July 31, 2007

Gasoline tax or higher fuel economy standards may be preferable to biofuels, says Oregon study

Corvallis, Oregon – A study by the Oregon State University Extension Service says that the adoption of biofuels in that state could reduce fossil fuel use by less than one per cent, and at a higher cost to society than more direct approaches such as a gasoline tax or raising fuel economy standards.

The study compared corn ethanol, canola biodiesel, and wood-based cellulosic ethanol, examining each fuel’s commercial viability, potential production scale, and cost-effectiveness for achieving energy independence and reducing greenhouse gases.

The researchers estimate that to achieve a given improvement in energy independence, biofuels could be six to 15 times more costly than other policy approaches, such as raising fuel economy standards for vehicles. When looking exclusively at reducing emissions of greenhouse gases, however, the analysis suggests that both canola biodiesel and wood-based ethanol may be more cost-effective ways to achieve that goal.

The results are also mixed in terms of commercial competitiveness. The study found that corn ethanol and canola biodiesel are currently commercially viable in Oregon, thanks in part to government subsidies and regulations, but current production costs are still too high to make wood-based ethanol commercially attractive. The authors explain that part of the cost structure is in the large differences in the amount of fossil-fuel energy required to produce each fuel, and that there are large differences in the amount of energy contained in each gallon of fuel.

The study looked only at large-scale commercial production of the three biofuels, and acknowledges that local or on-farm production may offer other advantages in some cases. It also cautions that the estimates are subject to future changes in price, technologies or other developments.

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