Costly biofuel support offers few benefits: OECD

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By Sybille de La Hamaide

PARIS (Reuters) - Public support for biofuels is costly and has little impact in cutting greenhouse gas emissions so governments would do better promoting lower energy consumption to fight climate change, the OECD said on Wednesday.

Governments should also boost the so-called second generation biofuels that do not use food crops, the Organization for Economic Co-operation and Development said in a report.

The study comes as the latest blow to biofuels, made from grains, oilseeds and sugar, which were once hailed for providing a clean alternative to fossil fuels but are now blamed for a surge in food prices.

Many European Union countries including Britain, Italy or France recently for a review of the EU's ambitious and sometimes confusing blending targets -- notably that 10 percent road transport fuel be derived from renewable sources by 2020.

Governments are increasingly doubtful about whether biofuels were as "green" as they claim to be when taking account of the total energy needed to produce them and the environmental impact of intensive farming and increased land use.

The OECD said that if Brazil's ethanol produced from sugar cane cuts greenhouse gas emissions by around 80 percent, biofuels from other feedstocks in the United States, the EU or Canada tend to have a far lower environmental benefit.

Biodiesel from vegetable oil cuts greenhouse emissions by around 40-55 percent and ethanol from corn, which is mostly produced in the United States, generally cuts them by less than 30 percent.

The United States and Brazil are the largest producers of ethanol with 48 percent and 31 percent of global output in 2007 while the European Union produced about 60 percent of the global output of biodiesel, the Paris-based organization OECD said.

It stressed that support policies including tax incentives, blending targets and trade restrictions to protect domestic output in the main producing countries such as the EU, United States and Canada would total $25 billion a year for a reduction of less than 1 percent of emissions from transport in 2015.

At the same time they cause high environmental risks, particularly in Latin America and large parts of Africa.

"While on the one hand this may provide additional income opportunities to generally poor rural populations it bears the risk of significant and barely reversible environmental damage," it said, citing higher greenhouse gas releases and a loss of biodiversity.

The OECD and the United Nation's FAO food agency said in a joint report at the end of May that global production of biofuels would more than double over the next decade, boosted by high government support, helping agriculture prices to flare up.

Rather than promoting biofuels, governments should spend their money on projects that consume less energy, it said.

"The primary focus for fossil energy saving needs to be redirected from alternative fuels towards lower energy consumption," the OECD said.

(Reporting by Sybille de La Hamaide, Editing by Peter Blackburn)