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grow). International trade may help to ease fuel supply issues, linking a larger number of producers in order to minimize the risk of supply disruption. Also as renewable fuel use becomes more widespread, opportunities for countries with more developed biofuel industries to export their technologies will expand.

Some agriculture incentive programs in wealthy countries have been blamed for supporting food production in a way that harms competitors in developing countries. These could be transformed into programs that instead support biofuel production, a process that has begun in Europe and is being discussed in the United States. While this is a step in the right direction, replacing highly subsidized and protected commodity food production in rich countries with highly subsidized and protected biofuel production is not the aim. Biofuel support strategies must be planned with gradual phase-outs, or other means of moving beyond the subsidies once they are no longer necessary.

3.8.1 Trade and the Environment

Energy crops and biofuels may be categorized as agricultural goods under the WTO Agreement on Agriculture. Industry proponents may seek an exemption from the Agreement’s restrictions on domestic price supports by including biofuels subsidies in the so-called “Green Box.” To qualify for Green Box status the incentives must be “non-trade distorting,” meaning they do not affect global market prices. This will be a difficult test to meet if financial incentives for biofuels are tied to production levels, especially if the trade grows to a significant size. The more that incentives are clearly tied to producing public goods, such as clean water and air, wildlife habitat preservation, carbon sequestration and soil erosion control, unconnected to crop yields and refinery production levels, the more likely they are to pass muster.

Alternatively, if biofuels are categorized as industrial goods, they may qualify for treatment as “environmental goods.” To be included in such a category they should be required to meet strict environmental standards for their production.

Developing countries have traditionally fought attempts to differentiate among traded goods based on Process and Production Methods (PPMs). However, some biofuels producers in developing countries could rank quite well in a scheme based on production standards. For example, the ethanol industry in Brazil has generally achieved very low net GHG emissions.

3.8.2 Standards and Certification

There are increasing calls in Europe and elsewhere for traded biofuels to be certified based in social and environmental standards. This could provide a means of ensuring that the production of these fuels provides net positive impacts for the planet and for society. However, if not developed in a participatory, transparent way, such a certification scheme could be viewed as a means for industrialized countries to erect new trade barriers to protect their domestic biofuel producers.

A certification framework based on sound standards could become a critical driver to facilitating development of sustainable trade in biofuels. A compromise must be reached between developing complicated certification schemes

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