Are Ethanol Mandates Good Economics? Maybe Not.


A few days before the story on oil from waste paper and other sources of lignocellulose hit the wires, the Australian Parliament released its research paper entitled, "The economic effects of an ethanol mandate." It looks at the costs and benefits of proposals such as nation-wide petrol including a blend with 10 per cent by volume of ethanol (E10), such as is already mandated by some Australian states. Although the paper doesn't spell it out in absolute terms it does suggest that in most cases there are more effective ways to achieve improved environmental and economic outcomes other than mandating ethanol fuel blends.One of the findings was that "On life-cycle analysis, savings in greenhouse gas emissions from E10 over neat petrol are generally from 1-4%, depending on feedstock." This, combined with other evidence led the review panel to determine that much cheaper carbon reduction options existed than ethanol. The research concluded in its Executive Summary that, "A mandate could benefit the economy if domestic ethanol could compete with imports without government assistance." And followed this up by stating, "Even though a comprehensive cost-benefit analysis of an ethanol mandate has not been undertaken, no prima facie economic case for a mandate has been established."

The full research paper can be viewed online at the Australian Parliamentary Library site. It is chock full of intriguing facts like, "... converting the total national oilseed crop to biodiesel would only produce 6 per cent of Australia's current diesel needs" or this doozy on the employment benefits of tax payer supported ethanol: "The high cost of job creation [...] means that it would be cheaper to pay each worker average weekly earnings to do nothing than to subsidise them to produce ethanol."

Not exactly a ringing endorsement. But we should point out that the report is a preliminary one, and concerned itself mostly about the benefits to the tax payers purse in covering the cost of setting up ethanol fuel supply. :: "The economic effects of an ethanol mandate", via listening to ABC Radio National, and as picked up by The Oil Drum.

See also Green Basics: Ethanol

(NB: we thought this was posted some days ago, but a gremlin in the blogging software gave a false reading, so resubmitting it here.)

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