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Biofuels — At What Cost? Government Support to Ethanol and Biodiesel in the United States
Subsidies to biofuels have risen to record levels in the United States, according to a new report by the Global Subsidies Initiative (GSI) of the International Institute for Sustainable Development (IISD). The report, "Biofuels – At What Cost? Government Support to Ethanol and Biodiesel in the United States," is the first of six country studies that will be released over the coming three months.
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The Global Subsidies Initiative
Governments spend hundreds of billions of dollars on subsidies each year, concentrated in just a handful of sectors. The consequences are often injurious, distorting global trade and accelerating environmental degradation.
Negotiating Subsidy Reduction in the World Trade Organization, an IISD report, demonstrates that a WTO-centred approach to eliminating harmful subsidies has a chance for success, given that this organization already has a clear mandate to deal with the underlying link between trade-distorting subsidies and sustainable development. However, without greater political will at the national level, trade negotiators will achieve little at the multilateral level.
People everywhere have a key interest in ensuring that effective subsidy reform takes place. As Professor Norman Myers points out in Perverse Subsidies, "A typical American taxpayer forks out a least $2,000 a year to fund perverse subsidies, and then pays another $2,000 through increased prices for consumer goods and services or through environmental degradation." Analysts looking at the situation in other countries have reached similar conclusions.
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The Global Subsidies Initiative advocates subsidy reform based on sound research and consultation with governments, multilateral organizations and civil society. We believe that while subsidies can play a legitimate role in public policy, those who advocate them must be able to demonstrate that the subsidies are environmentally, socially and economically sustainable—and that they do not undermine the developmental potential of other countries.
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Reforms to trade-distorting subsidies and import protection could yield significant welfare gains for the developing world. But this is not just a North-South issue: developing countries need to examine their own subsidy regimes, and dismantle those that harm the environment and hinder economic development.
Through the action of a distinguished Advisory Group, the GSI will help to lead this process of reform, by stimulating new research; encouraging public debate and awareness; and providing policy-makers with the tools needed for constructive reform.
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