Cultivating Governance: Cautionary tales for biofuel policy reformers

The policy brief analyzes the current developments around the emerging U-turns on government support to biofuels internationally.

Based on desk research as well as interviews with stakeholders, the policy brief seeks to provide guidance for biofuel policy reformers on good governance principles in view of pressures from different interest groups.

The brief's key messages are universal, but may be of special relevance to policy-makers in the EU in light of the European Commission's proposal of October 17, 2012 to limit the use of food-based biofuels to 5 per cent until 2020 in contributing to the 10 per cent target of renewable energy in transport.

Key messages of the policy brief are:

• Biofuel policies have been haunted by mismatches between their stated aims (climate change mitigation, innovative "green" development and energy security) and "Realpolitik" objectives (supporting agricultural constituencies). Such mismatches should be avoided. In particular, resorting to allegedly environmental causes for protection of national agriculture is at odds with the principles of the World Trade Organization (WTO).

• In addressing the frequently cited objectives of government support to biofuels, preference over subsidies should be given to first-best (i.e., market-based) solutions, including, but not limited to, phasing out support to fossil fuels and pricing carbon effectively through carbon caps and/or taxes.

• Governments need to assure good governance and base their decisions on evidence from independent research. In cases of uncertainty about biofuels' performance, especially with respect to indirect land use change and the food vs. fuel debate, decisions should be guided by the Precautionary Principle.

• Governments should phase out support to biofuels that a) compete with food or animal-feed uses for the same feedstock crops and/or b) have negative impacts on the environment.