An economic analysis by Oregon State University economists questions the cost-effectiveness of biofuels, saying they would barely reduce fossil-fuel use and would likely increase greenhouse-gas emissions.

The idea that biofuels can reduce dependency on fossil fuels and mitigate climate change has led governments to promote them as substitutes for gasoline and petroleum-based diesel, using mandates and subsidies, says Bill Jaeger, the study’s lead author.

"Our results suggest that existing biofuel policies have been very costly, produce negligible reductions in fossil-fuel use and increase, rather than decrease, greenhouse-gas emissions," says Jaeger, an ag and resource economist.

Biofuels were initially seen as a solution to energy and environmental problems, he says, because the carbon dioxide that's emitted when they're burned is equivalent to what they had absorbed from the atmosphere when the crops were growing. Thus, biofuels were assumed to add little or no carbon dioxide to the atmosphere.

But he says the bigger picture is more complex, in part because biofuels are produced and transported using fossil fuels. For example, nitrogen fertilizer, which is made using natural gas, is used to grow corn for ethanol. Additionally, growing biofuel feedstocks can push food production onto previously unfarmed land. When this new acreage is cleared and tilled, it can release carbon that accumulated over long periods in soil and vegetation, thus increasing greenhouse-gas emissions.

The costs of these side effects tend to be overlooked by policies that focus only on gallon-for-gallon substitutions, Jaeger adds.

The researchers focused on the major mandated and currently used biofuels worldwide: corn ethanol, soybean biodiesel, cellulosic ethanol from switchgrass grown in the U.S., canola biodiesel produced in Europe and sugarcane ethanol produced in Brazil and exported to the U.S. or Europe. They evaluated them in terms of their contribution to reducing fossil-fuel use and greenhouse-gas emissions. They also compared their costs and effectiveness to two alternative policies: an gas-tax increase and implementation of energy-efficiency improvements.

Their results indicate that all of the biofuel crops were much less cost-effective than the two alternative policies in terms of reducing greenhouse-gas emissions and fossil-fuel use.

"Each dollar spent on energy improvement programs would be 20 times more effective in reducing fossil-fuel use and greenhouse-gas emissions than a similar cost for the corn ethanol program," says Jaeger. "Likewise, a gas-tax increase would be 21 times more effective than promoting cellulosic ethanol."

Overall, it was estimated that U.S.-produced biofuels would cost between 20 and 31 times more than energy-efficiency improvements that would reduce gas consumption by 1%. The study also reports that combining a gas-tax increase with energy-efficiency improvements could reduce fossil-fuel use by more than 15% (or cut petroleum fuel use by more than 35%).

Next, the researchers looked at how much it would cost to achieve governmental targets for biofuel use and what the impact would be on fossil-fuel use. The Renewable Fuel Standard calls for 15 billion gallons of conventional biofuel sources such as corn ethanol, 1 billion gallons of biomass-based diesel, 16 billion gallons of advanced cellulosic biofuels and 4 billion gallons of other advanced biofuels to be used in transportation fuel by 2022.

They concluded that all of these biofuel mandates combined would reduce fossil-fuel use by less than 2.5%, or the same amount that a gas-tax increase of 25¢ per gallon could achieve, but at an estimated cost of $67 billion compared to $6 billion with a higher gas tax.

The study did not take into account the effect that increased production of biofuels might have on water use, pollution and food prices, all of which raise additional concerns about the merits of promoting biofuels, says Jaeger.