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Note: Biofuel entrepreneur Louis Strydom reports from the
Biofuels Finance & Investment World which was held in late 2006
in London, U.K. He brings some sobering macroscopic updates to
our ongoing coverage of the biofuel phenomenon. One message
coming from the Terrapinn conference was that the global biofuel
industry is utterly dependent on government subsidies. Another
was mention of the need for criteria for biofuel certification -
criteria that must reach beyond the consumer and the refinery to
the actual source of the feedstock.
HOW IS THE GLOBAL VALUE CHAIN SHAPING UP?
by Louis Strydom
In terms of impact on food production, sometime in 2007 world
biodiesel consumption is expected to outstrip world soybean
production, and also in 2007, US corn for ethanol consumption
will again outstrip US corn exports. Because of land
increasingly being allocated to growing biofuel, the global
grain market reserves have fallen from 120 days in 2000 to an
estimated reserve of only 40 days by 2008, with corn reserves
projected at falling to even lower levels of 20 days reserves.
With US corn, there is a significant gap between USDA
projections for corn supply vs. the amount of corn required for
ethanol production - requiring a further 15 million acres to be
planted by 2010 just to negate this initial gap.
How competitive is biofuel, right now? On a strict
energy-equivalent basis ethanol is competitive without subsidies
at approximately US$ 60 per barrel in the US, US$ 35 per barrel
in Brazil, and US$ 115 in Europe. The EU Commission estimates
that biodiesel is competitive without subsidies at US$ 65 per
barrel. Doesn't Athabasca crude go for US$ 42 per barrel?
Touched on in this report are the efforts to build the biofuel
industry in the developing world. The rapid construction of
refineries in the developed world is based on the assumption
that much of the feedstock will be imported from developing
nations. Some sort of certification program is essential -
biofuel is not always "carbon neutral" and having it is not
worth losing what remains of our tropical rainforests. In the
Congo deforestation accelerates to grow casava, in Indonesia for
oil palms, in South America for sugar cane. This is a disaster.