Subsidies for biofuel intended to help the environment may be increasing fossil fuel extraction and adding to carbon emissions, according to a new research by the Australian National University (ANU) announced on Thursday.

The researchers described it as a "green paradox" because a key justification for subsidizing biofuel is that they generate lower carbon emissions than fossil fuels at the time of consumption.

Professor Quentin Grafton, Professor Tom Kompas and Dr. Hang To of the Crawford School of Public Policy at the ANU, working with a colleague from McGill University, studied US energy data over a 25-year period.

Their work shows that biofuel subsidies that raise US biofuel production provide an added incentive for fossil fuel producers to increase their current rates of extraction that could increase carbon emissions and damage the environment.

"As biofuel subsidies go up, fossil fuel extraction responds by also increasing. So, you can end up with even higher carbon emissions in the short- to medium-turn, that's the paradox," said Grafton, Executive Director of the Australian National Institute of Public Policy (ANIPP) at Crawford School.

"It's likely that the US fossil fuel producers have increased their rates of oil extraction to such an extent that carbon emissions have increased in the United States as a result of biofuel subsidies," he said.

He added that even though the research focused on the United States, there are policy lessons for other countries, including Australia.

"When we make decisions about subsidizing biofuel we need to look very carefully at the costs and benefits," he said.