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    Spanish company Ferry Group is to invest €42/US$55.2 million in a project for the production of biomass fuel pellets in Bulgaria. The 3-year project consists of establishing plantations of paulownia trees near the city of Tran. Paulownia is a fast-growing tree used for the commercial production of fuel pellets. Dnevnik - Feb. 20, 2007.

    Hungary's BHD Hõerõmû Zrt. is to build a 35 billion Forint (€138/US$182 million) commercial biomass-fired power plant with a maximum output of 49.9 MW in Szerencs (northeast Hungary). Portfolio.hu - Feb. 20, 2007.

    Tonight at 9pm, BBC Two will be showing a program on geo-engineering techniques to 'save' the planet from global warming. Five of the world's top scientists propose five radical scientific inventions which could stop climate change dead in its tracks. The ideas include: a giant sunshade in space to filter out the sun's rays and help cool us down; forests of artificial trees that would breath in carbon dioxide and stop the green house effect and a fleet futuristic yachts that will shoot salt water into the clouds thickening them and cooling the planet. BBC News - Feb. 19, 2007.

    Archer Daniels Midland, the largest U.S. ethanol producer, is planning to open a biodiesel plant in Indonesia with Wilmar International Ltd. this year and a wholly owned biodiesel plant in Brazil before July, the Wall Street Journal reported on Thursday. The Brazil plant is expected to be the nation's largest, the paper said. Worldwide, the company projects a fourfold rise in biodiesel production over the next five years. ADM was not immediately available to comment. Reuters - Feb. 16, 2007.

    Finnish engineering firm Pöyry Oyj has been awarded contracts by San Carlos Bioenergy Inc. to provide services for the first bioethanol plant in the Philippines. The aggregate contract value is EUR 10 million. The plant is to be build in the Province of San Carlos on the north-eastern tip of Negros Island. The plant is expected to deliver 120,000 liters/day of bioethanol and 4 MW of excess power to the grid. Kauppalehti Online - Feb. 15, 2007.

    In order to reduce fuel costs, a Mukono-based flower farm which exports to Europe, is building its own biodiesel plant, based on using Jatropha curcas seeds. It estimates the fuel will cut production costs by up to 20%. New Vision (Kampala, Uganda) - Feb. 12, 2007.

    The Tokyo Metropolitan Government has decided to use 10% biodiesel in its fleet of public buses. The world's largest city is served by the Toei Bus System, which is used by some 570,000 people daily. Digital World Tokyo - Feb. 12, 2007.

    Fearing lack of electricity supply in South Africa and a price tag on CO2, WSP Group SA is investing in a biomass power plant that will replace coal in the Letaba Citrus juicing plant which is located in Tzaneen. Mining Weekly - Feb. 8, 2007.

    In what it calls an important addition to its global R&D capabilities, Archer Daniels Midland (ADM) is to build a new bioenergy research center in Hamburg, Germany. World Grain - Feb. 5, 2007.

    EthaBlog's Henrique Oliveira interviews leading Brazilian biofuels consultant Marcelo Coelho who offers insights into the (foreign) investment dynamics in the sector, the history of Brazilian ethanol and the relationship between oil price trends and biofuels. EthaBlog - Feb. 2, 2007.

    The government of Taiwan has announced its renewable energy target: 12% of all energy should come from renewables by 2020. The plan is expected to revitalise Taiwan's agricultural sector and to boost its nascent biomass industry. China Post - Feb. 2, 2007.

    Production at Cantarell, the world's second biggest oil field, declined by 500,000 barrels or 25% last year. This virtual collapse is unfolding much faster than projections from Mexico's state-run oil giant Petroleos Mexicanos. Wall Street Journal - Jan. 30, 2007.

    Dubai-based and AIM listed Teejori Ltd. has entered into an agreement to invest €6 million to acquire a 16.7% interest in Bekon, which developed two proprietary technologies enabling dry-fermentation of biomass. Both technologies allow it to design, establish and operate biogas plants in a highly efficient way. Dry-Fermentation offers significant advantages to the existing widely used wet fermentation process of converting biomass to biogas. Ame Info - Jan. 22, 2007.

    Hindustan Petroleum Corporation Limited is to build a biofuel production plant in the tribal belt of Banswara, Rajasthan, India. The petroleum company has acquired 20,000 hectares of low value land in the district, which it plans to commit to growing jatropha and other biofuel crops. The company's chairman said HPCL was also looking for similar wasteland in the state of Chhattisgarh. Zee News - Jan. 15, 2007.

    The Zimbabwean national police begins planting jatropha for a pilot project that must result in a daily production of 1000 liters of biodiesel. The Herald (Harare), Via AllAfrica - Jan. 12, 2007.

    In order to meet its Kyoto obligations and to cut dependence on oil, Japan has started importing biofuels from Brazil and elsewhere. And even though the country has limited local bioenergy potential, its Agriculture Ministry will begin a search for natural resources, including farm products and their residues, that can be used to make biofuels in Japan. To this end, studies will be conducted at 900 locations nationwide over a three-year period. The Japan Times - Jan. 12, 2007.

    Chrysler's chief economist Van Jolissaint has launched an arrogant attack on "quasi-hysterical Europeans" and their attitudes to global warming, calling the Stern Review 'dubious'. The remarks illustrate the yawning gap between opinions on climate change among Europeans and Americans, but they also strengthen the view that announcements by US car makers and legislators about the development of green vehicles are nothing more than window dressing. Today, the EU announced its comprehensive energy policy for the 21st century, with climate change at the center of it. BBC News - Jan. 10, 2007.

    The new Canadian government is investing $840,000 into BioMatera Inc. a biotech company that develops industrial biopolymers (such as PHA) that have wide-scale applications in the plastics, farmaceutical and cosmetics industries. Plant-based biopolymers such as PHA are biodegradable and renewable. Government of Canada - Jan. 9, 2007.

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Monday, October 02, 2006

Study shows effects of lifting U.S. tariff on ethanol

Our vision of biofuel farmers from the Global South gaining economic strength by producing green fuels for the world market, stands or falls with the nature of the trade regimes that regulate this market. The world's largest potential importers of biofuels from the South, the EU and the US, both impose heavy tariffs on ethanol and biodiesel which makes it difficult for farmers from the South to export to them. One of our aims is to campaign and to lobby (the non-profit way) so that both economic superpowers lift these barriers. The result would be that poor farmers in the South can lift themselves out of poverty, and consumers in the North would pay less for fuel. Moreover, given the agro-ecological advantages of producing climate-friendly energy in the South, much less land is required to produce an amount of biofuels compared to conditions in the more temperate climates of the North. In short, a win-win situation would arise, where farmers in the South, consumers in the North, and the environment all stand to benefit.

But trade policies are technical issues, with high political and economic stakes, as the recent collapse of the Doha development round proved (analysis of the role of biofuels during the last WTO negotiations, call to use bioenergy as the lever to revive Doha). A study produced by Iowa State University's Center for Agricultural and Rural Development however shows what the effects would be if the U.S. were to lift its US$0.54 per gallon tariff on imported ethanol. The effects would produce many winners, and the losers (American subsidized farmers) would not have to fear dramatic consequences. The study gives us a preview of how market relations would change, especially between the U.S. and Brazilian ethanol exporters. If the benefits of this tariff-free relation were to be passed on to American motorists, they would be paying 14% less for the green fuel.

In 2005, U.S. ethanol production capacity was 4.3 billion gallons from 95 ethanol refineries. Capacity expansion totaled 0.2 billion gallons, while capacity under construction was 1.8 billion gallons. Ethanol production consumed 1.6 billion bushels of corn (about 14 percent of U.S. corn production) in 2005; 2.6 billion bushels of corn are expected to be used by 2010 (about 22 percent of an 11.9 billion bushel crop). Thus, ethanol production has already exceeded the 2006 target of the renewable fuel mandate. A federal tax credit of 51¢ per gallon on all ethanol, available to ethanol refiners, has also contributed to increased ethanol production. Despite the rapid increase in production, consumption of ethanol has been outpacing production for the past few years, which has led to increased imports in the United States (see graph):
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U.S. trade policy on ethanol includes an ad valorem tariff of 2.5 percent as well as an import duty of 54¢ per gallon. The tariff is meant to ensure that the benefits of the domestic U.S. ethanol tax credit do not accrue to foreign producers. The other important trade policy that affects ethanol is the Caribbean Basin Recovery Act (CBERA) that groups Central American countries with Caribbean countries. This Act created the current import rules for ethanol under the Caribbean Basin Initiative (CBI).

Under this agreement, if ethanol is produced from at least 50 percent agricultural feedstock grown in a CBERA country, it is admitted free of duty. If the local feedstock content is lower, limitations apply on the quantity of duty-free ethanol. The amount of ethanol that can be imported duty-free that is produced from non-CBERA agricultural feedstock is restricted to 60 million gallons or 7 percent of the U.S. domestic ethanol market, whichever is greater. In this case, ethanol must be dehydrated in a CBI country. Dehydration plants are currently operating in Jamaica, Costa Rica, and El Salvador, where hydrous ethanol produced in other countries, historically Brazil or Europe, can be dehydrated. Table 1 shows the tariff rate quotas (TRQs) and fill rates for ethanol imports from CBI countries. The TRQ for 2006 is 268.1 million gallons.

The Brazilian Ethanol Market
Brazil is currently the world's largest producer of ethanol. The Brazilian government provides support to ethanol production through both market regulation and tax incentives. In terms of market regulations, an official blending ratio of anhydrous ethanol with gasoline of between 20 and 25 percent in transport fuel is imposed. There are also credit provisions for ethanol storage, in the form of a lower excise tax for ethanol than for gasoline and through the use of strategic reserves. Imports of ethanol to Brazil are subject to an ad valorem duty of 20 percent.
In 2005, production of sugar and ethanol in Brazil totaled 28.7 million metric tons and 4.8 billion gallons, respectively, continuing a record trend for the past few years. The record production has resulted in sugar exports of 18.2 million metric tons and 0.6 billion gallons of ethanol in 2005. In Brazil, a large number of plants are dual plants and can switch easily between the production of sugar and ethanol based on relative prices. Thus, sugar and ethanol prices tend to move closely together, whereas in the United States, movement in ethanol prices is affected primarily by gasoline and government regulations. In the past few years, relative prices of sugar and ethanol have favored more sugarcane diverted to ethanol production rather than to sugar. With the increased demand in ethanol both domestically and internationally, the share of sugarcane used in ethanol production is expected to rise steadily.
Increased demand for ethanol in Brazil has been driven by the popularity of flex-fuel cars that can run on gasoline, ethanol, or a combination of the two. Ethanol and flex-fuel vehicles enjoy some tax incentives not offered to gasohol cars that run on blended gasoline. The sale of flex-fuel cars has increased dramatically (by 585 percent in 2004) since their introduction in 2003. The share of flex-fuel cars reached 22 percent in 2004, 40 percent in 2005, and is expected to rise to 60 percent in 2006.
If both ethanol and sugar prices remain competitive in the near future, Brazil is expected to continue to increase sugarcane production for both ethanol and sugar. The country has enough land to easily double sugarcane area harvested. Sugar production is expected to increase by 21.5 percent between 2005/06 and 2015/16 while exports are projected to increase 22 percent during the same period. In terms of ethanol, production is expected to increase by 37.5 percent while ethanol exports are expected to nearly double by 2015/16.

Competitiveness of the United States versus Brazil
The cost of ethanol per gallon of fuel from sugarcane in Brazil, at $0.83 per gallon of fuel, is lower than the cost from corn in the United States, at $1.09 per gallon (see the OECD report "Agricultural Market Impacts of Future Growth in Production of Biofuels," available at http://www.oecd.org/dataoecd/58/62/36074135.pdf). In addition to higher costs of production, there are high costs in the United States of transporting supply from the Midwest to major population areas. This has led to an increase in competitiveness of Brazilian ethanol imports despite the steep tariffs. Furthermore, volatility in U.S. ethanol prices, which sometimes leads to spikes, provides Brazil the opportunity to export ethanol to the United States. For example, in October 2005, the Brazilian ethanol price was $1.38 per gallon. Adding freight and the import tariff, the price for ethanol would be about $2.12 per gallon (including the 16¢-per-gallon transportation cost), which is below the $2.47 per gallon U.S. price for the same month. Consequently, Brazil was able to export 5.2 million gallons to the United States, up from zero exports in August and 2.7 million gallons in September 2005. In total, Brazil exported 86.5 million gallons of ethanol in 2004 and 65.9 million gallons in 2005, becoming the major source of U.S. ethanol imports. These imports may increase in the future, because of the projected expanding demand for ethanol in the United States.

Simla Tokgoz and Amani Elobeid are international commodity analysts (grain and sugar, respectively) with the Food and Agricultural Policy Research Institute at CARD.

More information:
Iowa State University: Policy and Competitiveness of U.S. and Brazilian Ethanol - Iowa Ag Review Online, Spring 2006, Vol. 12 No. 2

NewsLeader: Import tariff stirs debate on ethanol - Oct. 1, 2006

The Clarion Ledger: Debate: Should the tariff on imported ethanol be lifted? - Oct. 1, 2006

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Invest in poor energy farmers, not in oil dictators - going geogreen

In the United States, the past few years have seen many people thinking about geopolitics, oil, democracy and terrorism and how these issues are related. They center around what Thomas Friedman aptly called the 'first law of petropolitics'. This law got Americans into a dark period of their history (dependence on oil, military action needed to protect the assets, resentment amongst people in the South, terrorism). Some are now attempting to break this law's fundaments, and open a new era, with a new logic, like that of the 'geogreens' who couple geopolitics to environmentalism, in order to get rid of the oil curse (overview here). The idea is spreading beyond the confines of academia and into the public sphere. John Gartner, for example, writes in Wired Magazine that it is time for Americans to invest in poor energy farmers in the South, instead of in wealthy oil dictators in the Middle East. It's the message the Biopact is trying to get across too.

The Brazilian government is greatly expanding biodiesel production in the country, and we should get in on the action, Gartner writes. Through their success with ethanol and friendship with Venezuela, Brazil doesn't have to worry about buying oil from Middle East nations, and now they are in the process of ramping up biodiesel production.

The economics, weather, and abundance of land are more favorable in Brazil than in the U.S. for growing sugar cane, palm, castor and soybeans, but we could still expand our biofuel usage:
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However, we could greatly expand our biofuel production if the federal and state governments guaranteed our domestic farmers on a volume and price of corn, sugar cane and soybeans. (I know corn isn't the long-term answer, but in the short term it's better than fluctuating oil prices). Even if we powered just our military vehicles with biofuels we could solidify the market. We could easily finance paying higher prices by eliminating the billions of dollars in tax breaks given to Big Oil for exploration and increases taxes on their sky-high profits.

But regardless of it that happens it is time to sign on the dotted line with Brazil to buy a few hundred million barrels of biofuel per year. Where should we export our dollars too -- unstable dictatorships or a democratic country with lots of poor farmers ready to work? We would help to move the country further into the first world, and they aren't about to attack anyone. One sticking point: Brazil isn't too keen on the leadership of this country, so it might take some convincing [entry ends here].

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Ethanol stocks: early winners, early losers

Bioconversion Blog has an interesting analysis of the booming biofuels sector as it plays out on the stock market.

In the rush to secure a position in the booming biofuels industry there are already early winners, companies with promising futures, and companies that will have to persevere to stay in the game. As last week has amply demonstrated, every drop in the price of oil affects the speculative value of ethanol related stocks. Even the strong players have recently witnessed bearish performance, but that is unlikely to dissuade pending deals from going through. Buyers beware - investing in this sector presents high risks.

On the other hand, high flying venture capitalists are betting big on the future of ethanol. We are clearly at the "bleeding edge" of the ethanol product lifecycle - and it is going to be a BIG one.

The first phase is based on the deployment of corn and sugar fermentation refineries. There has been a huge surge of investment in this field feeding off the President's Advanced Energy Initiative of 2005, concern about our dependence on Middle East oil, hurricane Katrina's damage to oil rigs in the Gulf of Mexico, and the huge spike in oil prices in 2006:
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The second phase involving cellulosic feedstock conversion to ethanol has yet to officially begin with the construction of commercial-scale facilities. With the rosy forecasting of people who should know, many investors are holding their chips for this second round to begin proving itself.

An online monitor of the price and health of existing ethanol stocks is the GoG2G Blog whose role is "Looking into Socially Responsible Stocks and the future of alternative fuels." Konrad Imielinski has just published Ethanol's Winners and Losers which list the winners as Pacific Ethanol, Inc. (PEIX) and Archer Daniels Midland (ADM). The losers during the early going are Xethanol (XNL) and GS CleanTech Corporation (GSCT.ob).

For the analysis of individual companies and their values, check out Bioconversion Blog.

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50MW biomass power plant for Uganda

Quicknote bioenergy business
A British energy firm wants to construct and install a biomass power plant of 50MW in Uganda, which is currently undergoing an energy crisis. Aldwych International - a company specialised in investing in energy in Africa and backed by the Dutch development finance institution and Shell -, filed a proposal with the Ugandan Electricity Regulatory Authority (ERA) in which it said the cost of the project would be about 296.8 billion shilling (€125/US$160 million). Mark Fitzpatrick, director, said the plant is expected to be commissioned in 2009 and has a life of 20 years.

Uganda currently consumes about 1.4TWh of electricity per annum, most of it coming from hydro. At a very low per capita consumption of 50KWh per year, the biomass power plant would have a capacity to bring electricity to some 500,000 Ugandan households.

“It will be the least expensive thermal option. The plant will have positive externalities like supporting agriculture, displacing green house emissions and reforestation in form of Eucalyptus trees,” he said. Fitzpatrick said the project would also require about 100 square kilometres of land to grow trees and collect bio-mass, access roads, generation plant, transmission and distribution lines.

However, he said until a feasibility study is completed, the cost, timing, size of the power plant and biomass source would be subject to change. Other directors are Helen Tarnoy, Nadia Crandall and Joost Zuidberg. Aldwych applied to ERA for a licence to set up the biomass plant in order to generate electricity for sale to the national grid. “The Electricity Regulatory Authority has under Section 29 of the Electricity Act 1999 received a Notice of Intended Application for a licence from Aldwych International for the generation and sale of electricity,” a statement read [entry ends here].
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