BIOFUELS - AT WHAT COST ?

The report finds that U.S. government support for biofuels is extensive and inefficient, with total subsidies projected to exceed $92 billion between 2006 and 2012. The largest contributors are volumetric excise tax credits and market price supports driven by renewable fuel mandates. The analysis argues that these subsidies are an expensive way to achieve energy security and greenhouse gas (GHG) reductions, noting that the cost per tonne of CO2-equivalent displaced is significantly higher than purchasing carbon offsets on climate exchanges. The report warns that pending legislation, such as the Renewable Fuels Standard, could further increase these costs, potentially exceeding $130 billion per year by 2030.

• Total government support for biofuels in the United States is estimated to be between $6.3 billion and $7.7 billion in 2006, with projections reaching approximately $13 billion in 2008 and nearly $16 billion by 2014.
• Over the 2006–2012 period, the biofuel industry is expected to receive total subsidies exceeding $92 billion, with ethanol receiving between $67 billion and $82 billion and biodiesel receiving between $9 billion and $10.8 billion.
• Volumetric excise tax credits for blenders are the largest federal subsidy; for the 2006–2012 period, these credits are estimated to provide $48 billion to the ethanol sector and nearly $5 billion to the biodiesel sector.
• Market price support, resulting from import barriers and domestic mandates, is the second-largest support element for ethanol, with transfers estimated at roughly $17 billion for the 2006–2012 period.
• A tax loophole allows volumetric excise tax credits to be excluded from taxable income, which provided an incremental benefit of $1.2 billion for ethanol and $105 million for biodiesel in 2006.
• Biofuel subsidies are an expensive method for replacing petroleum; the average cost over 2006–2012 is $12–17 per gigajoule (GJ) for corn ethanol and $16–25 per GJ for biodiesel.
• The cost of displacing fossil fuels is even higher than displacing petroleum alone, ranging from $22 to $57 per GJ for corn ethanol and $24 to $28 per GJ for biodiesel.
• Subsidies for GHG reductions are highly inefficient; the minimum subsidy cost per tonne of CO2-equivalent reduced (2006–2012) is $295 for corn ethanol and $239 for biodiesel, far exceeding the cost of carbon offsets on the Chicago Climate Exchange (CCX).
• Proposed increases to the Renewable Fuels Standard (RFS), such as a 25 percent mandate by 2025, could result in additional costs to the fuel sector exceeding $130 billion per year by 2030.
• The biodiesel industry has expanded capacity faster than demand, with utilization estimated at 43 to 57 percent, leading to a likely industry contraction.

APA

Koplow, D. (2007). BIOFUELS - AT WHAT COST ? International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/biofuels_subsidies_us_update.pdf

Chicago

Koplow, Doug. BIOFUELS - AT WHAT COST ? International Institute for Sustainable Development, 2007. https://www.iisd.org/system/files/publications/biofuels_subsidies_us_update.pdf.

Wikipedia

{{cite report |last1=Koplow |first1=Doug |title=BIOFUELS - AT WHAT COST ? |publisher=International Institute for Sustainable Development |date=October 2007 |url=https://www.iisd.org/system/files/publications/biofuels_subsidies_us_update.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{koplow2007biofuels, author = {Koplow, Doug}, title = {{BIOFUELS - AT WHAT COST ?}}, institution = {International Institute for Sustainable Development}, year = {2007}, month = oct, url = {https://www.iisd.org/system/files/publications/biofuels_subsidies_us_update.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }