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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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Friday, January 12, 2007

Biofuels boom may make WTO accord possible, cut US farming subsidies

In what was undoubtedly one of the most important stories last year, the World Trade Organisation's so-called Doha Round of trade negotiations collapsed over disagreements between the US and the EU over agricultural subsidies (earlier post). The talks, already on the table since 2001, were originally aimed at boosting free trade worldwide in such a way that developing countries might benefit from it. Proponents of free trade have called the collapse dramatic and a major set-back for the world economy, but countries in the South have been less negative since they viewed the direction in which the negotiations were going as working against their interests.

Several people, including Ted Turner (earlier post) and Nobel-prize winning economist Joseph Stiglitz (earlier post), have noted that the biofuel revolution may hold the key to revive the talks. In a remarkable announcement, the US ambassador to the EU now seems to agree, after initial skepticism (and also because Canada has meanwhile filed a complaint with the WTO against 'illegal' US corn subsidies). Continuing demand for corn for the production of ethanol may make it easier for the US to cut the enormous amount of subsidies US farmers receive. But obviously, this would seriously impact the competitiveness of American corn-based ethanol.

Still, "I am very confident that we are going to get a deal," C. Boyden Gray told reporters in Washington yesterday. "This whole alternative energy revolution is taking hold. This will take the whole issue of agriculture off the table as a sticking point" between the US and European Union, Gray said. Gray was in Washington for the summit between US President George W. Bush yesterday and European Commission President Jose Manuel Barroso.

Both leaders reaffirmed their support for the negotiations in the WTO. Barroso told reporters yesterday that he saw „unequivocal signals, very clear signals from President Bush, that he wants a deal for Doha.” Bush's trade negotiating authority expires at the end of June:
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Gray said negotiators will try to make progress early this year, and the administration will ask Congress to extend so-called Trade Promotion Authority through the end of 2007. Negotiators „will be close enough to probably get an extension,” Gray said. Congress, „probably would not extend trade promotion authority” unless the trade talks looked promising, he said.

Corn prices reached a 10-year high in November, as the biggest US crop was in demand as a source of ethanol. Since then prices have fallen 8.8 percent. They are still higher than they were a decade ago. Higher prices mean lower US subsidies, because government payments are dependent on the gap between a minimum mandated price and the market price for a crop. As a recent report by the Global Subsidies Initiative revealed, US ethanol based on corn receives an enormous amount of subsidies under hundreds of schemes (earlier post).

Resistance from US farm lobby
Still, US farm groups say they are reluctant to give up the safety of the current subsidy regime for the promise of biofuels. "What we're looking for is a safety net that we hopefully won't have to use," said Jon Doggett, vice president of the National Corn Growers Association in Washington. Support for a WTO agreement "is going to be related to trade, not biofuels." At its annual conference this week, the American Farm Bureau Federation called for a continuation of the current subsidy programs. "We will be dealing with a lower budget baseline to start with for agriculture due to higher crop prices because of renewable energy production," Farm Bureau President Bob Stallman said January 7.

Stallman and Gray said a key for getting an agreement will be new pledges by Europe to reduce its tariffs on agriculture goods. The EU said this week that it's willing to improve its offer by adding „substantially” to the 39% average cut in agriculture tariffs it submitted a year ago. In return, the EU wants the US to make „real cuts” to farm subsidies to levels near to those demanded by developing countries.

This would mean a cut of about €6.1 billion ($8 billion) from current ceilings of €17.6 billion ($23 billion), according to the European Commission, the 27-nation group's executive arm. A WTO analysis last May concluded that the current US proposal would allow the US to actually increase its subsidies to €17.4 billion ($22.7 billion) a year from 2005's estimated €15 billion ($19.6 billion). The US has said it is willing to go further in return for deeper tariff cuts by other WTO members.


Anonymous said...

This article seems to imply that Joseph Stiglitz supports the notion that biofuels hold the key to re-opening the WTO trade negotiations, citing an earlier commentary by the Nobel Prize winning economist, written last August. I see nothing in that commentary that suggests anything of the sort. Rather, Stiglitz uses U.S. policy supporting ethanol as a classic example of distortions caused by tariff escalation:

"Perhaps the most outrageous example is the US$0.14 per liter import tariff on ethanol in the US, whereas there is no tariff on oil, and only a US$0.13 per liter tax on gasoline. This contrasts with the US$0.13 per liter subsidy that US companies (a huge portion of which goes to a single firm) receive on ethanol. Thus, foreign producers can't compete unless their costs are US$0.27 per liter lower than those of US producers. The huge subsidies have meant that the US has become the largest producer of ethanol in the world. ... Evidently, the Bush administration would rather help Middle Eastern oil producers, whose interests so often seem at variance with those of the US, than Brazil. Of course, the administration never puts it that way -- with an energy policy forged by the oil companies, Archer Daniels Midland and other ethanol producers are just playing along in a corrupt system of campaign contributions for subsidies."

The whole notion, as espoused by Ted Turner and some others, that biofuels hold the key to re-opening the WTO trade negotiations, is naive at best, and potentially dangerous. For one, it depends on substituting one set of distorting (and, in the case of U.S. production incentives for ethanol and biodiesel, open-ended) subsidies and tariffs (recently extended by the U.S. Congress for another 15 months) for another. Second, subsidies and tariffs benefiting crops used as inputs to biofuels (sugarbeets, maize, wheat and oilseeds) are not the only ones that are contentious at the WTO. Something needs to be done about continuing high levels of support for cotton, rice and livestock products (particularly dairy products), as well. Indeed, as prices for feedgrains are driven up by diversion of those crops to biofuel production, livestock producers are finding themselves in a squeeze. We should not be surprised if they start demanding offsetting subsidies as well. And third, as documented in your article, the farm lobby wants it both ways: to maintain programmes that provide them with a safety net, even while subsidies for biofuel production drive the prices for their crops ever higher.

Ron Steenblik, Global Subsidies Initiative

10:03 AM  

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