Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.

Neolibs against Biofuels - Lazy Quote Diary

by nanne Wed Oct 31st, 2007 at 09:33:54 AM EST

I disagree with much of public choice theory, almost as much as metatone. Government is much more than a mere collection of rent-seekers. But I think that public choice theory sometimes provides a valuable heuristic for single cases, as there clearly are many single policies and political processes in which rent-seeking by various parties outside and inside government comes to dominate 'public' decision making.

The current biofuels madness may be such a case.

At any rate, some of neoliberalism's advocates are using public choice theory to come out against it.

A first case is Martin Wolf's piece in the Financial Times yesterday (via Willy De Backer's 3E Intelligence):

Energy security and climate change are two of the most significant challenges confronting humanity. What we see, in response, is the familiar capture of policymaking 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.

Link to the report, via Martin Wolf's piece.

A second example could recently be found on the Becker-Posner blog, where Richard Posner writes:

An important factor in recent food price increases is the ethanol subsidies. Ethanol is a "clean fuel" in the sense that unlike gasoline its burning as a fuel does not produce the conventional pollutants, including carbon monoxide. It does produce carbon dioxide, the principal culprit in global warming, but this effect is said to be offset by the fact that the corn from which ethanol is manufactured absorbs carbon dioxide, as trees do. However, the manufacture of ethanol requires a great deal of energy (more energy, some critics believe, than the ethanol itself produces), and in China for example that energy is supplied mainly by coal-burning plants, a fertile generator of carbon dioxide. Moreover, deforestation by fire, common in the Third World, is increasing in order to provide more cropland for the production of ethanol, and deforestation by fire is a major source of atmospheric carbon dioxide.
We could as I said increase the percentage of our total fuel consumption that is supplied by ethanol by buying ethanol from abroad, and while that would make us dependent on other countries for an important part of our fuel supply, it would not be dependence on other oil-producing countries. That would be a benefit. Because of the instability of many of those countries (such as Iraq and Nigeria), and the hostility to the United States of some of them (such as Iran and Venezuela), there would be value in achieving energy independence, or at least a good deal more independence than we have today. But we cannot achieve it through the ethanol subsidy. We can achieve it (at least insofar as ethanol can contribution to the solution) only by relaxing the tariff on imported ethanol. But this sensible measure seems blocked by one of the absurdities of our political system--the Iowa caucuses, which extract pledges from all plausible presidential candidates to preserve and indeed expand our home-grown ethanol industry--and, more broadly, by the excessive influence of our tiny farm population on U.S. policy. As a result of these factors, ethanol subsidies are bipartisan.

More interesting analysis in the original

I think that Posner has a partially self-contradicting analysis in that he first recognises that biofuels contribute to global warming partially because forest is cleared to grow them and uses this as an argument against biofuels, but then argues for tariffs on Brazilian ethanol to be cut to improve energy independence. But maybe he cares more for diversifying fuel supplies than cutting greenhouse gas emissions. That's an aside...

A question you can always ask in this context: Why are these special interests better at pushing their policy through than other, competing special interests?
by nanne (zwaerdenmaecker@gmail.com) on Wed Oct 31st, 2007 at 09:37:21 AM EST
I am guessing, but special interests are well-established, very fluid and well-connected, as in overlapping boards and trade associations.  Industrial farming is wide and deep into many other industries, while energy companies have been trying to diversify and playing the ´green´ card for many years.

Ag, ag, agrofuels.

Our knowledge has surpassed our wisdom. -Charu Saxena.

by metavision on Thu Nov 1st, 2007 at 04:33:13 PM EST
[ Parent ]
The current biofuels madness may be such a case.

And another one is the complete farrago of emissions trading, carbon credits etc etc.

A market solution based on the energy content of carbon in fuel might well work: a market solution based on carbon emissions has no chance, but is a nice little earner for the usual rent-seeking suspects - ie the intermediaries - and preferable to the alternative......

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Oct 31st, 2007 at 12:29:21 PM EST

Go to: [ European Tribune Homepage : Top of page : Top of comments ]

Top Diaries