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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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Wednesday, May 23, 2007

Expanding US ethanol market provokes food price surge - report

Citizens in the United States are paying a very heavy price for their locally produced, inefficient biofuels: first they spend billions on subsidies that are handed out to a select group of corn farmers and corn ethanol producers who produce a fuel that is energy inefficient and that does not help mitigate climate change. Then, to make things worse, they have to incur rising food prices because of the expansion of this industry.

All the while, they are being denied access to biofuels that are competitive and that effectively help reduce climate change. The US denies its citizens this access by imposing tariffs on efficiently produced imported ethanol. The question is: how much longer will Americans accept this state of affairs?

Maybe they will start to question things when they read that soaring corn prices due to the expanding US ethanol market have already driven US retail food prices up by US$14 billion over the last year. The Iowa State University Center for Agriculture and Rural Development calculated this in its study "Emerging Biofuels: Outlook of Effects on US Grain, Oilseed, and Livestock Markets" [*.pdf]. The report's outlook for US food prices is bleak. It confirms that greater US ethanol production will mean more competition for land and grain, and will subsequently cause long-run crop price increases.

The report suggests that this rise in US retail food prices is likely to get worse and that they could be pushed even higher - to an annual increase of US$20 billion. Crude oil prices could increase from US$65 to US$70 per barrel and US corn prices to US$4.42 per bushel, compared to US$2 per bushel in mid-August 2006. In response to higher feed costs, livestock farmgate prices and therefore retail prices for meat, eggs and dairy will also increase (graph, click to enlarge).

The magnitude of US ethanol market will depend on the price of oil - which is unlikely to decrease much from current levels - and the future makeup of the US automobile fleet. If Americans show sufficient demand for E-85 (a fuel that typically contains a mixture of up to 85 percent ethanol and 15 percent gasoline), corn-based ethanol production will increase to over 30 billion gallons per year, claims the study.

This would cause the US corn acreage to increase to more than 110 million acres, largely at the expense of soybean and wheat acres. Equilibrium corn prices would then rise to more than US$4.40 per bushel:
:: :: :: :: :: :: :: :: :: :: :: ::

The direct effect of higher feed costs would be to push up beef, pork and poultry prices by more than 4 percent, and to send egg prices rocketing by about 8 percent.

Corn will remain the primary raw material for biofuels in the Corn Belt, ahead of cellulosic ethanol from switchgrass and biodiesel from soybeans, because these crops are less economically viable, says the study.

The Grocery Manufacturers Association (GMA) recently urged a full report into the effect the growing use of corn for biofuels could have on the US food industry.

"We support policies that will permit an increase in biofuels production without hampering the ability of the food industry to provide consumers - both in the US and around the world - with a reliable and affordable supply of food," said Cal Dooley, GMA president and chief executive officer.

US President George Bush earlier this month signed an executive order directing federal agencies to draw up regulations that will "cut gasoline consumption and greenhouse gas emissions from motor vehicles".

These regulations, which he wants in place by the end of 2008, are expected to boost domestic ethanol production and could cause food prices to rise even higher than current forecasts.

Americans need a 'biopact'

There is only one alternative to the dreadful evolution of the U.S. biofuel market: to demand lower subsidies for corn growers, and to reduce or lift the trade barriers imposed on imported ethanol.

Biofuels produced in the subtropics and the tropics - like sugarcane ethanol - have a much better energy balance as well as a stronger greenhouse gas (GHG) reduction balance. This means that their use is energy efficient and helps fight climate change. This cannot be said of corn based ethanol, which, some scientists found, takes almost as much energy to make, as you get out of it. Its GHG balance is very weak as well.

By allowing biofuels from the South to be imported, American citizens can both enjoy lower fuel prices (sugar cane ethanol is competitive with oil at around US$35-40 per barrel), as well as lower food prices. Moreover, they would be helping farmers in the South, and would indirectly help alleviate poverty in the developing world.

At the Biopact, we understand that such a scenario is wishful thinking, because the corn lobby in the U.S. is extremely powerful. But still, the message must be repeated, so that eventually change becomes possible. It's in the hands of the American electorate. But voters should not feel alone: they are being supported by a small but growing group of law makers and politicians with green credentials, who are in favor of the abandonment of the tariff. Amongst them are Governor Arnold Schwarzenegger, Senator Richard Lugar, and former Governor Jeb Bush.

More information:
Simla Tokgoz, et al., Emerging Biofuels: Outlook of Effects on U.S. Grain, Oilseed, and Livestock Markets, Staff Report 07-SR 101, Center for Agricultural and Rural Development Iowa State University, May 2007.


rufus said...

YTD we've taken about $7 Billion of food costs away from the taxpayers and put them with the consumers where they belong.

This has caused the price of my 4 oz serving of pork to rise by 1.6 Cents.

6:21 PM  
Jonas said...

Sure, Rufus, but if 300 million Americans would not be forced to spend more on food (300 million times 1.6 cents times 365 days), the money could be spent on such things as health care, social services or, why not, imported biofuels - some fields that could need some extra funding in the U.S., don't you think?

It a matter of who you're giving your money to: to a handful of corn lobbyists, or to all citizens.

8:15 PM  
rufus said...

The price of food didn't, necessarily, go down. The big change was in how it was payed for. Corn subsidies to farmers are off by about $7 Billion. This means my cost of dinner is Up a couple of percent, but the amount that the government is borrowing, and spending, in my name is down by $50.00 or $60.00/yr.

10:04 PM  
rufus said...

Don't lose sight of the fact that that cane ethanol from Brazil gets a $0.51/gal TAX CREDIT when it's Blended as motor fuel. All the tariff does is put it in a "Break Even" situation.

BTW, 440 Million Gallons of Imported Ethanol was brought in last year Exempt from the Secondary Tariff.

10:12 PM  
rufus said...

If that ethanol cost $0.68/gal to make, and we allowed the Brazilians to import it virtually tariff-free (except for the two and a half cent primary tariff,) and then paid them $2.12/gal (a price made possible by the tax credit it's eligible for,) what kind of profit picture have we drawn for the Brazilian Refiner?

$2.12 - $0.68 - $0.10 shipping = $1.34/gal. Pretty Nice Profit, eh?

You're welcome.

10:24 PM  
rufus said...

We're going to be using 15 Million gallons/yr in just a few years. Is that Good? Is there any way that would have been possible if we hadn't brought the American Farmer into the Game?

10:35 PM  
Biopact team said...

Hi Rufus, thanks for your comments, but could you please condense them into one post? With so many comments, people might think Biopact is a very popular website... ;-)

10:41 PM  
rufus said...

Sure guys. I have a flakey internet connection and hate to type a lot and then get it eaten up by the ether, but I'll do better.

12:01 AM  

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