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    Spanish energy and engineering group Abengoa will spend more than €1 billion (US$1.35 billion) over the next three years to boost its bioethanol production, Chairman Javier Salgado said on Tuesday. The firm is studying building four new plants in Europe and another four in the United States. Reuters - May 23, 2007.

    According to The Nikkei, Toyota is about to introduce flex-fuel cars in Brazil, at a time when 8 out of 10 new cars sold in the country are already flex fuel. Brazilians prefer ethanol because it is about half the price of gasoline. Forbes - May 22, 2007.

    Virgin Trains is conducting biodiesel tests with one of its diesel engines and will be running a Voyager train on a 20 percent biodiesel blend in the summer. Virgin Trains Media Room - May 22, 2007.

    Australian mining and earthmoving contractor Piacentini & Son will use biodiesel from South Perth's Australian Renewable Fuels across its entire fleet, with plans to purchase up to 8 million litres from the company in the next 12 months. Tests with B20 began in October 2006 and Piacentinis reports very positive results for economy, power and maintenance. Western Australia Business News - May 22, 2007.

    Malaysia's Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui announces he will head a delegation to the EU in June, "to counter European anti-palm oil activists on their own home ground". The South East Asian palm oil industry is seen by many European civil society organisations and policy makers as unsustainable and responsible for heavy deforestation. Malaysia Star - May 20, 2007.

    Paraguay and Brazil kick off a top-level seminar on biofuels, cooperation on which they see as 'strategic' from an energy security perspective. 'Biocombustiveis Paraguai-Brasil: Integração, Produção e Oportunidade de Negócios' is a top-level meeting bringing together the leaders of both countries as well as energy and agricultural experts. The aim is to internationalise the biofuels industry and to use it as a tool to strengthen regional integration and South-South cooperation. PanoramaBrasil [*Portuguese] - May 19, 2007.

    Portugal's Galp Energia SGPS and Petrobras SA have signed a memorandum of understanding to set up a biofuels joint venture. The joint venture will undertake technical and financial feasibility studies to set up a plant in Brazil to export biofuels to Portugal. Forbes - May 19, 2007.

    The Cypriot parliament has rejected an amendment by President Papadopoulos on the law regarding the use of biofuels that contain genetically modified substances. The amendment called for an alteration in the law that currently did not allow the import or use of biofuels that had been produced using GM substances, something that goes against a recent EU Directive on GMOs. Cyprus Mail - May 18, 2007.

    According to Salvador Rivas, the director for Non-Conventional Energy at the Dominican Republic's Industry and Commerce Ministry, a group of companies from Brazil wants to invest more than 100 million dollars to produce ethanol in the country, both for local consumption and export to the United States. Dominican Today - May 16, 2007.

    EWE AG, a German multi-service energy company, has started construction on a plant aimed at purifying biogas so that it can be fed into the natural gas grid. Before the end of the year, EWE AG will be selling the biogas to end users via its subsidiary EWE Naturwatt. Solarthemen [*German] - May 16, 2007.

    Scania will introduce an ethanol-fueled hybrid bus concept at the UITP public transport congress in Helsinki 21-24 May 2007. The full-size low-floor city bus is designed to cut fossil CO2 emissions by up to 90% when running on the ethanol blend and reduce fuel consumption by at least 25%. GreenCarCongress - May 16, 2007.

    A report by the NGO Christian Aid predicts there may be 1 billion climate refugees and migrants by 2050. It shows the effects of conflicts on populations in poor countries and draws parallels with the situation as it could develop because of climate change. Christian Aid - May 14, 2007.

    Dutch multinational oil group Rompetrol, also known as TRG, has entered the biofuel market in France in conjunction with its French subsidiary Dyneff. It hopes to equip approximately 30 filling stations to provide superethanol E85 distribution to French consumers by the end of 2007. Energy Business Review - May 13, 2007.

    A group of British organisations launches the National Forum on Bio-Methane as a Road Transport Fuel. Bio-methane or biogas is widely regarded as the cleanest of all transport fuels, even cleaner than hydrogen or electric vehicles. Several EU projects across the Union have shown its viability. The UK forum was lauched at the Naturally Gas conference on 1st May 2007 in Loughborough, which was hosted by Cenex in partnership with the NSCA and the Natural Gas Vehicle Association. NSCA - May 11, 2007.

    We reported earlier on Dynamotive and Tecna SA's initiative to build 6 bio-oil plants in the Argentinian province of Corrientes (here). Dynamotive has now officially confirmed this news. Dynamotive - May 11, 2007.

    Nigeria launches a national biofuels feasibility study that will look at the potential to link the agricultural sector to the automotive fuels sector. Tim Gbugu, project leader, said "if we are able to link agriculture, we will have large employment opportunity for the sustenance of this country, we have vast land that can be utilised". This Day Onlin (Lagos) - May 9, 2007.

    Brazilian President Luiz Inácio Lula da Silva meets with the CEO of Portuguese energy company Galp Energia, which will sign a biofuel cooperation agreement with Brazilian state-owned oil company Petrobras. GP1 (*Portuguese) - May 9, 2007.

    The BBC has an interesting story on how biodiesel made from coconut oil is taking the pacific island of Bougainville by storm. Small refineries turn the oil into an affordable fuel that replaces costly imported petroleum products. BBC - May 8, 2007.

    Indian car manufacturer Mahindra & Mahindra is set to launch its first B100-powered vehicles for commercial use by this year-end. The company is confident of fitting the new engines in all its existing models. Sify - May 8, 2007.

    The Biofuels Act of the Philippines has come into effect today. The law requires all oil firms in the country to blend 2% biodiesel (most often coconut-methyl ester) in their diesel products. AHN - May 7, 2007.

    Successful tests based on EU-criteria result in approval of 5 new maize hybrids that were developed as dedicated biogas crops [*German]. Veredlungsproduktion - May 6, 2007.

    With funding from the U.S. Department of Labor Workforce Innovation for Regional Economic Development (WIRED), Michigan State University intends to open a training facility dedicated to students and workers who want to start a career in the State's growing bioeconomy. Michigan State University - May 4, 2007.

    Researchers from the Texas A&M University have presented a "giant" sorghum variety for the production of ethanol. The crop is drought-tolerant and yields high amounts of ethanol. Texas A & M - May 3, 2007.

    C-Tran, the public transportation system serving Southwest Washington and parts of Portland, has converted its 97-bus fleet and other diesel vehicles to run on a blend of 20% biodiesel beginning 1 May from its current fleet-wide use of B5. Automotive World - May 3, 2007.

    The Institut Français du Pétrole (IFP) and France's largest research organisation, the CNRS, have signed a framework-agreement to cooperate on the development of new energy technologies, including research into biomass based fuels and products, as well as carbon capture and storage technologies. CNRS - April 30, 2007.

    One of India's largest state-owned bus companies, the Andra Pradesh State Road Transport Corporation is to use biodiesel in one depot of each of the 23 districts of the state. The company operates some 22,000 buses that use 330 million liters of diesel per year. Times of India - April 30, 2007.

    Indian sugar producers face surpluses after a bumper harvest and low prices. Diverting excess sugar into the ethanol industry now becomes more attractive. India is the world's second largest sugar producer. NDTVProfit - April 30, 2007.

    Brazilian President Luiz Inacio Lula da Silva and his Chilean counterpart Michelle Bachelet on Thursday signed a biofuel cooperation agreement designed to share Brazil's experience in ethanol production and help Chile develop biofuels and fuel which Lula seeks to promote in other countries. More info to follow. People's Daily Online - April 27, 2007.

    Italy's Benetton plans to build a €61 million wood processing and biomass pellet production factory Nagyatád (southwest Hungary). The plant will be powered by biogas. Budapest Sun - April 27, 2007.

    Cargill is to build an ethanol plant in the Magdeburger Börde, located on the river Elbe, Germany. The facility, which will be integrated into existing starch processing plant, will have an annual capacity of 100,000 cubic meters and use grain as its feedstock. FIF - April 26, 2007.

    Wärtsilä Corporation was awarded a contract by the Belgian independent power producer Renogen S.A. to supply a second biomass-fuelled combined heat and power plant in the municipality of Amel in the Ardennes, Belgium. The new plant will have a net electrical power output of 3.29 MWe, and a thermal output of up to 10 MWth for district heating. The electrical output in condensing operation is 5.3 MWe. Kauppalehti - April 25, 2007.

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Thursday, October 26, 2006

Subsidies for uncompetitive U.S. biofuels cost taxpayers billions - report

America needs to rethink the cost of its appetite for home-grown biofuels, according to a European research group. The Global Subsidies Initiative, based in Geneva, Switzerland, totaled up the cost of all the tax breaks, direct subsidies and other benefits for corn-derived ethanol, and it estimates that the assistance will cost U.S. taxpayers at least $5.1 billion this year. The cost for subsidizing biodiesel production adds another $400 million to $500 million, according to a study the group released Wednesday.

The report Biofuels: At What Cost? Government Support to Ethanol and Biodiesel in the United States [*.pdf], indicates that these numbers will go up as production increases. "Subsidies to biofuels are large and growing rapidly," said Doug Koplow, the report's author. The ethanol industry has long been criticized for its reliance on government subsidies, but there have been few attempts to calculate the costs to taxpayers. And the incentives keep growing, on the local, state and national level.

These subsidies are needed because U.S. ethanol (based on corn) and biodiesel (soy) are not competitive, unlike biofuels produced in the South.

'U.S. needs to import biofuels from the South'
Recently, IEA Chief Claude Mandil hit the nail on the head when he called on Europe and the US to import green fuels from the developing world, where they can be made much more competitively because of an abundance of land, water, sunshine and high-yielding crops (earlier post).

What's more, by paying too much for their ethanol, U.S. taxpayers keep millions of potential energy farmers from the South in poverty, by limiting access to their market. It is time for consumers in the North to stop subsidizing an uncompetitive industry, and instead choose for the win-win situation in which they buy fuels from the poor in the South, who in turn benefit from the opportunity to sell on a big market.

Government subsidies to biofuels in the U.S. have lately been promoted as a way to simultaneously address concerns related to the environment, energy security, and rural development. But the cost-effectiveness of achieving these goals under the current subsidy regime is low.

A very inefficient way of tackling climate change
The report finds, for example, that biofuels are an extremely high-cost means for reducing greenhouse-gas emissions. Under optimistic projections, it costs some $500 in federal and state subsidies to reduce one metric ton of CO2-equivalent through the production and use of corn-based ethanol. “That could purchase more than 30 metric tons of CO2-equivalent offsets on the European Climate Exchange, or nearly 140 metric tons on the Chicago Climate Exchange,” notes Doug Koplow:
:: :: :: :: :: :: :: :: ::

But ethanol supporters said the study overestimates the costs to taxpayers by failing to account for the biofuels' economic benefits. The operation and construction of ethanol plants contributed nearly $2 billion in taxes to the federal treasury last year, said Matt Hartwig of the Renewable Fuels Association.

"The industry is paying dividends," he said.

The study said the actual cost of subsidizing ethanol could be as high as $6.8 billion this year, depending on an unanswered question of whether refiners have to pay taxes on the value of a tax credit they receive for using ethanol.

The subsidies make ethanol far more expensive than other sources of energy, according to the study. The cost of subsidizing ethanol this year is about $15.90 to $17 per million BTUs, a unit of measuring energy content.

Based on a 1989 study, the cost of subsidizing oil and natural gas is under 40 cents per million BTUs when adjusted for inflation. Even accounting for the military expenses from defending oil shipping in the Persian Gulf, oil still costs taxpayers much less than ethanol, according to the latest report.

The biggest subsidy for ethanol is the 51-cent-per-gallon excise tax credit that refiners receive for adding grain alcohol to gasoline.

But the Global Subsidies Initiative study also included in its calculations a portion of the subsidies for growing corn as well as about 200 state and federal incentives that encourage the production and use of ethanol.

Also included in the study: the value of ethanol import tariffs and a 2005 law that bolsters the price of ethanol by requiring refiners to use a certain amount of biofuels each year.

Biodiesel, which can be made from vegetable oils as well as restaurant grease and slaughterhouse waste, is eligible for a tax credit of up to $1 a gallon.

The group argues that there are better, less expensive ways to reduce the use of fossil fuels than subsidizing and requiring the use of biofuels.

The Global Subsidies Initiative is paid for by the governments of the Netherlands, Sweden and New Zealand, which have long-standing concerns about the cost of agricultural subsidies.

Disputes over agricultural tariffs and subsidies recently forced suspension of negotiations aimed at liberalizing trade worldwide.

Hartwig said the study doesn't account for the savings to the government when the demand for ethanol raises corn prices and lowers crop subsidies. The U.S. Agriculture Department has estimated that ethanol production adds about 30 cents to the value of a bushel of corn.

The ethanol subsidy may overstate the value of corn subsidies, the authors acknowledged. The study estimated corn subsidies based on payments made to farmers in recent years.

Leading agricultural economists, however, expect corn subsidies to fall sharply in coming years because of the ethanol-fueled rise in the price of corn. Corn growers would continue to get fixed annual payments each year unless the payments were discontinued by Congress.

More information:

Global Subsidies Initiative: Executive Summary - Biofuels: At What Cost? [*.pdf]

Global Subsidies Initiative: Biofuels: At What Cost? - Government support to ethanol and biodiesel in the United States [*.pdf]


rufus said...

We allowed about 440 Million Gallons of ethanol duty free (except for the 2% primary tariff.)

How much did Europe let in?

Yeah, that's what I thought.

5:39 PM  
rufus said...

BTW, Dept of Agriculture Outlays are down about $7 Billion YTD from this same period last year.

THAT wipes out their 6 billion right there.

I didn't see any mention of how much Sweden subsidizes their wood chips to ethanol industry. Whyz'zat?

5:49 PM  

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