Hundreds of millions of taxpayer dollars have been misspent supporting the Canadian biofuel industry, according to a new report by a policy think-tank.
The International Institute for Sustainable Development estimates provincial and federal governments provided between $860 million and $1 billion in support to the industry between 2006 and 2008, money that could have been better spent elsewhere to accomplish the same goals.
“Subsidies to Canadian biofuels remain an expensive way to conserve fossil fuels or reduce greenhouse gas emissions,” stated the policy research institute in its 105-page report.
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The Canadian Renewable Fuels Association can’t quibble with the numbers but takes issue with the findings of the report and its failure to provide meaningful comparison to fossil fuel subsidies.
“This is not disinterested policy work but a report from an organization with a clearly established bias against renewable fuels,” said CRFA president Gordon Quaiattini.
“In fact, the report provides no solutions or recommendations to what other competing technology is more viable in the transportation sector.”
In its report, the institute determined that corn ethanol requires subsidies of 50 to 70 cents per litre to replace a litre of fossil fuel. Wheat ethanol is slightly more costly at 55 to 75 cents per litre. When cellulose ethanol arrives, the estimated cost would be 24 to 33 cents per litre of fossil fuel displaced.
“For corn and wheat based ethanol, Canadian governments could achieve between six and 100 times more reductions in carbon emissions by simply purchasing carbon offsets in the market rather than by subsidizing ethanol production,” stated the report.
The multiple is larger than that for canola biodiesel.
Quaiattini said buying carbon offsets is not a viable policy solution to resolving greenhouse gas emissions. It doesn’t encourage investment in communities, create employment or provide alternative markets for farmers’ crops.
He said the institute is ignoring data from the International Energy Agency that shows grain ethanol’s contribution to reducing greenhouse gas emissions is steadily improving and could reach 55 percent by 2015.
The group said it has analyzed the model used by the IEA and the Canadian government and has concluded it is flawed. It fails to consider a full range of environmental impacts. In 2008, Canada’s federal environmental commissioner said Ottawa has repeatedly based claims of environmental effectiveness on flawed or lax analysis.
One area where Canada does get high marks is on how it has targeted and limited its biofuel subsidies. It has shifted from using unlimited excise tax reductions to production credits that have caps and will be phased out over time.
“These features result in subsidies that are better targeted than schemes in many other countries and have the potential to wean the industry off ongoing support,” stated the report.
Quaiattini said once the industry matures, it will be contributing an estimated $600 million annually to the Canadian economy.
“That more than pays for itself,” he said.
Quaiattini didn’t say when that will happen but he acknowledged that investment in the sector has been happening at a slower pace than originally envisioned due to the global economic crisis.
