This new paper (pdf) by Harry de Gorter and David R. Just, published in the Cato Institute’s journal, Policy Analysis, looks interesting.
From the executive summary:
Sustainability standards are based on “lifecycle accounting,” in which ethanol is assumed to replace gasoline; but in fact, it may be replacing coal or other energy sources. Life-cycle accounting also fails to recognize that if incentives are given for ethanol producers to use relatively “clean” inputs (e.g., natural gas), the “dirtier” inputs (e.g., coal) that might otherwise have been used for the ethanol production will simply be used by other producers to make products that are not covered by the sustainability standard. Sustainability standards reshuffle who is using what inputs—with no net reduction in national emissions.
2 thoughts on ““Why Sustainability Standards for Biofuel Production Make Little Economic Sense””
The entire concept of sustainability is based on a deeply flawed simplistic model of how we get resources.
It’s based on what I like to call the “flour barrel” model in which resources are viewed as just laying around in nature like a tub of floor in an old fashion general store. In this model, everyone in the world scoops out the resource from the finite barrel. There is no feedback and everyone just keeps consuming at the same rate until we suddenly reach the bottom of the barrel and suffer a catastrophic collapse.
In reality, there are no natural resources save the ambient oxygen in the air. Every other resources from potable water and flint chips to titanium is created by human actions. We make our resources pretty much on demand. As long as we’re free to experiment and find solutions we can create new resources indefinitely.
The other stupid thing about “sustainability” is the idea we can perform the kind of detailed economic analysis needed to pick and choose different resource creation options without experimentation. It’s simply a variant of the mirage of central planning.
To be LEED-certified (on 4 progressive levels) a building has to comply with a credit system scoring maximum of 57 points (for a Platinum level) within 6 categories. One of the available credits within Energy and Atmosphere category is Green Power (EA cr.4).
This credit states that the tenant (or building’ owner) purchases 50% of the energy bill from Green (Sustainable) sources. These sources, f.ex., include “biomass”, but exclude nuclear energy.
So, how the typical commercial tenant occupying a floor in an rental office building can achieve this? 3 ways are offered – -to purchase their G-power directly from an energy market (undoable in a hi-rise bldg), -to purchase it through utility Co usually means $extra to energy bill and not always available from local utilities) or – and that’s the most senseless – to continue your regular power consumption from a non-Green Energy local utility, but in addition to buy Tradable Renewable Certificates in a qualtity equal to 50% of your typical el. consumption!
So you’re made to subsidy somebody’s “green” electrical generation business without even consuming the product.
How economically appealing is it?
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