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    Given unstable fossil fuel prices and their negative effects on the economy, Tanzania envisages large-scale agriculture of energy crops Deputy Minister for Agriculture, Food Security and Cooperatives, Mr Christopher Chiza has said. A 600 hectare jatropha seed production effort is underway, with the seeds expected to be distributed to farmers during the 2009/2010 growing season. Daily News (Dar es Salaam) - April 12, 2007.

    Renault has announced it will launch a flex-fuel version of its Logan in Brazil in July. Brazilian autosales rose 28% to 1,834,581 in 2006 from 2004. GreenCarCongress - April 12, 2007.

    Chevron and Weyerhouser, one of the largest forest products companies, are joining forces to research next generation biofuels. The companies will focus on developing technology that can transform wood fiber and other nonfood sources of cellulose into economical, clean-burning biofuels for cars and trucks. PRNewswire - April 12, 2007.

    BioConversion Blog's C. Scott Miller discusses the publication of 'The BioTown Source Book', which offers a very accessible introduction to the many different bioconversion technologies currently driving the bioenergy sector. BioConversion Blog - April 11, 2007.

    China's State Forestry Administration (SFA) and the China National Cereals, Oils and Foodstuffs Import & Export Corp., Ltd. (COFCO) have signed a framework agreement over plans to cooperatively develop forest bioenergy resources, COFCO announced on its web site. Interfax China - April 11, 2007.

    The Ministry of Agriculture and Livestock of El Salvador is speeding up writing the country's biofuels law in order to take advantage of the US-Brazil cooperation agreement which identified the country as one where projects can be launched fairly quickly. The bill is expected to be presented to parliament in the coming weeks. El Porvenir - April 11, 2007.

    ConocoPhillips will establish an eight-year, $22.5 million research program at Iowa State University dedicated to developing technologies that produce biofuels. The grant is part of ConocoPhillips' plan to create joint research programs with major universities to produce viable solutions to diversify America's energy sources. Iowa State University - April 11, 2007.

    Interstate Power and Light has decided to utilize super-critical pulverized coal boiler technology at its large (600MW) new generation facility planned for Marshalltown, Iowa. The plant is designed to co-fire biomass and has a cogeneration component. The investment tops US$1billion. PRNewswire - April 10, 2007.

    One of India's largest sugar companies, the Birla group will invest 8 billion rupees (US$187 million) to expand sugar and biofuel ethanol output and produce renewable electricity from bagasse, to generate more revenue streams from its sugar business. Reuters India - April 9, 2007.

    An Iranian firm, Mashal Khazar Darya, is to build a cellulosic ethanol plant that will utilise switchgrass as its feedstock at a site it owns in Bosnia-Herzegovina. The investment is estimated to be worth €112/US$150 million. The plant's capacity will be 378 million liters (100 million gallons), supplied by switchgrass grown on 4400 hectares of land. PressTv (Iran) - April 9, 2007.

    The Africa Power & Electricity Congress and Exhibition, to take place from 16 - 20 April 2007, in the Sandton Convention Centre, Johannesburg, South Africa, will focus on bioenergy and biofuels. The Statesman - April 7, 2007.

    Petrobras and Petroecuador have signed a joint performance MOU for a technical, economic and legal viability study to develop joint projects in biofuel production and distribution in Ecuador. The project includes possible joint Petroecuador and Petrobras investments, in addition to qualifying the Ecuadorian staff that is directly involved in biofuel-related activities with the exchange of professionals and technical training. PetroBras - April 5, 2007.

    The Société de Transport de Montréal is to buy 8 biodiesel-electric hybrid buses that will use 20% less fuel and cut 330 tons of GHG emissions per annum. Courrier Ahuntsic - April 3, 2007.

    Thailand mandates B2, a mixture of 2% biodiesel and 98% diesel. According to Energy Minister Piyasvasti Amranand, the mandate comes into effect by April next year. Bangkok Post - April 3, 2007.

    In what is described as a defeat for the Bush administration, the U.S. Supreme Court ruled [*.pdf] today that environmental officials have the power to regulate greenhouse gas emissions that spur global warming. By a 5-4 vote, the nation's highest court told the U.S. Environmental Protection Agency to reconsider its refusal to regulate carbon dioxide and other emissions from new cars and trucks that contribute to climate change. Reuters - April 2, 2007.

    Goldman Sachs estimates that, in the absence of current trade barriers, Latin America could supply all the ethanol required in the US and Europe at a cost of $45 per barrel – just over half the cost of US-made ethanol. EuroToday - April 2, 2007.

    The Kauai Island Utility Cooperative signed a long-term purchase power agreement last week with Green Energy Team, LLC. The 20-year agreement enables KIUC to purchase power from Green Energy's proposed 6.4 megawatt biomass-to-energy facility, which will use agricultural waste to generate power. Honolulu Advertiser - April 2, 2007.

    The market trend to heavier, more powerful hybrids is eroding the fuel consumption advantage of hybrid technology, according to a study done by researchers at the University of British Columbia. GreenCarCongress - March 30, 2007.

    Hungarian privately-owned bio-ethanol project firm Mabio is planning to complete an €80-85 million ethanol plant in Southeast Hungary's Csabacsud by end-2008. Onet/Interfax - March 29, 2007.

    Energy and engineering group Abengoa announces it has applied for planning permission to build a bioethanol plant in north-east England with a capacity of about 400,000 tonnes a year. Reuters - March 29, 2007.

    The second European Summer School on Renewable Motor Fuels will be held in Warsaw, Poland, from 29 to 31 August 2007. The goal of the event is to disseminate the knowledge generated within the EU-funded RENEW (Renewable Fuels for Advanced Powertrains) project and present it to the European academic audience and stakeholders. Topics on the agenda include generation of synthetic gas from biomass and gas cleaning; transport fuel synthesis from synthetic gas; biofuel use in different motors; biomass potentials, supply and logistics, and technology, cost and life-cycle assessment of BtL pathways. Cordis News - March 27, 2007.

    Green Swedes want even more renewables, according to a study from Gothenburg University. Support for hydroelectricity and biofuels has increased, whereas three-quarters of people want Sweden to concentrate more on wind and solar too. Swedes still back the nuclear phase-out plans. The country is Europe's largest ethanol user. It imports 75% of the biofuel from Brazil. Sveriges Radio International - March 27, 2007.

    Fiat will launch its Brazilian-built flex-fuel Uno in South Africa later this year. The flex-fuel Uno, which can run on gasoline, ethanol or any combination of the two fuels, was displayed at the Durban Auto Show, and is set to become popular as South Africa enters the ethanol era. Automotive World - March 27, 2007.

    Siemens Power Generation (PG) is to supply two steam turbine gensets to a biomass-fired plant in Três Lagoas, 600 kilometers northwest of São Paulo. The order, valued at €22 million, was placed by the Brazilian company Pöyry Empreendimentos, part of VCP (Votorantim Celulose e Papel), one of the biggest cellulose producers in the Americas. PRDomain - March 25, 2007.

    Asia’s demand for oil will nearly double over the next 25 years and will account for 85% of the increased demand in 2007, Organization of Petroleum Exporting Countries (Opec) officials forecast yesterday at a Bangkok-hosted energy conference. Daily Times - March 24, 2007.

    Portugal's government expects total investment in biomass energy will reach €500 million in 2012, when its target of 250MW capacity is reached. By that date, biomass will reduce 700,000 tonnes of carbon emissions. By 2010, biomass will represent 5% of the country's energy production. Forbes - March 22, 2007.

    The Scottish Executive has announced a biomass action plan for Scotland, through which dozens of green energy projects across the region are set to benefit from an additional £3 million of funding. The plan includes greater use of the forestry and agriculture sectors, together with grant support to encourage greater use of biomass products. Energy Business Review Online - March 21, 2007.

    The U.S. Dep't of Agriculture's Forest Service has selected 26 small businesses and community groups to receive US$6.2 million in grants from for the development of innovative uses for woody biomass. American Agriculturalist - March 21, 2007.

    Three universities, a government laboratory, and several companies are joining forces in Colorado to create what organizers hope will be a major player in the emerging field of converting biomass into fuels and other products. The Colorado Center for Biorefining & Biofuels, or C2B2, combines the biofuels and biorefining expertise of the University of Colorado, Colorado State University, the Colorado School of Mines, and the Colorado-based National Renewable Energy Laboratory (NREL). Founding corporate members include Dow Chemical, Chevron, ConocoPhillips, and Shell. C&EN - March 20, 2007.

    The city of Rome has announced plans to run its public bus fleet on a fuel mix of 20 per cent biodiesel. The city council has signed an accord that would see its 2800 buses switch to the blended fuel in order to cut greenhouse gas emissions and local air pollution. A trial of 200 buses, if successful, would see the entire fleet running on the biofuel mix by the end of 2008. Estimates put the annual emission savings at 40,000 tonnes of carbon dioxide. CarbonPositive - March 19, 2007.

    CODON (Dutch Biotech Study Association) organises a symposium on the 'Biobased Economy' in Wageningen, Netherlands, home of one of Europe's largest agricultural universities. In a biobased economy, chemistry companies and other non-food enterprises primarily use renewable materials and biomass as their resources, instead of petroleum. The Netherlands has the ambition to have 30% of all used materials biobased, by 2030. FoodHolland - March 19, 2007.

    Energy giants BP and China National Petroleum Corp, the PRC's biggest oil producer, are among the companies that are in talks with Guangxi Xintiande Energy Co about buying a stake in the southern China ethanol producer to expand output. Xintiande Energy currently produces ethanol from cassava. ChinaDaily - March 16, 2007.

    Researchers at eTEC Business Development Ltd., a biofuels research company based in Vienna, Austria, have devised mobile facilities that successfully convert the biodiesel by-product glycerin into electricity. The facilities, according to researchers, will provide substantial economic growth for biodiesel plants while turning glycerin into productive renewable energy. Biodiesel Magazine - March 16, 2007.

    Ethanol Africa, which plans to build eight biofuel plants in the maize belt, has secured funding of €83/US$110 million (825 million Rand) for the first facility in Bothaville, its principal shareholder announced. Business Report - March 16, 2007.

    A joint venture between Energias de Portugal SGPS and Altri SGPS will be awarded licences to build five 100 MW biomass power stations in Portugal's eastern Castelo Branco region. EDP's EDP Bioelectrica unit and Altri's Celulose de Caima plan to fuel the power stations with forestry waste material. Total investment on the programme is projected at €250/US$333 million with 800 jobs being created. Forbes - March 16, 2007.

    Indian bioprocess engineering firm Praj wins €11/US$14.5 million contract for the construction of the wheat and beet based bio-ethanol plant for Biowanze SA in Belgium, a subsidiary of CropEnergies AG (a Sudzucker Group Company). The plant has an ethanol production capacity of 300,000 tons per year. IndiaPRWire - March 15, 2007.

    Shimadzu Scientific Instruments announced the availability of its new white paper, “Overview of Biofuels and the Analytical Processes Used in their Manufacture.” The paper is available for free download at the company’s website. The paper offers an overview of the rapidly expanding global biofuel market with specific focus on ethanol and biodiesel used in auto transportation. It provides context for these products within the fuel market and explains raw materials and manufacturing. Most important, the paper describes the analytical processes and equipment used for QA testing of raw materials, in-process materials, and end products. BusinessWire - March 15, 2007.

    Côte d'Ivoire's agriculture minister Amadou Gon has visited the biofuels section of the Salon de l'Agriculture in Paris, one of the largest fairs of its kind. According to his communication office, the minister is looking into drafting a plan for the introduction of biofuels in the West African country. AllAfrica [*French] - March 13, 2007.

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Thursday, April 12, 2007

IMF calls for US/EU to lift tariffs on biofuels from the South

Economists, development thinkers, energy experts, and environmentalists alike have all been calling for the US and the EU to lift their tariffs on biofuels produced in the Global South. Likewise, many are demanding these wealthy countries abandon their subsidies for unsustainable and inefficient biofuels like corn ethanol and rapeseed biodiesel - these subsidies benefit large wealthy farmers, at the expense of millions of small peasants and the environment.

Now the International Monetary Fund, in its Spring 2007 World Economic Forecast, repeats this call. In the report 's segment on "Recent Developments in Commodity Markets" there is a sub-section titled "Food and Biofuels."

It notes that food prices (as measured by its own food price index) rose by 10% in 2006, driven partly by a poor wheat crop in certain countries and high energy prices (see below), but also by (mandated) demand for heavily subsidised and tariff protected biofuels in the US and Europe.

The forecast states that prices of crops like corn and soybeans, which are the main feedstocks for ethanol (US) and biodiesel (Europe), respectively, should: (1) continue to rise and (2) begin moving in line with the price of crude oil, which is currently the case with sugar because of its role in the Brazilian ethanol industry.

But it is the sub-section's final paragraph that best captures IMF's view of current US and European biofuels policy. It reads as follows:
Many energy market analysts also question the rationality of large subsidies that benefit farmers more than the environment. While new technology is being developed, a more efficient solution from a global perspective would be to reduce tariffs on imports from developing countries (for example, Brazil) where biofuels production is cheaper and more energy efficient.
This way, the IMF joins the ranks of the most senior energy analysts of the International Energy Agency - whose General Chief and Chief Economist both came to the same conclusion - , of the researchers at International Food Policy Research Institute, of the Global Subsidies Initiative and of the World Bank's bank chief, who have all noticed the detrimental effects of US/EU subsidies and tariffs, and who understand the opportunity for the Global South to produce biofuels that make more sense because they are far more efficient (up to 8 times more efficient than corn ethanol), beneficial to the environment, can fuel local economies and effectively contribute to the fight against climate change.

In this context it is time to repeat some basics:
  • The way the US and the EU are proceeding with their approach to ethanol and biodiesel will inevitably place inflationary pressures on domestic and global food prices, which will result in tensions at home and abroad.
  • The main reasons for pursuing ethanol in the manner that it is being pursued in the US/EU right now are: (1) to placate the farming lobbies and earn valuable political support; (2) to placate the wean-America-off-foreign-oil lobby; (3) to placate the soft domestic environmentalist lobby which doesn't look further than its own backyard
  • Not letting emerging markets export ethanol tariff-free to the US/EU is bad economically for a lot of people, from poor Brazilians, Africans and Asians to poor and middle-class Americans and Europeans for who mobility and cheap fuels are very important socially and economically
High energy costs push food prices up
To add complexity, the IMF report also points at the effects of rising crude oil and natural gas prices on agricultural production as such. It shows (table, click to enlarge) that, in the US, energy costs make up between 9.0 and 23.1% of total production costs of grains like wheat, corn and soybeans. Corn is most energy intensive (because it requires vast amounts of nitrogen fertiliser) and if used as a biofuel feedstock, the costs of this inefficient fuel will likewise rise with crude oil/natural gas prices. Importantly, this aspect also shows why biofuel production in developing countries, where green fuels can be made from crops that require far lower energy inputs (like sugarcane, cassava, jatropha or palm oil), can play a great role in lowering food production costs.

If farmers in the Global South, where food insecurity is rampant, were to produce biofuels en masse that would be used in agriculture itself (in tractors, harvesters, trucks, irrigation engines...), they could partially offset the effects of high energy prices on food production. This logic is a bit of a taboo amongst some, who refuse to see that agriculture and food production require many energy related inputs. Without low-cost energy, there is no low-cost food. In short, it makes sense to consider biofuel production in the South in light of boosting food production:
:: :: :: :: :: :: :: :: :: :: ::

But back to corn ethanol. About the recent news that US farmers are planning to plant more corn acreage next year, the IMF has this to say:
For 2007, the United States Department of Agriculture is estimating a record corn crop, as planting areas increase by 10 percent from 2006 at the expense of soybeans and cotton. Still, demand fueled by the increase in domestic ethanol production capacity is expected to outpace the production rise.
IMF economists also point out that the price of "partial substitutes" such as wheat and rice, as well as the price of meat and poultry, should trend upwards as a result of higher corn and soybean prices.

It is time for all of us - consumers, producers, investors and analysts - to be more open about the truly global effects of rising energy costs on food prices, and about the way biofuel production is currently organised. It makes no sense to subsidize and protect a small group of farmers at the detriment of not only millions of poor people in the South but of ordinary middle class consumers in the North.

Biofuels should be produced there where they can be produced in an efficient way, that is in sub-Saharan Africa, South America and South East Asia. We need to kickstart an industry there, because these fuels can help mitigate climate change, relieve poverty and - as indicated by the effects of energy prices on food production - increase the food security of poor people by lowering agriculture's dependence on costly fossil fuels.

In the South, biofuels production should start on two fronts simultaneously with two aims that do not contradict each other: (1) locally, in order to offset high energy costs in food production and to make basic mobility more affordable to the poor, and (2) with the aim of exporting to markets in the North, as a way to mitigate climate change and energy insecurity. These two simultaneous initiatives are synergetic and result in a win win situation for consumers in the West, and for the millions of people who face food shortages and poverty in the South. For this reason, biofuels investors should dare to think of their global responsibilities and dare to venture into Africa, Latin America and South East Asia, instead of digging themselves in behind the subsidy and tariff walls of fortress America and Europe.

More information:
The still highly relevant FAO publication on the energy costs of agriculture in Africa: Future energy requirements for Africa's agriculture - Rome, 1995.

IEA: World Energy Outlook 2004 Edition [*.pdf] - see Chapter 9 on "Energy and Development" for an overview of how biofuels could offset some of the impacts of high fossil fuel prices that are detrimental to the economies of developing countries.

IMF: World Economic Outlook - Spillovers and Cycles in the Global Economy [*.pdf] - April 2007.


rufus said...

The U.S. produces over 6 million barrels of oil/day. We have thousands of small producers in Indiana, Illinois, Kansas, Texas, Oklahoma, etc.

We give ALL ethanol a $0.51/gal tax break at the Blender. This is designed to give the U.S. ethanol producer a leg up to help him get started. It's not designed, nor will it be used, to give a "Brazilian" Ethanol Producer an edge over an American Oil/gas producer. Never gonna hoppen, GI.

Although, we did import approx. 440 million gallons of ethanol (mostly from Brazil) last year, and that $0.51 tariff was paid on exactly NONE of it. We allow an amount equal to 10% of last years production in through the Caribbean duty-free (as regards the level two tariff.)

Look, Rio De Janiero has just about the highest crime rate in the world. That country could go under, tomorrow. We're not about to transfer our Energy Dependency to Brazil, or Ethiopia. Again; Ain't gonna hoppen, GI.

ALSO, you don't do anyone a favor when you misrepresent the situation. American Corn Ethanol is very much a sustainable program, with or without subsidies. You really should research the true costs of farming corn, and producing ethanol, and Distillers Grains. It's true, ethanol from corn can only satisfy a fraction of our demand for transportation fuels, but the industry operates in a free market (more or less) and will self-correct as to the amount of acres devoted to the endeavor.

You have a Wonderful Blog. It is jam-packed full of useful and fascinating information every day. But, you need to be a bit more open as to the True economics and opportunities in the North. The North Drives the World for a Reason. If the South will get on the ball and start USING BIOFUELS they will be able to develop very vibrant economies built on the production and use of very cost-efficient biofuel regimes.

Anyway, Great Article, and keep up the good work. BTW, I'm going up to Reynolds, Indiana (Bio Town) next week to witness the beginning of the future.

7:43 PM  
Biopact team said...

Hey, not us saying this. This is the IMF speaking, after chief economists of many different global and very objective organisations said the same thing.
But you're right when you say that as a first impulse, subsidies and tariffs in the US and the EU might help in getting biofuels to become a global commodity. After a while, they would have to go. They are truly outrageous!

8:45 PM  
rufus said...

Maybe, not as "Outrageous" as it might, at first blush, seem. Take the 2005 Energy Bill, for instance. Oil, Gas, and Coal had much larger subsidies than ethanol/biodiesel. Nuclear can't survive without subsidies.

We'll spend $150 Billion keeping the oil flowing from the ME this year. I'm not saying the biofuel subsidies should last forever; and, they won't. I'm just saying that they need to be kept in context.

The RFA put out a study showing that Uncle Sam got all of his 2.5 Billion Dollars back in sales, and employment taxes on the construction and sale of ethanol and it's production facilities; plus, they figure that ethanol is supporting about 160,000 jobs in the U.S.

The thing is, we're not going to let ourselves become "dependent," again. This deal with the Mid East (and with CHAVEZ) hasn't worked out too well. The South is going to have to look after itself. We've got an Impending Glaciation to get ready for.

9:02 PM  
rufus said...

Oh, and nobody pays any attention to the IMF, anymore. A reason might be their comment on the increased corn acreage this year. If it was all devoted to ethanol it would produce at least 4 Billion Gallons, which is about twice the amount of expansion we will have in the demand. (And, that's not even taking into account the effect thatthe extra 6 million tons of Distillers Grains will have on the demand for corn.) When they can't get even the simplest stuff right, why bother?

9:12 PM  

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