Biofuel program a 'dismal failure'
Report says costs eclipse benefits 3-1By Bruce Johnstone, The Leader-Post June 27, 2014
REGINA Canada's biofuel support programs have been "a dismal failure," with costs outweighing benefits by a three-to-one margin, according to a Macdonald-Laurier Institute study released Thursday.
From 2008 to 2012, the study authors estimate that the federal biofuels policies cost between $3 and $3.50 for every dollar of social and environmental benefits. "Consequently the policy has failed to deliver value to Canadian taxpayers," said the report, entitled Money to Burn.
Governments need "to phase out the major components of current transportation biofuel policy on the grounds that the costs far exceed the social benefits and there are no realistic prospects for this situation to change," say study authors, Douglas Auld and Ross McKitrick, both economics professors at the University of Guelph.
"The support for ethanol as a partial substitute for gasoline in Canada has been very expensive by any test,' the study says. "On a per-tonne basis, we estimate that the cost per tonne of CO2 equivalent reduction from production and use of corn ethanol ranges from $400 to $3,300 per tonne, and that from cellulosic ethanol is about $142 per tonne. This far exceeds the conventionally estimated benefits of CO2 reduction of between $0 and $50 per tonne."
The study's major recommendation is to phase out the major components of current transportation biofuel policy, although "a case can be made for limiting public research and development funds to cellulosic ethanol."
However, the Canadian Renewable Fuels Association blasted the two authors, saying their study was "full of misinformation."
"Contrary to their claims, biofuels mandates remain the best policy tool in affecting meaningful GHG reductions within the transportation sector," said Scott Thurlow, president of CFRA. "Determining the overall environmental benefits from biofuels must take into account the entire lifecycle of GHG emissions, a fact the authors have unfortunately omitted."
Over the full lifecycle, biofuels generate significantly lower GHG emissions than traditional fossil fuels, Thurlow said. "Compared to burning traditional fossil fuels, lifecycle GHG emissions are reduced by 62 per cent with ethanol and up to 99 per cent with biodiesel and renewable diesel," Thurlow said.
"Every year in Canada biofuels use reduces carbon emissions by 4.2 megatonnes, which is equivalent to removing the air pollution and GHG emissions associated with one million cars from our roads."
The renewable fuels industry generates gross economic benefits in excess of $3.5 billion every year and has provided more than 14,000 direct and indirect jobs. All told, the federal government will realize a net return on investment of more than $3.7 billion, CFRA said.
"Characterizing this as a 'failure' for taxpayers is dubious to the public and insulting to policy-makers," Thurlow said.
In the 2014-15 budget, the province announced a $8-million reduction in subsidies to the biofuels sector from $16 million in 2013. Industry has received $149 million in subsidies since 2002. The federal government is winding down its subsidy program in 2016-17, Alberta in 2014-15 and Manitoba in 2015-16.