Global Consequences of the Bioenergy Greenhouse Gas Accounting Error
Like the global financial crisis, which resulted in part from misguided accounting of mortgages, global policies to expand transportation biofuels and bioelectricity reflect an accounting error. Although the carbon accounting in these policies assumes tha
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Abstract Like the global financial crisis, which resulted in part from misguided accounting of mortgages, global policies to expand transportation biofuels and bioelectricity reflect an accounting error. Although the carbon accounting in these policies assumes that plant growth offsets all carbon released by burning biofuels, only ‘‘additional’’ plant growth can provide an offset. Because they double count biomass and land already used by people or sequestering carbon, many policy proposals aim for bioenergy to supply 20% or more of the world’s energy by 2050. That would require almost doubling the present global harvest of plants for all uses, which would likely lead to extensive deforestation and increase greenhouse gases. Fixing the accounting would focus policies on the more limited potential for truly low carbon biofuels.
1 Introduction Can an accounting error that has crept into world efforts to curb global warming threaten much of the Earth’s natural forests and savannas? Can that error be large enough to cause efforts to reduce global warming to increase it? Most rational people would probably react to such suggestions with grave doubts. Anything to Thanks to Ralph Heimlich for substantial data analysis and to Mary Booth for many contributions to the understanding of emissions from bioelectricity. T. Searchinger (&) Woodrow Wilson School of Public and International Affairs, Princeton University, Robertson Hall, Princeton, NJ, USA e-mail: [email protected]
O. Inderwildi and Sir David King (eds.), Energy, Transport, & the Environment, DOI: 10.1007/978-1-4471-2717-8_36, Springer-Verlag London 2012
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do with accounting seems too obscure to have such large effects, and if the problem were that serious, surely they would already know about it. Yet, the world economic crisis from which we are still recovering results to a great extent from flawed accounting. The gross overvaluation of risky U.S. mortgages once combined into securities played a critical role in the housing bubble, whose burst touched off the 2008 financial collapse. A look back at previous financial disasters, such as the U.S. Savings and Loan crisis of the 1980s and the Enron bankruptcy, would show that flawed accounting played a similarly dominant role. At least three features of the financial crisis explain the potential of accounting errors to have such vast consequences. First, although justified by layers of complex computer modeling or other analyzes, the mortgage financial error had such a simple origin that it could be repeated broadly. It was the belief that housing values never fall at the same time in cities all across the U.S., which meant securities that combined mortgages from all over the country would hold their value regardless of how little income people had to pay them back [31, 33]. This accounting concept proved false because it led to a flood of easy money across the country that itself created a nationwide bubble and a nationwide collapse. Second, the error distorted incentives for vast num
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