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Biofuels - at What Cost? BIOFUELS - AT WHAT COST? Government support for ethanol and biodiesel in the United States One of a series of reports addressing subsidies for biofuels in Australia, Brazil, Canada, the European Union, Switzerland and the United States. October 2006 Prepared by: Doug Koplow, Earth Track, Inc. Cambridge,MA Prepared for: The Global Subsidies Initiative (GSI) of the International Institute for Sustainable Development (IISD) Geneva, Switzerland Biofuels – At What Cost? Government support for ethanol and biodiesel in the United States One of a series of reports addressing subsidies for biofuels in Australia, Brazil, Canada, the European Union, Switzerland and the United States. October 2006 Prepared by: Doug Koplow, Earth Track, Inc. Cambridge, MA Prepared for: The Global Subsidies Initiative (GSI) of the International Institute for Sustainable Development (IISD) Geneva, Switzerland Biofuels – At What Cost? Government support for ethanol and biodiesel in the United States One of a series of reports addressing subsidies for biofuels in Australia, Brazil, Canada, the European Union, Switzerland and the United States. October 2006 Prepared by: Doug Koplow, Earth Track, Inc. Cambridge, MA Prepared for: The Global Subsidies Initiative (GSI) of the International Institute for Sustainable Development (IISD) Geneva, Switzerland Government Support for Ethanol and Biodiesel in the United States © 2006, International Institute for Sustainable Development Acknowledgments The International Institute for Sustainable Development contributes to sustainable development by advancing This report was written by Doug Koplow (Earth Track). The author is grateful for the dedication, assistance and policy recommendations on international trade and investment, economic policy, climate change and energy, encouragement provided by Ronald Steenblik, Director of Research for the Global Subsidies Initiative, who man- measurement and assessment, and sustainable natural resources management. Through the Internet, we report aged the project and provided text and data for several parts of the report. Matt Heimdahl of the Taxpayers League on international negotiations and share knowledge gained through collaborative projects with global partners, of Minnesota provided research support and detailed information on subsidies to ethanol producers in resulting in more rigorous research, capacity building in developing countries and better dialogue between North Minnesota. Katy Nicholson provided research assistance on state-level biofuels subsidies. IISD’s Damon Vis- and South. Dunbar and Stuart Slayen, and graphic designer Don Berg provided invaluable support in the formatting and IISD’s vision is better living for all—sustainably; its mission is to champion innovation, enabling societies to live reproduction of the report. sustainably. IISD is registered as a charitable organization in Canada and has 501(c)(3) status in the United States. The project team is grateful to a number of individuals who served as peer reviewers on an earlier version of this IISD receives core operating support from the Government of Canada, provided through the Canadian report. In particular, we thank: International Development Agency (CIDA), the International Development Research Centre (IDRC) and Environment Canada; and from the Province of Manitoba. The Institute receives project funding from numerous Steven Bantz (Union of Concerned Scientists) governments inside and outside Canada, United Nations agencies, foundations and the private sector. Kyle Datta (Rocky Mountain Institute) International Institute for Sustainable Development Nathanael Greene (Natural Resources Defense Council) Head Office 161 Portage Avenue East, 6th Floor H. Benjamin Hartley (Joint Committee on Taxation, retired) Winnipeg, Manitoba Charlotte Hebebrand (International Food & Agricultural Trade Policy Council) Canada R3B 0Y4 Tel.: +1 (204) 958-7700 Suzanne Hunt (Worldwatch Institute) Fax: +1 (204) 958-7710 Masami Kojima (World Bank) Web site: http://www.iisd.org Michael O’Hare (University of California at Berkeley) International Institute for Sustainable Development Global Subsidies Initiative Tadeusz W. Patzek (University of California at Berkeley) International Environment House 2 Erich Pica (Friends of the Earth) 9 chemin de Balexert 1219 Châtelaine David Pimentel (Cornell University) Geneva, Switzerland Lee Schipper (World Resources Institute) Telephone +41 22 917-8373 Fax +41 22 917-8054 Randy Schnepf (Congressional Research Service) Web site: http://www.globalsubsidies.org Jerry Taylor (Cato Institute) Biofuels – At What Cost ?: Government Support for Ethanol and Biodiesel in the United States Brent D. Yacobucci (Congressional Research Service) By Doug Koplow Their comments and insights helped to greatly improve the final version. However, the report should not be inter- ISBN 1-895536-94-4 preted as necessarily representing their views. And, as is always the case, any remaining errors or inaccuracies remain the responsibility of the author. The GSI’s research activities are funded by the governments of The Netherlands, New Zealand and Sweden. The views expressed in this study do not necessarily reflect those of the GSI’s funders, nor should they be attributed to them. Printed on 100% post-consumer recycled paper. ii iii | ii | iii Government Support for Ethanol and Biodiesel in the United States © 2006, International Institute for Sustainable Development Acknowledgments The International Institute for Sustainable Development contributes to sustainable development by advancing This report was written by Doug Koplow (Earth Track). The author is grateful for the dedication, assistance and policy recommendations on international trade and investment, economic policy, climate change and energy, encouragement provided by Ronald Steenblik, Director of Research for the Global Subsidies Initiative, who man- measurement and assessment, and sustainable natural resources management. Through the Internet, we report aged the project and provided text and data for several parts of the report. Matt Heimdahl of the Taxpayers League on international negotiations and share knowledge gained through collaborative projects with global partners, of Minnesota provided research support and detailed information on subsidies to ethanol producers in resulting in more rigorous research, capacity building in developing countries and better dialogue between North Minnesota. Katy Nicholson provided research assistance on state-level biofuels subsidies. IISD’s Damon Vis- and South. Dunbar and Stuart Slayen, and graphic designer Don Berg provided invaluable support in the formatting and IISD’s vision is better living for all—sustainably; its mission is to champion innovation, enabling societies to live reproduction of the report. sustainably. IISD is registered as a charitable organization in Canada and has 501(c)(3) status in the United States. The project team is grateful to a number of individuals who served as peer reviewers on an earlier version of this IISD receives core operating support from the Government of Canada, provided through the Canadian report. In particular, we thank: International Development Agency (CIDA), the International Development Research Centre (IDRC) and Environment Canada; and from the Province of Manitoba. The Institute receives project funding from numerous Steven Bantz (Union of Concerned Scientists) governments inside and outside Canada, United Nations agencies, foundations and the private sector. Kyle Datta (Rocky Mountain Institute) International Institute for Sustainable Development Nathanael Greene (Natural Resources Defense Council) Head Office 161 Portage Avenue East, 6th Floor H. Benjamin Hartley (Joint Committee on Taxation, retired) Winnipeg, Manitoba Charlotte Hebebrand (International Food & Agricultural Trade Policy Council) Canada R3B 0Y4 Tel.: +1 (204) 958-7700 Suzanne Hunt (Worldwatch Institute) Fax: +1 (204) 958-7710 Masami Kojima (World Bank) Web site: http://www.iisd.org Michael O’Hare (University of California at Berkeley) International Institute for Sustainable Development Global Subsidies Initiative Tadeusz W. Patzek (University of California at Berkeley) International Environment House 2 Erich Pica (Friends of the Earth) 9 chemin de Balexert 1219 Châtelaine David Pimentel (Cornell University) Geneva, Switzerland Lee Schipper (World Resources Institute) Telephone +41 22 917-8373 Fax +41 22 917-8054 Randy Schnepf (Congressional Research Service) Web site: http://www.globalsubsidies.org Jerry Taylor (Cato Institute) Biofuels – At What Cost ?: Government Support for Ethanol and Biodiesel in the United States Brent D. Yacobucci (Congressional Research Service) By Doug Koplow Their comments and insights helped to greatly improve the final version. However, the report should not be inter- ISBN 1-895536-94-4 preted as necessarily representing their views. And, as is always the case, any remaining errors or inaccuracies remain the responsibility of the author. The GSI’s research activities are funded by the governments of The Netherlands, New Zealand and Sweden. The views expressed in this study do not necessarily reflect those of the GSI’s funders, nor should they be attributed to them. Printed on 100% post-consumer recycled paper. ii iii | ii | iii Biofuels – At What Cost? Government Support for Ethanol and Biodiesel in the United States Table of Contents Abbreviations and Acronyms vii 1. Introduction 1 1.1 Framework of the analysis 3 2. Overview of Liquid Biofuels Industry in the United
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