Biofuel subisidies are sparking food price inflation, says OECD, in today’s Financial Times. The FT has a copy of a paper it says theOECD will be presenting later today.
Key findings are that the US is spending $7bn helping to make ethanol, with each tonne of carbon dioxide avoided costing around $500. The cost of European Union could be about ten times that.The OECD adds:
As long as environmental values are not adequately priced in the market, there will be powerful incentives to replace natural eco-systems such as forests, wetlands and pasture with dedicated bio-energy crops.
Instead of subsidising biofuels, governemts should tax carbon taxes which are carbon neutral, says the OECD. The money saved from subsidies should then be pushed into second generation research. Hard to disagree with that, unless you’re a farmer..