Economic Perspective:Biofuel Subsidy Debate Goes Green

There has been a lot of talk lately about the lack of a level-playing field for biofuels because of the heavy subsidies being used to support the sector's shaky economics. The sector's economics are certainly questionable when you consider that the current route to ethanol would require huge land usage to make only a small contribution to motor fuel demand in the U.S., the world's biggest consumer. Even an environmental group recently called for an end to U.S. biofuel subsidies, saying they are not well targeted or efficient. However, the dominant issue has to be environment, especially in the developing world. In Beijing, for example, the air quality is so atrocious that doctors recommend babies be taken out of the city every few months. Subsidies for biofuels, at least for the time being, might be a sensible approach to trying to resolve the problems being generated by hydrocarbon pollution. And as environmental pressure intensifies on growing evidence of global warming, governments might have little choice but to keep diverting money to the biofuels industry.