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Boersema, J.J.

Martin, A.

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Journal of Integrative Environmental Sciences
Publication details, including instructions for authors and subscription information:
http://www.informaworld.com/smpp/title~content=t713682447
Biofuels and perverse subsidies: fuelling the wrong solutions?
Jan Boersema; Andrew Blowers; Adrian Martin
To cite this Article Boersema, Jan , Blowers, Andrew and Martin, Adrian(2007) 'Biofuels and perverse subsidies: fuelling
the wrong solutions?', Journal of Integrative Environmental Sciences, 4: 4, 195 — 198
To link to this Article: DOI: 10.1080/15693430701783457
URL: http://dx.doi.org/10.1080/15693430701783457
Full terms and conditions of use: http://www.informaworld.com/terms-and-conditions-of-access.pdf
This article may be used for research, teaching and private study purposes. Any substantial or
systematic reproduction, re-distribution, re-selling, loan or sub-licensing, systematic supply or
distribution in any form to anyone is expressly forbidden.
The publisher does not give any warranty express or implied or make any representation that the contents
will be complete or accurate or up to date. The accuracy of any instructions, formulae and drug doses
should be independently verified with primary sources. The publisher shall not be liable for any loss,
actions, claims, proceedings, demand or costs or damages whatsoever or howsoever caused arising directly
or indirectly in connection with or arising out of the use of this material.
EDITORIAL
Biofuels and perverse subsidies: fuelling the wrong
solutions?
JAN BOERSEMA, ANDREW BLOWERS & ADRIAN MARTIN
Subsidies are an important feature of our economic landscape. Although there is no
universally accepted definition of a subsidy, the one probably most widely used is that of the
OECD (2005): ‘A subsidy is a result of a government action that confers an advantage on
consumers or producers, in order to supplement their income or lower their costs’. All over
the world it is common policy to subsidize to lower the cost of commodities or stimulate
developments or breakthroughs that otherwise would not take off. From a purely economic
viewpoint, all subsidies are potentially distortive, but in some cases they may be given for
sound economic reasons, e.g. to create a level playing field or to compensate for unwanted
external effects. If they result in unfair competition and a disadvantage for competitors they
may be called distortive.
It is well known from a great number of studies that subsidies can have harmful effects on the
environment (Whitfield 2006). The OECD (1998) speaks of subsidies that ‘(unintentionally)
discriminate against sound environmental practices’. By using the term ‘environmentally
damaging subsidies’ one is leaving aside the question of whether or not these subsidies really do
result in benign effects on the economy. Less widely recognised are ‘perverse subsidies’ defined
as subsidies having adverse effects on both the economy and the environment in the long run
(Myers 1998, p. xiii; Myers and Kent 2001). They encourage development in industrial and
other sectors, and in particular locations, that is counterproductive to economic and
environmental concerns. They may also encourage development and growth in activities that
rather should be reduced and/or regulated.
This editorial stresses the importance of being more critical of this kind of subsidy,
especially in the energy sector and the emerging new field of biofuels. Biofuels have been
championed as an energy source that can reduce vehicle emissions and provide a new income
stream for farmers. Both claims have been contested in recent publications, but they remain
key arguments for supporting the development of crops for biofuels. Apart from the contested
economic arguments, there are concerns about the environmental damage that biofuel
production can cause. Do we have a clear case of perverse subsidies here?
Substantial amount of money
Perverse subsidies exist all over the world and it is estimated that they cost taxpayers billions.
According to MacNeill et al. (1991, p. 34), they cost North American, European and
Environmental Sciences
December 2007; 4(4): 195 – 198
ISSN 1569-3430 print/ISSN 1744-4225 online  2007 Taylor & Francis
DOI: 10.1080/15693430701783457
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Japanese consumers and taxpayers more than $250 billion dollars per year for agricultural
subsidies alone. At the end of the 90s, Myers estimated the total subsidies in five sectors –
agriculture, fossil fuels/nuclear energy, road transportation, water and fisheries – to be around
$1 trillion worldwide. He concluded that such a sizeable amount of subsidies could exert
a significantly distorting impact on the global economy. Ten years later, in its recently
published report, the Institute for European Environmental Policy claims that perverse
subsidies of environmentally damaging industries is costing Europe billions of euros: 29
billion for the energy sector, 7.3 for household fuels and a staggering 240 billion for road
transport (IEEP 2007). Although the figures vary, we may safely assume Myers was right and
is still right in his judgment on the distortive impact on the economy.
The environmental damage of perverse subsidies is not to be underestimated, but is far
more difficult to assess due to the less direct nature of the impacts. It may be questioned if it is
always necessary to know the full details of damage before calling for reforms. It may be
assessed in a comparative way. If we, for instance, consider the energy sector, the relevant
question is not how much harm is done to the environment by the subsidy, but whether the
energy source it supports causes more or less harm than an alternative energy source (OECD
2005).
Most subsidies have laudable aims when they are instigated. They aim, for example to
ensure food and energy security, to reduce pollution or protect disadvantaged social groups.
Decreasing price competitiveness, protection of domestic employment and jobs are
increasingly seen as less justifiable aims. In many cases, the original rationale no longer
fully applies and the continued use of subsidies acts in a way that locks in old technologies
while locking-out new and better ones. A telling example is the ongoing subsidies for the
German hard coal mining industry. With a declining production and workplace numbers, the
2.7 billion Euros of subsidy spent in 2005 (75,000 Euro per coal job) is still higher per Kwh
than the cost of electricity from wind turbines. In 2007, while the world market price averaged
about 60 Euros, the extraction costs for a tonne of German coal was about 190 Euros. After
years of debate, a court decision in 1994 and a ‘coal compromise’ in 1997, it was agreed in
January 2007 to phase out production by 2018. It is hard to get rid of perverse subsidies, even
in modern democracies.
Biofuels
The drive for green energy all over the world is in danger of creating the same perverse effects.
While the use of biofuels are supposed to reduce CO2 emissions, the benefits may vary
significantly, depending on the resource used and the process applied. The clear and present
danger is that we are fuelling the wrong solutions; wrong because of the poor overall
performance of many biofuels in environmental terms. According to a recent paper, it may be
asked if the most common ways of producing biofuels offer a cure that is worse than the
disease they seek to heal (OECD 2007). According to the US Department of Energy and the
US Environmental Protection Agency, the statistics are as follows. For corn ethanol, the most
widely produced biofuel in the USA, 4.9 billion gallons in 2006, the energy balance (input of
fossil fuel energy used compared with the energy in the output) is 1:1.3, leading to an overall
reduction in greenhouse gasses of 22%. To get the energy equivalent of a gallon of gasoline
costs 25% more (retail prices 2007). These figures are far from impressive. Cane ethanol is
more profitable in terms of price and productivity. It yields twice as much as corn and can be
produced 20% cheaper than gasoline. Brazil is the world leader: in 2005 it produced
approximately 4 billion gallons. Compared to corn ethanol the energy balance is far better,
1:8, and the reduction in greenhouse gas emissions is about 56%. Another way of producing
196 J. Boersema et al.
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biofuels is by chemically altering plant oils into biodiesel. It takes less energy than distilling
corn into alcohol, but the yields are low and the costs high. The energy balance is 1:2.5 and
the greenhouse gas emissions can be reduced by 68%. Germany is the world’s leading
producer with 0.5 billion gallons in 2005. It comes from rapeseed, canola, and soybeans.
Whatever the way of producing biofuels is or was, it has never happened without being
subsidised in one way or another. The federal government in the USA started supporting
ethanol use in the late 1970s through a reduction in the excise tax for gasohol (a fuel
composed of 90% gasoline and 10% ethanol). From that time on, according to an article in
Foreign Affairs, the push for ethanol and other biofuels has spawned a worldwide industry
that depends on billions of dollars of taxpayer subsidies (Runge et al. 2007, p. 41). Recently,
the USA congress gave the ethanol industry another boost, extending the tax credits and
tariffs while requiring that 7.5 billion gallons of the nation’s fuel come from ethanol or
biodiesel by 2012. President George W. Bush went even further, calling on the country to
produce 35 billion gallons of renewable fuel by the year 2017, nearly five times the level
currently mandated. In the EU, financial support to biofuels production and use includes a
fuel duty, enhanced capital allowances (an extra tax incentive to companies for investing in
biofuel processing plants) and a ‘bio-credit’ (IEEP 2007, p. 125). The leading OECD
countries producing ethanol apply import tariffs that add at least 25% to the cost of imports.
As a result, current trade is only about 10% of the world’s biofuel consumption. From an
economic viewpoint, this is an inefficient outcome, as biofuels produced in tropical regions
from sugercane and vegetable oils have a considerable cost advantage over those derived from
agricultural crops in temperate zones.
Social impacts
Looking at the environmental impact, the record of biofuels is not as good as its promoters
would have us believe. In some cases, it is not good at all. For instance, the Indonesian
government is planning the conversion of some 20 million hectares to oil palm plantations,
largely to serve the European biofuel market. This is likely to destroy most of the remaining
peatlands and rainforests and lead to the emission of as much as 50 billion tonnes of carbon
(IEEP 2007, p. 130). But there is more at stake. One of the most obvious drawbacks is that
every biofuel also consumes crops/land that could feed hungry people. The Foreign Affairs
article asks with appropriate rhetoric: ‘will it starve the poor?’ (Runge et al. 2007). This is
especially true in the case of corn, but it holds for almost all biofuels currently available.
Alcohol from sugarcane may be a relatively clean fuel, but the process of making it is very
dirty, especially the burning of cane. Labour conditions are harsh, and they equal the situation
of coal miners in China. The exploitation of cane workers is said to be a shame to every
civilised nation.
Solutions
There are no easy solutions to the problems created by environmentally damaging or perverse
(energy) subsidies. This is even more the case with of subsidies that create some benefit to the
environment but at unacceptable social costs or for subsidies that could yield far more benefit
economically, environmentally and socially if spent elsewhere. It requires taking measures on
several levels. For the EU, the authors of the IEEP report give sensible and detailed
recommendations. Others like Koplow (2007) and Myers (1998) have done their part for
countries like the USA and Brasil. They are all pointing in the same direction. The worst
thing to do is to throw away the baby with the bath water. Subsidies make sense if they meet
Editorial 197
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conditions already mentioned. Subsidies could and should be part of a carefully drafted and
widely discussed energy policy plan. They should be given to promising technologies only
after thorough assessment. But how do we evaluate? The big issue for interdisciplinary science
is to develop methods to make such an assessment feasible and sensible at the same time.
Phasing out quickly the most harmful subsidies is required in any case. Taking energy
conservation seriously is still the best advice to be given to oil-addicted countries. It is by far
the cheapest way to go for developed countries, certainly in the long run. For countries with
an expanding economy like China and India, applying the best technology and technology
transfer is probably the best way to mitigate their emissions. As to biofuels, probably the best
thing to do is to take food out of the picture. Far better to turn to the (further) development of
a cellulose based production of ethanol. The raw material might come from perennial prairie
grasses or from by-products that are normally dumped, burned or ploughed back under. The
energy balance of cellulosic ethanol could rise above 30 while the reduction of greenhouse
gasses amounts to 91%. Far from being perverse, subsidies directed towards such a form of
development would bring both economic and environmental benefits.
References
IEEP. 2007. Reforming environmentally harmful subsidies. Final report to the European Commission’s DG
Environment. Institute for European Environmental Policy. Available online: www.ieep.eu.
Koplow D. 2007. Biofuels: at what costs? government support for ethanol and biodiesel in the united states. GSI
Global Subsidies Initiative, IISD, Geneva Available online: www.globalsubsidies.org.
MacNeill J, Winsemius P, Yakushiji T. 1991. Beyond interdependence: the meshing of the world’s economy and the
earth ecology. Oxford, UK: Oxford University Press.
Myers N. 1998. Perverse subsidies. The International Institute for Sustainable Development, Winnipeg, Manitoba.
Myers N, Kent J. 2001. Perverse subsidies – how tax dollars can undercut the environment and the economy. New
York: Island Press.
OECD. 1998. Improving the environment through reducing subsidies. OECD, Paris.
OECD. 2005. Environmentally harmful subsidies – challenges for reform. OECD, Paris.
OECD. 2007. Biofuels: is the cure worse than the disease? Paper prepared for the Round table on Sustainable
Development by Richard Doornbosch and Ronald Steenblik. OECD, Paris.
Runge CF, Senauer B. 2007. How biofuels could starve the poor. Foreign Affairs May/June 41–53.
Whitfield J. 2006. How green was my subsidy? Nature 439:908–910.
198 J. Boersema et al.
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Biofuels and perverse subsidies: fuelling the wrong

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VU Research PortalBiofuels and perverse subsidies: fuelling the wrongBoersema, J.J.; Blowers, A.; Martin, A.published inEnvironmental Sciences2007document versionPublisher's PDF, also known as Version of recordLink to publication in VU Research Portalcitation for published version (APA)Boersema, J. J., Blowers, A., & Martin, A. (2007). Biofuels and perverse subsidies: fuelling the wrong.Environmental Sciences, 4(4), 195-198.General rightsCopyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright ownersand it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights.            • Users may download and print one copy of any publication from the public portal for the purpose of private study or research.            • You may not further distribute the material or use it for any profit-making activity or commercial gain            • You may freely distribute the URL identifying the publication in the public portal ?Take down policyIf you believe that this document breaches copyright please contact us providing details, and we will remove access to the work immediatelyand investigate your claim.E-mail address:vuresearchportal.ub@vu.nlDownload date: 22. May. 2021  PLEASE SCROLL DOWN FOR ARTICLEThis article was downloaded by: [Vrije Universiteit, Library]On: 27 May 2011Access details: Access Details: [subscription number 907218092]Publisher Taylor & FrancisInforma Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UKJournal of Integrative Environmental SciencesPublication details, including instructions for authors and subscription information:http://www.informaworld.com/smpp/title~content=t713682447Biofuels and perverse subsidies: fuelling the wrong solutions?Jan Boersema; Andrew Blowers; Adrian MartinTo cite this Article Boersema, Jan , Blowers, Andrew and Martin, Adrian(2007) 'Biofuels and perverse subsidies: fuellingthe wrong solutions?', Journal of Integrative Environmental Sciences, 4: 4, 195 — 198To link to this Article: DOI: 10.1080/15693430701783457URL: http://dx.doi.org/10.1080/15693430701783457Full terms and conditions of use: http://www.informaworld.com/terms-and-conditions-of-access.pdfThis article may be used for research, teaching and private study purposes. Any substantial orsystematic reproduction, re-distribution, re-selling, loan or sub-licensing, systematic supply ordistribution in any form to anyone is expressly forbidden.The publisher does not give any warranty express or implied or make any representation that the contentswill be complete or accurate or up to date. The accuracy of any instructions, formulae and drug dosesshould be independently verified with primary sources. The publisher shall not be liable for any loss,actions, claims, proceedings, demand or costs or damages whatsoever or howsoever caused arising directlyor indirectly in connection with or arising out of the use of this material.EDITORIALBiofuels and perverse subsidies: fuelling the wrongsolutions?JAN BOERSEMA, ANDREW BLOWERS & ADRIAN MARTINSubsidies are an important feature of our economic landscape. Although there is nouniversally accepted definition of a subsidy, the one probably most widely used is that of theOECD (2005): ‘A subsidy is a result of a government action that confers an advantage onconsumers or producers, in order to supplement their income or lower their costs’. All overthe world it is common policy to subsidize to lower the cost of commodities or stimulatedevelopments or breakthroughs that otherwise would not take off. From a purely economicviewpoint, all subsidies are potentially distortive, but in some cases they may be given forsound economic reasons, e.g. to create a level playing field or to compensate for unwantedexternal effects. If they result in unfair competition and a disadvantage for competitors theymay be called distortive.It is well known from a great number of studies that subsidies can have harmful effects on theenvironment (Whitfield 2006). The OECD (1998) speaks of subsidies that ‘(unintentionally)discriminate against sound environmental practices’. By using the term ‘environmentallydamaging subsidies’ one is leaving aside the question of whether or not these subsidies really doresult in benign effects on the economy. Less widely recognised are ‘perverse subsidies’ definedas subsidies having adverse effects on both the economy and the environment in the long run(Myers 1998, p. xiii; Myers and Kent 2001). They encourage development in industrial andother sectors, and in particular locations, that is counterproductive to economic andenvironmental concerns. They may also encourage development and growth in activities thatrather should be reduced and/or regulated.This editorial stresses the importance of being more critical of this kind of subsidy,especially in the energy sector and the emerging new field of biofuels. Biofuels have beenchampioned as an energy source that can reduce vehicle emissions and provide a new incomestream for farmers. Both claims have been contested in recent publications, but they remainkey arguments for supporting the development of crops for biofuels. Apart from the contestedeconomic arguments, there are concerns about the environmental damage that biofuelproduction can cause. Do we have a clear case of perverse subsidies here?Substantial amount of moneyPerverse subsidies exist all over the world and it is estimated that they cost taxpayers billions.According to MacNeill et al. (1991, p. 34), they cost North American, European andEnvironmental SciencesDecember 2007; 4(4): 195 – 198ISSN 1569-3430 print/ISSN 1744-4225 online  2007 Taylor & FrancisDOI: 10.1080/15693430701783457Downloaded By: [Vrije Universiteit, Library] At: 13:52 27 May 2011Japanese consumers and taxpayers more than $250 billion dollars per year for agriculturalsubsidies alone. At the end of the 90s, Myers estimated the total subsidies in five sectors –agriculture, fossil fuels/nuclear energy, road transportation, water and fisheries – to be around$1 trillion worldwide. He concluded that such a sizeable amount of subsidies could exerta significantly distorting impact on the global economy. Ten years later, in its recentlypublished report, the Institute for European Environmental Policy claims that perversesubsidies of environmentally damaging industries is costing Europe billions of euros: 29billion for the energy sector, 7.3 for household fuels and a staggering 240 billion for roadtransport (IEEP 2007). Although the figures vary, we may safely assume Myers was right andis still right in his judgment on the distortive impact on the economy.The environmental damage of perverse subsidies is not to be underestimated, but is farmore difficult to assess due to the less direct nature of the impacts. It may be questioned if it isalways necessary to know the full details of damage before calling for reforms. It may beassessed in a comparative way. If we, for instance, consider the energy sector, the relevantquestion is not how much harm is done to the environment by the subsidy, but whether theenergy source it supports causes more or less harm than an alternative energy source (OECD2005).Most subsidies have laudable aims when they are instigated. They aim, for example toensure food and energy security, to reduce pollution or protect disadvantaged social groups.Decreasing price competitiveness, protection of domestic employment and jobs areincreasingly seen as less justifiable aims. In many cases, the original rationale no longerfully applies and the continued use of subsidies acts in a way that locks in old technologieswhile locking-out new and better ones. A telling example is the ongoing subsidies for theGerman hard coal mining industry. With a declining production and workplace numbers, the2.7 billion Euros of subsidy spent in 2005 (75,000 Euro per coal job) is still higher per Kwhthan the cost of electricity from wind turbines. In 2007, while the world market price averagedabout 60 Euros, the extraction costs for a tonne of German coal was about 190 Euros. Afteryears of debate, a court decision in 1994 and a ‘coal compromise’ in 1997, it was agreed inJanuary 2007 to phase out production by 2018. It is hard to get rid of perverse subsidies, evenin modern democracies.BiofuelsThe drive for green energy all over the world is in danger of creating the same perverse effects.While the use of biofuels are supposed to reduce CO2 emissions, the benefits may varysignificantly, depending on the resource used and the process applied. The clear and presentdanger is that we are fuelling the wrong solutions; wrong because of the poor overallperformance of many biofuels in environmental terms. According to a recent paper, it may beasked if the most common ways of producing biofuels offer a cure that is worse than thedisease they seek to heal (OECD 2007). According to the US Department of Energy and theUS Environmental Protection Agency, the statistics are as follows. For corn ethanol, the mostwidely produced biofuel in the USA, 4.9 billion gallons in 2006, the energy balance (input offossil fuel energy used compared with the energy in the output) is 1:1.3, leading to an overallreduction in greenhouse gasses of 22%. To get the energy equivalent of a gallon of gasolinecosts 25% more (retail prices 2007). These figures are far from impressive. Cane ethanol ismore profitable in terms of price and productivity. It yields twice as much as corn and can beproduced 20% cheaper than gasoline. Brazil is the world leader: in 2005 it producedapproximately 4 billion gallons. Compared to corn ethanol the energy balance is far better,1:8, and the reduction in greenhouse gas emissions is about 56%. Another way of producing196 J. Boersema et al.Downloaded By: [Vrije Universiteit, Library] At: 13:52 27 May 2011biofuels is by chemically altering plant oils into biodiesel. It takes less energy than distillingcorn into alcohol, but the yields are low and the costs high. The energy balance is 1:2.5 andthe greenhouse gas emissions can be reduced by 68%. Germany is the world’s leadingproducer with 0.5 billion gallons in 2005. It comes from rapeseed, canola, and soybeans.Whatever the way of producing biofuels is or was, it has never happened without beingsubsidised in one way or another. The federal government in the USA started supportingethanol use in the late 1970s through a reduction in the excise tax for gasohol (a fuelcomposed of 90% gasoline and 10% ethanol). From that time on, according to an article inForeign Affairs, the push for ethanol and other biofuels has spawned a worldwide industrythat depends on billions of dollars of taxpayer subsidies (Runge et al. 2007, p. 41). Recently,the USA congress gave the ethanol industry another boost, extending the tax credits andtariffs while requiring that 7.5 billion gallons of the nation’s fuel come from ethanol orbiodiesel by 2012. President George W. Bush went even further, calling on the country toproduce 35 billion gallons of renewable fuel by the year 2017, nearly five times the levelcurrently mandated. In the EU, financial support to biofuels production and use includes afuel duty, enhanced capital allowances (an extra tax incentive to companies for investing inbiofuel processing plants) and a ‘bio-credit’ (IEEP 2007, p. 125). The leading OECDcountries producing ethanol apply import tariffs that add at least 25% to the cost of imports.As a result, current trade is only about 10% of the world’s biofuel consumption. From aneconomic viewpoint, this is an inefficient outcome, as biofuels produced in tropical regionsfrom sugercane and vegetable oils have a considerable cost advantage over those derived fromagricultural crops in temperate zones.Social impactsLooking at the environmental impact, the record of biofuels is not as good as its promoterswould have us believe. In some cases, it is not good at all. For instance, the Indonesiangovernment is planning the conversion of some 20 million hectares to oil palm plantations,largely to serve the European biofuel market. This is likely to destroy most of the remainingpeatlands and rainforests and lead to the emission of as much as 50 billion tonnes of carbon(IEEP 2007, p. 130). But there is more at stake. One of the most obvious drawbacks is thatevery biofuel also consumes crops/land that could feed hungry people. The Foreign Affairsarticle asks with appropriate rhetoric: ‘will it starve the poor?’ (Runge et al. 2007). This isespecially true in the case of corn, but it holds for almost all biofuels currently available.Alcohol from sugarcane may be a relatively clean fuel, but the process of making it is verydirty, especially the burning of cane. Labour conditions are harsh, and they equal the situationof coal miners in China. The exploitation of cane workers is said to be a shame to everycivilised nation.SolutionsThere are no easy solutions to the problems created by environmentally damaging or perverse(energy) subsidies. This is even more the case with of subsidies that create some benefit to theenvironment but at unacceptable social costs or for subsidies that could yield far more benefiteconomically, environmentally and socially if spent elsewhere. It requires taking measures onseveral levels. For the EU, the authors of the IEEP report give sensible and detailedrecommendations. Others like Koplow (2007) and Myers (1998) have done their part forcountries like the USA and Brasil. They are all pointing in the same direction. The worstthing to do is to throw away the baby with the bath water. Subsidies make sense if they meetEditorial 197Downloaded By: [Vrije Universiteit, Library] At: 13:52 27 May 2011conditions already mentioned. Subsidies could and should be part of a carefully drafted andwidely discussed energy policy plan. They should be given to promising technologies onlyafter thorough assessment. But how do we evaluate? The big issue for interdisciplinary scienceis to develop methods to make such an assessment feasible and sensible at the same time.Phasing out quickly the most harmful subsidies is required in any case. Taking energyconservation seriously is still the best advice to be given to oil-addicted countries. It is by farthe cheapest way to go for developed countries, certainly in the long run. For countries withan expanding economy like China and India, applying the best technology and technologytransfer is probably the best way to mitigate their emissions. As to biofuels, probably the bestthing to do is to take food out of the picture. Far better to turn to the (further) development ofa cellulose based production of ethanol. The raw material might come from perennial prairiegrasses or from by-products that are normally dumped, burned or ploughed back under. Theenergy balance of cellulosic ethanol could rise above 30 while the reduction of greenhousegasses amounts to 91%. Far from being perverse, subsidies directed towards such a form ofdevelopment would bring both economic and environmental benefits.ReferencesIEEP. 2007. Reforming environmentally harmful subsidies. Final report to the European Commission’s DGEnvironment. Institute for European Environmental Policy. Available online: www.ieep.eu.Koplow D. 2007. Biofuels: at what costs? government support for ethanol and biodiesel in the united states. GSIGlobal Subsidies Initiative, IISD, Geneva Available online: www.globalsubsidies.org.MacNeill J, Winsemius P, Yakushiji T. 1991. Beyond interdependence: the meshing of the world’s economy and theearth ecology. Oxford, UK: Oxford University Press.Myers N. 1998. Perverse subsidies. The International Institute for Sustainable Development, Winnipeg, Manitoba.Myers N, Kent J. 2001. Perverse subsidies – how tax dollars can undercut the environment and the economy. NewYork: Island Press.OECD. 1998. Improving the environment through reducing subsidies. OECD, Paris.OECD. 2005. Environmentally harmful subsidies – challenges for reform. OECD, Paris.OECD. 2007. Biofuels: is the cure worse than the disease? Paper prepared for the Round table on SustainableDevelopment by Richard Doornbosch and Ronald Steenblik. OECD, Paris.Runge CF, Senauer B. 2007. How biofuels could starve the poor. Foreign Affairs May/June 41–53.Whitfield J. 2006. How green was my subsidy? Nature 439:908–910.198 J. Boersema et al.Downloaded By: [Vrije Universiteit, Library] At: 13:52 27 May 2011

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