declining. Today, only the United States and Brazil are making really significant efforts in biofuels for transportation (though more modest efforts are under way in a number of other countries).

Biofuels represent an excellent opportunity to manage global warming and reduce poverty at the same time. They are easy to produce and distribute. They are ready for use right now. But political interests prevent biofuels from gaining the market penetration they deserve—even though immediate ways to reduce greenhouse-gas emissions are urgently needed. Making matters worse, much attention that should be paid to biofuels is going instead to shale gas, another fossil fuel that serves the interests of potential "losers." One can only hope that discussion of these issues will open people's minds to the merits of biofuels.