Peter Wooders is a senior economist at the the International Institute for Sustainable Development, a Canadian-based, international public policy research institute for sustainable development.
Since 2006, the International Institute for Sustainable Development’s Global Subsidies Initiative (IISD-GSI) has worked to quantify and understand the impacts of biofuel subsidies. We have published comprehensive reports on more than ten countries, from Indonesia to Germany, most recently focusing on the costs and benefits of biofuel subsidies in the EU as a whole.
That study was recently criticized by Rob Vierhout, secretary-general of ePURE, the association of the European renewable ethanol industry, in a commentary published in EurActiv (Take an honest look at ethanol). Given the serious nature of Mr. Vierhout’s criticism, we are compelled to respond.
IISD-GSI has no a priori position on subsidies to buiofuels or any other type of energy. We support an informed public debate around whether such subsidies are good public policy – ie. Is the money well spent with respect to society’s objectives to develop sustainability, or not?
Vierhout notes IISD’s “hard won reputation for impartiality and leadership” but questions whether our report was adequately peer-reviewed and claims that factual and methodological errors stand uncorrected. IISD-GSI engages peer-reviewers for quality control for all its studies. We seek out experts who will respect the confidentiality requirements we work under and who will engage in an objective, non-personalised debate. We did not ask ePURE formally to review the report, but did visit and discuss the operations of the Dunafoldvar plant run by ePURE member Pannonia Ethanol in Hungary.
We are also broadly aware of the industry’s views on biofuels policy, having spoken with and interviewed various biofuels producers in the recent past. Where factual errors are identified in a review, these are always corrected. Otherwise, in instances where opinions are expressed about the best approach or methodology for analysis, the IISD-GSI uses its judgement to determine which comments and suggestions are taken into account.
A number of methodologies can be applied to estimate EU biofuels subsidies. The debate around the report has drawn suggestions from a number of groups on this matter, including Ecofys, who reviewed the report on behalf of VDB, the German Biofuels Industry Association. Subsidies through excise tax exemptions for biofuels are simple to calculate and the methodology is undisputed, but there is a lack of transparency on the data required which the European Commission and national governments should urgently address.
The other major subsidy type is market transfers, which make wholesale biofuel prices in the EU more expensive than in other parts of the world. Methodological suggestions include that: subsidies should be calculated by comparing biofuel to fossil fuel prices; excise taxes should be subtracted; and only the portion of subsidies benefitting EU biofuel producers should be accounted for. IISD-GSI is confident that the methodology it applied to generate its estimate of €5.5-6.9 billion for 2011 remains the best available. This accounts for the full cost of subsidies to the EU, regardless of whether these benefit producers or occur within or outside the EU.
ePURE has also questioned whether IISD-GSI’s funding sources have influenced our stance on biofuels. We are proud that our funding comes from a wide variety of government and non-government sources. Half comes via programmatic support from European governments who believe in our mission to create information about subsidies and foster public debate about their impacts. This gives us considerable freedom to choose what we work on, and our work spans the energy sector. Project-based funding is only accepted if it supports the aims of our independent work programme. The views of donors or project-based funders are not allowed to influence our analysis or its publication.
The IISD-GSI is pleased that our work has stimulated a lively debate on the scale and impacts of biofuel subsidies, on who benefits from them, and how they should best be calculated. We understand that there are a range of legitimate methodological and data issues and opinions where face-to-face discussion amongst all stakeholders, from producers to researchers, would improve the analysis, and commit to participate fully in this process.