Czech brown-coal-fired power plant Elektrárna Tisová (ETI), a unit of the energy producer ČEZ, could co-fire up to 40,000 tons of biomass this year, the biggest amount in the company’s history, said Martin Sobotka, ČEZ spokesman for West Bohemia. ETI burned more than 19,000 tons of biomass in the first half of 2007. The company’s plan reckoned with biomass consumption of up to 35,000 tons a year.
New Zealand biofuel plant on hold because of Brazilian competition
An interesting example of how the global biofuel market works when there are no trade barriers or subsidies comes from New Zealand. There LanzaFuels Limited today announced that it has put its plans for a local biofuels production plant on hold because of competition from the tropics. LanzaFuels has been investigating the feasibility of ethanol produced from locally grown maize (corn) in response to the 3.4% biofuel sales obligation announced by the country's government in February this year.
LanzaFuels spokesman Howard Moore explained the reasons behind the decision:
The low prices for sugar cane based ethanol are the result of a record sugar crop in both Brazil and India (previous post). In May, ethanol prices in Brazil recorded their lowest level in 2 years, making the government consider an increase in the blending rate by 2% (from 23 to 25%). At the same time, crude oil prices have risen to new records. The advantage of sugar cane based ethanol has never been this great (earlier post).
Besides a record crop, Brazilian farmers, sugar processors and ethanol producers can draw on vast experience resulting in steep efficiency increases, which lowered their production costs for ethanol by 75% over 25 years (earlier post), further strengthening their natural comparative advantages:
energy :: sustainability :: ethanol :: corn :: sugarcane :: biomass :: bioenergy :: biofuels :: competition :: tariffs :: subsidies :: comparative advantage :: Brazil :: New Zealand ::
Industry analysts and agronomists think this trend is far from over: Brazilian ethanol can become even more efficient and double or even triple its output per hectare, as both processing technologies progress and biotechnological advancements are made (earlier post).
In this case it will become nearly impossible for biofuel producers relying on crops like corn to compete. At least not in a free trade environment.
Both the European Union and the United States heavily subsidize their farmers and protect their markets against more efficient fuels by imposing import tariffs that can be as high as US$0.54 per gallon. For the U.S. alone, these biofuel subsidies were estimated to be as high as $5.1 billion in 2006 for ethanol alone (earlier post).
But resistance to this state of things is growing. Brazil recently initiated a WTO case against U.S. ethanol and farm subsidies (earlier post). Likewise, the governments of Sweden and the Netherlands have launched a formal request for a study to be performed by the Organisation of Economic Cooperation and Development (OECD) to assess the damages brought about by farm subsidies and biofuel trade barriers both in the U.S. and the EU (earlier post). Sweden, one of Europe's leading green nations, wants all barriers for biofuels removed, so that a global trade can emerge that allows countries in the South to make use of their comparative advantages (more here).
References:
Scoop: LanzaFuels Biofuels Plant On Hold - August 27, 2007.
Biopact: Brazil initiates WTO case against U.S. ethanol and farm subsidies - August 20, 2007
Biopact: Subsidies for uncompetitive U.S. biofuels cost taxpayers billions - report - October 26, 2006
LanzaFuels spokesman Howard Moore explained the reasons behind the decision:
"Brazilian prices for fuel ethanol are currently at historically low levels and so, combined with the strong New Zealand dollar, the cost to import ethanol is now lower than it can be made locally. This situation has developed recently, and until future prospects become more encouraging, the Company considers it is unwise to invest further in the project".LanzaFuels has been planning to build a large-scale ethanol production plant using locally grown maize, and powered by wood waste. It planned to target land currently used for beef and sheep farming. This would have provided higher returns to farmers who are not benefiting from current high dairy prices. Moore says "this would have had a double benefit for the environment by both reducing fossil fuel use and reducing agricultural methane emissions".
The low prices for sugar cane based ethanol are the result of a record sugar crop in both Brazil and India (previous post). In May, ethanol prices in Brazil recorded their lowest level in 2 years, making the government consider an increase in the blending rate by 2% (from 23 to 25%). At the same time, crude oil prices have risen to new records. The advantage of sugar cane based ethanol has never been this great (earlier post).
Besides a record crop, Brazilian farmers, sugar processors and ethanol producers can draw on vast experience resulting in steep efficiency increases, which lowered their production costs for ethanol by 75% over 25 years (earlier post), further strengthening their natural comparative advantages:
energy :: sustainability :: ethanol :: corn :: sugarcane :: biomass :: bioenergy :: biofuels :: competition :: tariffs :: subsidies :: comparative advantage :: Brazil :: New Zealand :: Industry analysts and agronomists think this trend is far from over: Brazilian ethanol can become even more efficient and double or even triple its output per hectare, as both processing technologies progress and biotechnological advancements are made (earlier post).
In this case it will become nearly impossible for biofuel producers relying on crops like corn to compete. At least not in a free trade environment.
Both the European Union and the United States heavily subsidize their farmers and protect their markets against more efficient fuels by imposing import tariffs that can be as high as US$0.54 per gallon. For the U.S. alone, these biofuel subsidies were estimated to be as high as $5.1 billion in 2006 for ethanol alone (earlier post).
But resistance to this state of things is growing. Brazil recently initiated a WTO case against U.S. ethanol and farm subsidies (earlier post). Likewise, the governments of Sweden and the Netherlands have launched a formal request for a study to be performed by the Organisation of Economic Cooperation and Development (OECD) to assess the damages brought about by farm subsidies and biofuel trade barriers both in the U.S. and the EU (earlier post). Sweden, one of Europe's leading green nations, wants all barriers for biofuels removed, so that a global trade can emerge that allows countries in the South to make use of their comparative advantages (more here).
References:
Scoop: LanzaFuels Biofuels Plant On Hold - August 27, 2007.
Biopact: Brazil initiates WTO case against U.S. ethanol and farm subsidies - August 20, 2007
Biopact: Subsidies for uncompetitive U.S. biofuels cost taxpayers billions - report - October 26, 2006
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