The Australian government spent A$ 95 million on biofuel production and consumption in 2006–07, according to the latest country study by the GSI on government support to biofuels. That cost could grow to several hundred million dollars a year by the end of the decade if planned new ethanol and biodiesel capacity comes on-line over the next two years. Currently, biofuels contribute less than 0.5% of Australia’s transport-fuel needs.

Biofuels – At what cost? Government support for ethanol and biodiesel in Australia, finds that the effective rates of assistance (ERAs) for most biofuels is over 100%, far more than any other industry in Australia.  By comparison, the next-highest ERA in Australia is for dairy cattle farming, which was 15% in 2006–07, according to the Australian Productivity Commission.

Total government expenditure on biofuels is lower in Australia than many other OECD countries examined by the GSI (for example, US$ 6 billion in the United States), though at around A$ 0.42 per litre, support is roughly the same as that provided in the United States.

The production of biofuels is expanding rapidly around the world, as governments strive to lower CO2 emissions and bolster their energy security. But in each OECD country examined by the GSI, subsidies to biofuels have proved a hugely inefficient way to achieve these goals.

Under even the most optimistic scenario for Australian biofuels, the amount of funding required to achieve a one-tonne reduction of CO2 through biofuel subsidies could have purchased between 5 and 30 tonnes of CO2-equivalent offsets on the U.S. or European carbon markets. Biofuel subsidies are also an expensive way to reduce fossil fuel use in Australia, costing between A$ 0.50 and A$ 2.00 for every litre of petroleum-equivalent displaced.

The GSI has released country reports covering the United States, the European Union, and Switzerland, as well as a synthesis report on select OECD countries. All these reports can be found at the GSI website: www.globalsubsidies.org. Studies on Indonesia and Malaysia are scheduled to be released this summer.