2007, Volume 10, Paper 74
Biofuel Mania
Bill Malcolm – School of Agriculture and Food Systems, Faculty of Land and Food Resources, University of Melbourne
Paper presented to Sheepvention, Hamilton, August, 2007
Against a backdrop of concern about the natural environment and renewed worrying over world energy supply, governments around the world are diverting resources into investment into biofuels as a source of energy. This has potential implications for the Australian economy and the agricultural economy, and beyond.
Investment commits capital now to reap rewards in the future. The future awaiting the invested capital cannot be known. Some of the possible futures awaiting invested capital can be imagined. When imagining the future it is helpful to draw on what is known. Theory and principles explaining the behaviour of what is known are a help also.
The causes and effects that derive from established theory about how parts of the world work represent the best explanation we have at this time – with good research and tough testing, new knowledge is established and theory evolves. This approach is better than making up your own theories about science or economics, based on some particular set of personal experience, or simply seeing phenomena through the prism of private interest. Such approaches are no less fraught for being increasingly common approaches. In the following discussion, principles of economics are applied to questions about the implications of investing public and private resources in biofuel production in Australia.
To draw conclusions about ‘what could be’ for biofuels from an economic perspective, information about the future of biofuels in Australia is drawn from research from the ABARE, views presented to the ABARE by experts from science, the fuels industry and business; a series of research reports recently commissioned by and reported in the Australian Farm Journal; and research of the RIRDC and the CSIRO. As well, some views from management of businesses that are investing in biofuels around the world are canvassed.
These sources are considered, substantial analyses, central to the question. As always with issues involving the environment and the economy, at the periphery of this debate are purveyors of an impressive collection of fallacies and shibboleths: self-sufficiency and protectionism, environmental fundamentalism, regionalism, agrarian socialism, northern developmentism, business opportunism and self interest. There is no shortage of this type of commentary. The ‘ism’ most notably missing from much debate is economic rationalism.
Download the full PDF version here.