Promoting biofuels use in Spain: A cost-benefit analysis

Public support for renewable energy is usually justified in terms of its contribution to reducing energy dependency; an improvement in environmental quality and a stimulation of economic activity and employment. In the case of biofuels, greenhouse gas emissions reduction has received significant attention. Nevertheless, nowadays there is a lively debate surrounding the convenience of biofuels. This is a consequence of the potentially negative impacts revealed from their production on a large scale. The aim of the present work is to analyse the potential contribution of biofuels to the main impact categories identified. All those impacts categories have been measured in economic terms with the aim of conducting a very simple cost-benefit analysis to assess the suitability of biofuel promotion policies in Spain. Since the scope of the analysis is the national level, the study seeks to cover three main impact categories: [i] the environmental impact, including not only the greenhouse gases but also other kind of regional and local pollutants; [ii] the economic impact or potential stimulus for the national economic activity derived from a new productive sector; and [iii] the potential consequences on the economy derived from using biofuels to reduce the Spanish energy dependency. Results confirm that consuming biofuels has a positive impact on environmental quality, mainly due to the reduction of greenhouse gases, SO2 and particulate matter emissions. In contrast, analyzing the whole effect on the economy, the use of biofuels is displacing income from other economic sectors, resulting in a net negative impact. In terms of energy dependency, biofuels do not significantly contribute to reduce the risk of supply disruptions nor the impact on the economy derived from increases in fuel prices. Concluding, the study shows that the introduction of mandatory targets of biofuel consumption along the timeframe of 2008–2020 in Spain could result in a welfare loss for the Spanish society.