Tag Archives: green
How EU Subsidies Inflate Biofuel Prices
Published 08 May 2013, updated 10 May 2013 Public subsidies constitute a powerful market intervention that indirectly inflate biofuel prices, argues Chris Charles. Industry criticisms of the International Institute of Sustainable Development’s research on the subject fall wide of the mark, he writes. Chris Charles is a project manager with the International Institute for Sustainable Development’s Global Subsidies Initiative. The costs and benefits of biofuels have been hotly debated in the European Union, where the EU and member states both have ambitious renewable fuel targets – to be met largely through biofuels. Some have charged that supporting biofuels is not a cost-effective way to replace oil-based liquid fuels, reduce greenhouse-gas emissions, or support rural and innovative development. Others argue that the economic and environmental benefits make biofuels a ‘win-win’ source of energy. So where does the truth lie? It was with that question in mind that the International Institute for Sustainable Development’s Global Subsidies Initiative recently published ‘ Biofuels – At What Cost, A review of costs and benefits of EU biofuels policy ’ . The study found that the EU spent €9.3 billion to €10.7 billion subsidising biofuels in 2011. The study questions whether the current use of biofuel support measures is the most efficient means of addressing climate change and promoting economic growth. A number of issues have been raised about the study by Eric Sievers and Rob Vierhout, both of whom represent the EU ethanol industry, in a commentary published last week by EurActiv ( Biofuels: Who’s subsidising whom? ). Their commentary questioned IISD’s subsidy estimates, and suggested that the method used to determine them was flawed. I would like to address some of the more serious critiques by Sievers and Vierhout with respect to our research. IISD contributes to sustainable development by advancing policy recommendations on a range of key issues, such as international trade and investment, economic policy, climate change and energy. The IISD is independent of all governments, suppliers and consumer groups. Its focus is on providing high quality, independent, freely available policy research to improve transparency and debate. The Institute established the Global Subsidies Initiative (GSI) in 2005 to analyse subsidies and how they support or undermine efforts to achieve sustainable development. The GSI has a comprehensive program on energy subsidies that includes fossil-fuels (oil, coal and gas production and consumption), and parallel programmes on biofuels and renewable electricity. Its research is guided by the use of the best available information, using data from public accounts and state-of-the-art literature. Factual information is supported by references, with assumptions supporting calculations clearly stated, so stakeholders are able to critique, disagree, or provide alternative analysis. Independent peer-review of research is an important quality control measure. The report in question was peer-reviewed by respected non-governmental organisations, inter-governmental and governmental organisations, such as the Department for Environment, Food and Rural Affairs (United Kingdom), the Fraunhofer Institute for Systems and Innovation Research, the International Council on Clean Transportation (ICCT), Imperial College London, and the Organisation for Economic Co-operation and Development (OECD) . The GSI follows a three-stage approach to subsidy analysis: define, measure, and evaluate. Different approaches to one or more of these stages, and how they are combined, lead to different interpretations of the scale and impact of support measures. Sievers and Vierhout question our approach to measuring the size of the subsidy to the EU biofuel industry. The subsidy definition applied by the IISD in developing the 2011 subsidy estimate of €9.3 billion to €10.7 billion follows the WTO’s Agreement on Subsidies and Countervailing Measures (ASCM) negotiated by 158 member countries. Following the WTO definition, our analysis includes market price support and market transfers, which include government’s policies that mandate transfers between consumers and producers. It also includes excise tax exemptions, where biofuels are exempted from taxes applied to petrol and diesel, and the use of biofuel mandates requiring the use of biofuels in road transport markets. Mandates require that a certain percentage of road transport fuels must come from biofuels, with the share often rising over time. These are a powerful market intervention that provides the biofuel industry with an important financial benefit in the form of market security, which in turn raises biofuel prices. Some in the biofuel sector view mandates as a technical policy resulting from the application of the Renewable Energy Directive (RED). While we are confident in our methodology – and have consistently applied it other studies – we have also encouraged discussion on the range of approaches that are available. For example, the International Energy Agency (IEA), which applies a method that multiplies the volumes of biofuels consumed by the difference of their cost to the reference price of comparable petroleum-based product, estimates support to the EU biofuel industry in 2011 at $11 billion (or €8.4 billion). Different subsidy estimates will result in differing carbon abatement costs for reducing emissions and different calculations of the per litre subsidy for biofuels. And not all biofuels are the same – the costs and benefits of biofuels differ, including by feedstock and production process. The IISD seeks to encourage a full debate on whether subsidies represent the best use of public funds against public policy objectives, based on both its own research and the work of others. Research put forth by the biofuel industry should also be transparent, referenced, and ideally reviewed by independent organisations. This includes issues such as job numbers, where it is often not clear if figures developed by the biofuel industry include direct, indirect or induced jobs, or gross or net jobs. Tax payments also provide an example where data provided by the industry would benefit from greater transparency and information sharing. The question should not be ‘who‘s subsidising whom?’ but how best to invest public funds for an environmentally, socially and economically prosperous future. Continue reading
Report: South Korea To Launch World’s Most Ambitious Carbon Trading Scheme
Bloomberg New Energy Finance predicts price of carbon in South Korean scheme could hit $90 a tonne By BusinessGreen staff 14 May 2013 South Korea is preparing to introduce the world’s most ambitious emissions trading scheme, potentially paving the way for carbon costs as high as $90 a tonne for many of the country’s key industries. That is the stark conclusion of a major new report from Bloomberg New Energy Finance (BNEF) and Ernst & Young, which hails the proposed scheme as the world’s most ambitious carbon-pricing policy but warns that changes to the proposals may be required before the scheme is introduced in 2015 to avoid “punitive” costs on industry. “If the government implements the scheme without any changes, it will have major implications for Korean companies,” said Richard Chatterton, lead analyst for carbon markets at BNEF, in a statement. “A carbon price will lead to higher power prices and impose additional costs on industrial firms. The government is mitigating the impact for covered entities by handing out most allowances for free, but costs could still rise quickly.” The report calculates that if South Korea adheres to its national target of cutting emissions to 30 per cent below business-as-usual levels by 2020 emissions reductions delivered through the planned emissions trading scheme would have to reach 836 million tonnes between 2015 and 2020. But it also predicts the “need to reduce emissions will, however, exceed the options available within industrial companies and from the country’s current fleet of gas fired power stations”, meaning that the target is likely to be missed and the price of carbon in the scheme will effectively be set by a $90 a tonne penalty price for company’s exceeding their emissions cap . The government hopes that businesses will be able to comply with the cap by accelerating the shift toward lower carbon energy sources, such as gas, renewables, and carbon capture and storage plants. But the BNEF report warns that the cost of such technologies is likely to be significantly higher than the penalty price, meaning many firms are likely to opt to exceed their targets. It recommends that the government consider a number of options to improve the proposed scheme, including relaxing the number of offset credits companies can use to count towards their carbon target or loosening the over-arching cap on emissions. “The challenge is to put in place a carbon price high enough to impact investment decisions, but low enough to transition smoothly towards a carbon-constrained economy,” said Milo Sjardin, head of Asia research for BNEF, in a statement. “With the proposed design, demand and supply within the ETS are not well-matched and will lead to unnecessarily high carbon prices. Policy-makers will need to look at cost containment measures closely while not compromising the ambitions of the scheme.” However, Yoon Joo-Hoon, senior manager at Ernst & Young, warned that while changes to the proposals could be made businesses still needed to be preparing now to the likely impact of the scheme, arguing that firms should be looking at carbon mitigation options and developing a plan for operating effectively under an emissions trading scheme. Continue reading
HOW TO understand commercial and investment real estate Kelowna Okanagan
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