Time to end pricey biofuel subsidies, says Ecofiscal Commission

A new report by a group of economists says it’s time to end expensive federal and provincial government subsidies of the ethanol industry.

While biofuels have cut greenhouse gas emissions by about three million megatonnes annually, a study by the privately funded Ecofiscal Commission says a carbon tax would reduce Canada’s carbon footprint at a much lower cost.

“I actually know no economist who doesn’t agree … that the cheapest, most efficient, most cost-effective way to reduce greenhouse gas emissions is with a carbon price,” the chair of the commission, Christopher Ragan told the Calgary Eyeopener.

Pricey experiment

Ragan, an associate professor of economics at McGill University and member of the federal government’s Advisory Council on Economic Growth, says the ethanol industry subsidies were an interesting, but pricey, experiment.

“By using biofuel policies, it’s costing us between $150 and $180 to reduce one tonne of greenhouse gas emissions. If you actually just relied on a carbon price … to reduce those emissions,  it could cost just under the actual carbon price,” said Ragan,

“For example in B.C. with a $30 per tonne carbon price , the average cost of a tonne of emissions is $28. So with a carbon price at $20 or $30 you’re paying one-fifth or less of the cost you would be paying through these much more expensive biofuel policies — and that’s why we think it’s time for these policies to go.”

Chris Ragan

McGill University professor and economist Christopher Ragan is the chair of the Ecofiscal Commission. (CBC)

While the renewable fuels industry was consulted for the report, the president of Advanced Biofuels Canada was critical of the commission’s findings.

“Rarely have we seen a report that falls so short on accuracy, balance, scientific rigour, and knowledge of the subject it addresses,” Ian Thomson said in a press release.

The commission’s report comes days after the Trudeau government told provinces that if they didn’t create their own carbon tax or cap-and-trade, it would impose it’s own rate of $10 per tonne, starting in 2018.

With files from the CBC’s Marc Montgomery and the Calgary Eyeopener

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