Abstract
Three EU countries (Germany, the Netherlands and the UK) are planning to tax biofuels
according to their carbon footprints. The EU has picked up the idea as well (its legislation, if
passed, would apply to all 27 member states) and so has the US federal government. The
basic principle of carbon certification is that to qualify for tax relief or subsidy, a biofuel must
have carbon footprint 20-40% lower than the ‘reference’ petrofuel it putatively substitutes.
Fine in principle, except in practice, the governments disagree as to which fuels qualify.
North American ethanol from corn (maize), for instance, clearly qualifies under one system,
barely qualifies under another and fails to qualify under yet another. Palm methyl ester, sugar
beet ethanol and wheat ethanol, too, are both clear winners and clear losers under various
systems. The ratings for soy methyl ester and rape methyl ester also diverge from system to
system.
Carbon certification has major implications for biofuels. It will reward some and punish
others, it will create a new market in biofuel carbon certificates and it will trigger growth in
farm certification. The disagreement over which biofuels should be certified also has
implications: confusion in biofuels markets, cynicism among consumers plus an upswing in
lobbying and lawsuits.
This issue is important, not only because the developed world’s tax relief and subsidies to biofuels reached $15 billion in 2007, but also because precedents set here surely will apply to carbon certification schemes for other products and services.
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