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An Examination of U.S. and EU Government Support to Biofuels: Early Lessons

An Examination of U.S. and EU Government Support to Biofuels: Early Lessons. Charlotte Hebebrand and Kara Laney International Food & Agricultural Trade Policy Council. US and EU Government Support. Drivers Policies Implications Recommendations.

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An Examination of U.S. and EU Government Support to Biofuels: Early Lessons

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  1. An Examination of U.S. and EU Government Support to Biofuels: Early Lessons Charlotte Hebebrand and Kara Laney International Food & Agricultural Trade Policy Council

  2. US and EU Government Support • Drivers • Policies • Implications • Recommendations IPC would like to thank the United Nations Foundation for its support of this work.

  3. Drivers • Integrate easily into transportation infrastructure • Energy security • Environmental sustainability • New market for agricultural commodities

  4. Policies – US Mandates Renewable Fuels Standard • 4 billion gallons – 2006 • 7.5 billion gallons – 2012 (likely to meet this in 2009) • 36 billion gallons by 2022?

  5. Policies – EU Mandates • 2003 Biofuels Directive: 2% by 2005; 5.75% by 2010 • European Council March 2007: endorse goal of 10% by 2020

  6. Estimated Required Crops and Cropland Needed to Produce Biofuels Source: IEA.

  7. Tax Incentives and Tariffs: US • US Volumetric Ethanol Excise Tax Credit: $.51 per gallon • Biodiesel tax credit: $1.00 per gallon (virgin oils and fats); $.50 from recovered oils and fats • US ethanol tariff: $.54 per gallon

  8. Tax Incentives and Tariffs: EU • No uniform EU tax incentive • Germany – applied to all biofuels • France – coupled with quota for domestic biofuels • Tariff on ethanol E19.2 per hectoliter

  9. Implications - Price % change 2005 to mid-May 2007: Maize – 68% Wheat – 27% Sugar – 6% Palm Oil – 43% Soybean oil – 29% Rapeseed oil – 19%

  10. Price and Trade Impacts Vary • Food Security Concerns for net importing LDCs and net importers within developing countries • Producers and exporters welcome higher commodity prices • Opportunities to fill export gap • Limited export possibilities for biofuels and feedstocks

  11. Recommendations • Clarify intent behind support • If objective is energy security and desire to reduce GHG emissions, set policies accordingly • Useful to clarify WTO rules -tariffs: Ag or NAMA? Environmental Goods? -subsidies: like products? Ag or NAMA? Amber or Green Box?

  12. Recommendations IV. Establish internationally agreed standards - feedstock neutral technical standards - Focus on priorities for sustainability criteria - Don’t overlook economic sustainability

  13. Thank You! www.agritrade.org http://www.agritrade.org/Publications/EU_US_Biofuels.html

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