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Case 4: Biofuels subsidies criticised Governments need to scrap subsidies for biofuels as the current rush to support alternative energy sources will lead to surging food prices and the potential destruction of natural habitats, the Organisation for Economic Co-operation and Development warned in September 2007. The OECD report argued that politicians are rigging the market in favour of an untried technology that will have only limited impact on climate change. The current push to expand the use of biofuels is creating unsustainable tensions that will disrupt markets without generating significant environmental benefits, say the authors of the report. The report also says that biofuels would cut energy-related emissions by 3% at most This benefit would come at a huge cost, which would swiftly make biofuels unpopular among taxpayers. The study estimates the US alone spends $7 billion ($3.4 billion) a year helping make ethanol, with each tonne of CO2 avoided costing more than $500. In the European Union, it can be almost ten times that The study states that biofuels could lead to some damage to the environment: "As long as environmental values are not adequately priced in the market, there will be powerful incentives to replace natural Ecosystems such as forests, wetlands and pasture with dedicated bio-energy crops. The report recommends governments phase out biofuel subsidies, using "technology[1]neutral' carbon taxes to allow the market to find the most efficient ways of reducing greenhouse gases The survey puts a question mark over the EU's plans to derive10% of transport fuel from plants by 2020. It states that money saved from phasing out subsidies should fund research into so-called second-generation fuels, which are being developed to use waste products and so emit less CO2 when they are made. Adrian Bebb, biofuels campaigner with Friends of the Earth said, 'The OECD is righto warn against throwing ourselves head-first down the agro fuels path.' Wheat costs actually doubled in 2007, not only because of a poor harvest but also because farmland previously used for cereals had been converted to growing biofuel energy crops such as rapeseed - the increased demand for biofuels having raised the price of such crops. Source: Adapted from Bounds, A., 'OECD slams biofuels subsidies for sparking food price inflation', Financial Times, 11 September 2007. Question Why might subsidising biofuels actually damage the environment