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Sustain to gain: May 2011 Archives

In a recent post, I reported on current climate policies for road transport - these policies are challenged by increasing market shares of alternative fuels and technologies. These fuels have a carbon footprint that is increasingly determined by upstream processing, recovery, and general equilibrium effects. Notably, biofuels such as corn ethanol induce deforestation which itself is a major source of front-up CO2 emissions (ignoring other effects such as biodiversity loss). Not all biofuels, however, have the same carbon footprint. How can biofuels for transport and their life-cycle greenhouse gas emissions then be effectively regulated? As pointed out in the corresponding paper, fuel mandates but also the Californian Low Carbon Fuel Standard or the European Fuel Quality Directive (FQD) are insufficient for not accounting for a series of general equilibrium effects. The European Commission, in fact, is currently reviewing its stance, and may review the FQD in this summer. But what kind of measure can improve the biofuel conundrum? The twin paper by Flachsland et al. studies a potential role of emission trading also for the transport sector. Now, this is an effective measure in terms of bringing a level-playing field across all fuels. In fact, if a cap is global in scope, and covers all relevant sectors, we could sleep quietly: wherever emissions appear they will be accounted for, and it is not relevant whether they are induced by biofuels or not. It matters only that they get a price tag, and that people try to reduce emissions. However, a global cap is not in sight, and an inclusion of agricultural emissions also seems utopian currently. Hence, we are still stuck with the GHG accounting problem for biofuels (and potentially relevant general equilibrium effects for other fuels such as electricity) when transport is included in the European Emission Trading Scheme. One possibility is to treat biofuels by default as having at least gasoline-equivalent emissions (see DeCicco, 2009). Fuel providers can then prove that their feedstock has neglible indirect effect and low fertilizer (N20) and processing emissions, gaining credits if certified. This would reverse the burden of proof. Properly implemented, it can be seen as an implemented precautionary principle - better safe the forests and its carbon stock then being sorry big time.