The strange case of Mad Dogs and BioFuel Subsidies - absolutely bizarre!

I moaned about the wrongfully applied subsidies on oilseeds and biofuels making foodgrains expensive for the poor across the world.

Further to that, see this oped from Martin Wolf, absolutely brilliant, read and weep!

Energy security and climate change are two of the most significant challenges
confronting humanity. What we see, in response, is the familiar capture of policy making by well-organised special interests. A superb example is the flood of subsidies for biofuels. These are farm programmes masquerading as answers to energy insecurity and climate change. Not surprisingly, they have the depressing characteristics of such programmes:high protection, open-ended support to producers, and indifference to economic rationality.

Already the support in members of the Organisation for Economic Co-operation
and Development costs about $13bn to $15bn a year. But this sum generates much less than 3 per cent of the overall supply of liquid transport fuel. To bring the biofuel share to 30 per cent, as some propose,would cost at least $150bn a year and probably more, as marginal costs rose.Someone needed to take a close look at the rationality of all these supports. An excellent report from the Global Subsidies Initiative of the International Institute for Sustainable Development does just that*. It does not tell a pretty story.

Policy is extraordinarily complex. It can also be highly irrational. Brazil is, for
example, the most efficient supplier of bioethanol, but confronts tariffs of at least 25 per cent in the US and 50 per cent in the European Union. A smaller example is the advantage given to production of“flexible-fuel vehicles” in US corporate average fuel-efficiency standards.Because the fuel-economy credit is biggest for the least energy-efficient models, manufacturers concentrate on sport utility vehicles and light trucks. Yet almost all the drivers of these vehicles use ordinary petrol.The result is greater consumption of petrol, not less.The cost of support per litre of ethanol varies between $0.29 and $0.36 per litre in the US and $1 in the EU (see chart). Support for biodiesel varies between $0.2 per litre in Canada and $1 in
Switzerland.

But the cost of petrol, in terms of equivalent energy units, is $0.34 and of diesel is$0.41. Thus, the subsidy to biofuels is often greater than the cost of the
fossil fuel equivalent. Not surprisingly, the production costs of subsidised biofuels are also generally much higher (see charts).Does this costly shift to biofuels at least deliver reductions in net emissions of greenhouse gases? Not by as much as one might suppose, is the answer. The net greenhouse gas emissions of expensive European rapeseed oil-based diesel are a mere 13 per cent less than those of conventional diesel. Similarly, net emissions from US corn-based ethanol are only 18 percent less than conventional petrol.

All this to be taken with a grain of piquant salt!!!