David Fickling, Bloomberg, on biofuel mandates when farmland, crop production is scarce…
“As a result, an industry that always had questionable advantages is now starting to be an impediment to cleaner modes of transport. Worse, the pressure it’s putting on the planet’s limited farmland is hampering our ability to feed the world’s poorest. It’s time to start dismantling the pipeline connecting farms to gas tanks before it does any more harm.
Look across the largest vehicle markets, and biofuel blending mandates are everywhere. In the US, with the second-largest national fleet, ethanol derived mostly from corn comprises more than 10% of all gasoline sold. India, the next-largest market, blends in 7.5%, largely from sugarcane. Indonesia and Brazil, which come next, now require mixes of 30% and 27%, respectively. Only China, the largest national market of all, has a lower rate of around 2.1%. The European Union, bigger even than China, requires a 10% blending mandate across the bloc.
There’s a problem with such mandates. If supply-demand imbalances push up the cost of corn, sugar or vegetable oils too much, most industrial and household consumers will work hard to find alternatives that better suit their budgets. That demand destruction helps rebalance the market and bring costs back to affordable levels. Fuel blenders rarely have so much discretion: If they’re below the mandated target, they must buy additional bioenergy at any price to make up the shortfall.
There’s a problem with such mandates. If supply-demand imbalances push up the cost of corn, sugar or vegetable oils too much, most industrial and household consumers will work hard to find alternatives that better suit their budgets. That demand destruction helps rebalance the market and bring costs back to affordable levels. Fuel blenders rarely have so much discretion: If they’re below the mandated target, they must buy additional bioenergy at any price to make up the shortfall.””
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