The appearance of GSI's recent survey of how OECD economies are pouring billions into subsidising biofuels provides a good time to take stock of the GSI project.
 
Ours is not an ideological crusade against subsidies. Subsidies are a perfectly legitimate policy tool. Spending public money to advance private ends can sometimes make sense. But those who claim that have to provide hard evidence. Government handouts have a long history of being advocated as temporary measures, but very often they become permanent. That should come as no surprise: subsidies can create privileged, well-organized cliques who have a strong incentive to argue for their continuation.
 
Biofuels have a place - just like wind power, photo-voltaic arrays and energy efficiency standards. The question is whether they warrant deeper draughts of public money than other energy sources that can make energy supplies more secure and mitigate our environmental footprint. Again, the onus is on those who lobby for public largesse to make that case beyond reasonable doubt.

So what does our stock take of the financial consequences of current subsidies for biofuels in OECD countries suggest? Very simply, a bonfire of public money in which common sense seems to have been thrown out the window. In 2006 we estimate that OECD economies subsidised biofuels to the tune of at least $11 billion. This year the total is likely to climb towards $13-15 billion. These totals may be less than the value of subsidies to the petroleum industry, but in terms of their percentage of market value, they far surpass it: in most of the countries we examined, transfers per litre (adjusted for energy content) exceed 50% of the pre-tax value of gasoline or petroleum diesel. For the years ahead, governments seem to have signalled that the sky is the limit. Open-ended, production related incentives could drive this number well above $50 billion a year by 2020.
 
Any public expenditure has an opportunity cost. In our view "even" $11 billion a year represents some opportunity! If limiting greenhouse gases or improving energy security are the goals, then that would buy an awful lot energy efficiency improvements. Expand that to $15 billion, $20 billion or more and the scale of the lost opportunities brings tears to the eyes.

But it would seem that no-one wants legislators to look too closely at what they're doing. Over and over again, biofuel proponents claim that their favoured fuel is good for everything: rural development, jobs, climate change, energy security - you name it, biofuels seem to fit the bill. My former experience as a politician is that policies claimed to be ideally suited to meeting multiple objectives should be treated with particular suspicion. Things that seem to be good for everything are all too frequently good for very little.
 
It is taking stock of the consequences - intended and otherwise - that really count. Here, the GSI is in the business of raising doubts. Can we be sure that biofuels are a cost-effective way of reducing greenhouse gas emissions? Prima facie, we doubt it - not at several hundreds of dollars per tonne of carbon avoided. Can we be sure that biofuels are a practical and cost-effective way of reducing dependence on imported oil? Again, we doubt it, given long-run forecasts that suggest biofuels cannot practically meet more than 20% of transport sector requirements.
 
But maybe these questions are too hasty. Do second-generation biofuels hold the answers? Is it just a question of subsidizing the transition to a much brighter biofuel future? No-one knows for certain. There are certainly limits on the amount of the planet's biosphere we can co-opt for fuel production without disrupting food supplies or devastating what's left of our natural biodiversity. We need to keep an open mind. What we do know is that once open-ended subsidies have been handed out to first generation biofuel producers, it will be very hard to remove them. Look at agricultural subsidies and protection, which have been meticulously monitored and described by the OECD since the mid-1980s. It has taken decades to reform them, and the project is still not finished.
 
The GSI's message is very simple - and it is addressed in particular to those countries that are still rolling out their policy programmes: before any more money is spent, stop and ask whether mandating and subsidizing biofuels, especially first-generation biofuels, are the best ways to achieve the policy goals you have set yourselves; check to see whether the measures you erect will be able to be dismantled rather than become hard-wired; and inform yourselves fully on whether your support for biofuels isn't simultaneously causing environmental damage at home and trade disruption abroad.

None of this is particularly radical. It's the sort of public finance 101 lecture that is dished out by reform-minded organisations every week. What is radical is the fact that an NGO should have to collect and collate public finance data rather than the countries' own finance ministries.
 
There may be a bright future for biofuels. The scale of that future, however, should be determined by a marketplace that prices environmental externalities properly and in which governments intervene for reasons of national security in the most transparent and neutral ways possible. Neither of these conditions currently applies. Until they do - and until governments get a grip on how much they are spending and why - we can only post a warning beacon over the several billion dollars of public expenditure which is, for the time being, burgeoning out of control.
 
Simon Upton is the Director of the Global Subsidies Initiative