A modest contribution of biofuels to energy independence

As oil prices reach record levels, the EU is pressing member states to meet their target of increasing their share of biofuels to 5.75% of overall fuel consumption by 2010. The renowned French Institute for Agricultural Research (INRA) assesses the economic impact of this scenario for France. It concludes that the advantages of first-generation biofuels are not sufficient to replace petroleum in sufficiently large quantities.

Both energy and economic advantages of first-generation biofuels are not clear-cut, says the INRA in this paper. 

Although INRA is convinced that the energy balance of biofuels is positive, (i.e.: it provides more energy than it takes to produce it), it says the savings in petroleum are limited in proportion to France’s domestic consumption of oil. In short, it believes the contribution of first-generation biofuels to France’s energy independence can only be “modest” (between 1.5 and 2 mtoe by 2010 compared to consumption of 92.8 mtoe in 2004).

Moreover, INRA says energy crops (especially rapeseed, which is the most utilised in France) cannot only grow from fallow land, which may put them in competition with food production. To alleviate this risk, INRA says the EU would have to increase its subsidies for energy production. Indeed, farmers currently receive by 200 to 300 euros per hectare of fallow land converted to food crops (in comparison to 45 euros per hectare of land devoted to energy crops). 

Another concern lies in economic viability of biofuels if oil prices continue to increase. Despite government tax incentives (e.g. exemption from the domestic tax on petroleum products), the cost-benefit trade-off for the sector calculated for 2010, with an oil price at about $65/barrel, would be close to zero, according to INRA calculation. 

Against this background, the findings tend to be more optimistic for the economic impact of second-generation biofuels.