Biofuel regulations and subsidies

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The intellectual premise upon which the latest Policy Exchange report is sound enough:

Aviation is, amongst other things, a fundamental part of the global economy and facilitates inter-cultural exchange. Moreover, people throughout the world want to travel. As a result, we must promote methods that can reduce emissions from those flights that do take place.

Yet the substance leaves a lot to be desired, as Martin Livermore has discussed previously on this blog.

Green Skies Thinking argues for the EU and UK polities to promote the development and commercialization of sustainable bio-jet fuels, complaining that at present “there are no specific policies within Europe to create that aim." The policy suggestion is built upon the creation of an EU Sustainable Biofuels Mandate, that if introduced would require planes to be run on 20% bio-jet fuel by 2020, rising to 80% by 2050.

If as this report suggests there is commercial viability for bio-jet fuel, then there is no need to upload airline energy policy to EU. Competition, not subsidy is the only sustainable energy policy. Of course there are financial risks involved, but this will not deter the entrepreneur. And it is much better that they take on this risk, as opposed to European taxpayers.

The argument for regulations and subsidies for investment are never a sensible move for the defenders of free markets. Even if you happen to make the right call on the technological path (hard enough in itself), overturning the regulations and turning off the subsidy tap becomes increasingly difficult.

Although the political capital of climate change gives think tanks an opportunity to cash in and exert influence over government policy, those usually on the right side of the debate should tread with caution. The policy suggestions contained in this paper put politics before markets and upload key aspects of private company and national energy policy to the European level.