I saw this essay on one of the Biofuels news groups and thought it looked interesting, Tim Joslin has given me permission to reproduce it so here it is. If you want to use it or extracts you should ask Tim. He holds the copyright.
The first part is an interesting argument about the effects of supply demand and price... as we add more biofuels to the transportation fuel pool the price of that fuel will fall (it assumes that there is no underlying increase in the capacity to use fuel).
I also like the second part, which examines some of the sloppy thinking that can be involved in ideas like Carbon offsetting.
Here it is: The Displacement fallacy.
Promoters of biofuels and of carbon offset schemes both rely on the same flawed premise. They
assume that supplying an alternative to a source of greenhouse gases (GHGs) will somehow prevent
the activity causing the GHG emissions. The UK's Department for Transport (DfT), for example,
claims that compelling the country's motorists to burn (approximately) one million tonnes per annum
of carbon in the form of biofuel1 under its Renewable Transport Fuel Obligation (RTFO), will result in
one million tonnes less carbon reaching the atmosphere each year.2 This is not the case.
The problem is that, whilst the RTFO may ensure that motorists burn one million tonnes of biofuel
carbon a year, at great cost to the environment and to food supplies, it will not ensure that motorists
burn one million tonnes less carbon in petrol or diesel. There is no reason to suppose the biofuel will
"displace" oil-based fuels and every reason to suppose that it won't.
The price of oil is determined by supply and demand in a global market-place. The greater the supply,
the lower the price. The lower the price, the more people will buy. Conversely, the greater the
demand for fuel - that is, the more people want to buy - the higher the price. A balance is reached.
The price at any given time is that at which the amount people will buy matches the supply.
If we add one million tonnes of biofuel to the fuel supply each year we will free up one million tonnes
of the current supply of oil-based fuels. This will cause the price to fall. More people will want to buy
petrol or diesel at this lower price, so demand will rise to compensate for the increased supply.
In practice the effect is global. The price of oil and oil-based fuels around the world will adjust
continuously as biofuel is added to the fuel supply. Consumers in the UK and in other countries
around the world will buy more petrol and diesel. People will simply drive more.
A similar argument applies to schemes to "offset" carbon emissions. I read recently about one such
scheme, to subsidise a wind-farm in China under the Clean Development Mechanism of the Kyoto
Protocol.3 Now, paying for a wind-farm in China is not a bad thing in itself, but it is impossible to
claim that doing so "offsets" a specific amount of carbon emissions elsewhere in the world. It may be
that China is unable to build coal-fired power stations fast enough to meet the demand for electricity.
The wind-farm may therefore simply be generating electricity that would not have been produced
otherwise, and is not "offsetting" carbon emissions at all.
Depending on market conditions, adding one million tonnes of biofuel carbon to the UK road fuel
supply will not "deliver carbon savings of approximately one million tonnes per annum"4. The saving
will be somewhere between zero and one million tonnes. In general, a fair assumption might be to
halve the expected carbon saving. But, at present the world is developing rapidly and there are fuel
shortages in many countries. The main limitation on oil consumption is how quickly we can get it out
of the ground - there is very little surplus production capacity. Under present conditions it is
reasonable to assume that the UK's RTFO will "displace" only a small proportion of the one million
tonnes of carbon claimed by the DfT.
1 After allowing for the fossil fuel inputs required to produce the biofuels, and for the differing energy contents of biofuels and petrol/diesel. The "Consultation on the Draft Renewable Transport Fuel Obligations Order 2007", Dept. for Transport, February 2007 (the "RTFO Consultation document"), assumes that "on average, biofuels offer a 60% carbon saving compared to their fossil fuel equivalents" (paragraph 74, p.18). This equates to "2.5 billion litres of biofuel a year" (RTFOConsultation document, paragraph 5, p.1). This note refers to "one million tonnes of carbon in the form of biofuel" and "one million tonnes of biofuel" for simplicity.
2 RTFO Consultation document, e.g. paragraph 1, p.4.
3 "Clean Power That Reaps a Whirlwind", The New York Times, 9th May 2007, accessed online on 15/5/07.
4 RTFO Consultation document, paragraph 1, p.4.
16/05/2007, 3:14 PM 1/1 ©Tim Joslin