Who’s making money on bio-fuels and are they a good alternative to oil?


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I just read an interesting paper from the MIT Centre for Energy and Environmental Policy Research and it had some interesting things to say about bio-fuels and politics.  The paper Some Inconvenient Truths About Climate Change Policy: The Distributional Impacts of Transportation Policies (August 2011), by Stephen P. Holland, Jonathan E. Hughes Christopher R. Knittel and Nathan C. Parker is a technical paper where they reflect on the relationship that exists between various forms of carbon emission reductions that rely on subsidised biofuels and voting patterns in the United States. 

The paper compares the costs to reduce greenhouse gasses of three different policy choices against the Cap and Trade (CAT) option, which does not subsidize the production of biofuels.  They show CAT as the lowest cost alternative in terms of dollars per unit of carbon reduction but find that the higher cost options are frequently adopted.  They go on to show that the subsidized options, though more expensive, produce the highest potential for private gain, while CAT produces the highest potential for carbon emission reduction per dollar spent. 

While the article does not answer the question posed in the title, it does seem to conclude that if private interests were taken out of the equation, we could get better carbon reduction bang for our bucks if we adopted a cap and trade system rather than any of the subsidized bio-fuel alternatives.

The article is a bit technical, but it is still written in such a way that most informed readers can take something away from it.  It is also nice to see that these issues are being discussed by institutions such as MIT.

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