Agreed – I do discuss this in the post I link to (http://tvhe.co.nz/2008/03/28/biofuel-regulation-and-carbon-prices/) when I say that I don’t agree. I think that investment subsidies may be a superior mechanism as they are more direct. However, a good cost benefit analysis can convince me otherwise.

The demand for some biofuels increases the value of the crops that they are produced from to the extent that virgin rainforest is cleared to make way for it. When the CO2 emitted from this, and the CO2 (or other GHG’s) used in energy and fertilisers applied when growing it are taken into account, these biofuels actually do no good for climate change. Likewise, some biofuel crops displace other crops, which has a domino effect on other land uses, and yes, ultimately pushes essential food prices up.

On the other hand, some fuels (ie Brazilian ethanol) are, on a life cycle basis, good for climate change and don’t effect food prices much. It all really is a matter of scheme design. And in the case of New Zealand, there is in fact an economically rational argument (though you might not agree with it) for regulating for biofuels IF DONE PROPERLY. Poorly targetted subsidies that ruin the environment and hike global food prices, such as those from the USA must be avoided.

The key thing is that it is impossible to say “good” or “bad” in general to biofuels, either in terms of effect on food prices, or the environment, or in terms of economic rationality. Unfortunately it is complex and requires detailed thought – a thing most people are reluctant to do.

Because Weetbix is an over-rated experience good. Net migration has eased substantially over the past year, implying that there is a smaller net inflow of people coming into New Zealand who will give Weetbix a go – implying that demand has fallen.

I don’t think this is probably the main reason, but I like it.