gabby

Cellulosic Ethanol: The Next Biofuel Boom?

The development of cellulosic ethanol is not "free", but perhaps you are suggesting the ingredients for it's creation are. Do you have a recommendation for what could be used in the interim as we await viable cellulosic alternatives? Hodges's article mentions commercial availability by 2012 -2015. Additionally, I don't understand why the US should be sibsidizing this industry when there are valid free market alternatives. Somewhat off topic, but the plug is being pulled on the FutureGen project (Coal Capture & Sequestration) because the project has ballooned to $2.8 billion, almost double the initial cost and the model has been determined to be seriously flawed by MIT. In this case, the government has realized that the free market & industry should be more involved and running these projects for effectiveness, accountability & efficiency. The quickest path to solutions is to encourage competition. Check out the story on Brazilian ethanol.

Cellulosic Ethanol: The Next Biofuel Boom?

Investment in cellulosic ethanol producers is contingent on continued government subsidies and protection. Currently ethanol producers receive a 51 cent a gallon tax credit and imported ethanol from Brazil has a 54 cent/gallon tariff. Later in '09 the US government will be addressing whether to let the tariff expire, which would open the door to more energy efficient, lower cost Brazilian sugar cane ethanol. Cosan (CZZ) is one of Brazil's largest cane ethanol producers and is already powering some of the ethanol production equipment with cellulosic ethanol made from the left over parts of the cane plant - leaves, etc. Europe is re-evaluating their stance on imported ethanol and is considering a ratings system which will take into account the energy efficiency of specific ethanol product production. Cane based ethanol is 6-8x more efficient than other crop base ethanol and doesn't impact vital food supply. Betting on US cellulosic ethanol right now assumes continued US government support via subsidies and tariffs while sugar cane ethanol powers ahead on both the established and experimental (cellulosic) aspects. Hampering free trade could provide temporary investment support for nascent US cellulosic producers but runs the risk of not being competitive in the rest of world and could miss out inestimable demand in China & India. Reuter's story below discusses ethanol tariff & 2009 budget. Note that the Renewable Fuels Assoc. (ethanol producers) are lobbying to keep the tariffs in place to "encourage investment" in US cellulosic development. Never a good sign, if you need a gov. assist for your investment $$$.

gabby
Disclosure: I hold CZZ

Bush budget doesn't alter ethanol import tariff
Mon Feb 4, 2008 4:44pm EST
By Tom Doggett

WASHINGTON (Reuters) - The Bush administration did not propose any changes to the expiring U.S. ethanol import tariff in its new 2009 government budget that was sent to Congress on Monday, an Energy Department spokeswoman said.

The spokesperson said while the 54-cent-a-gallon tariff is set to expire at the end of December during the 2009 budget year, which begins this October 1, the administration will have discussions with lawmakers later this year on what should be done with the tariff.

The tariff is designed to protect U.S. corn-based ethanol makers from cheaper imports, mainly from Brazil which makes its ethanol from sugar.

Energy Secretary Sam Bodman had hinted last week while speaking at the U.S. Chamber of Commerce that he favored eliminating or cutting back the tariff and that the administration would address the issue in its new 2009 budget.

"I would just say I think that there are advantages to having had the kind of both subsidies and tariffs that have helped protect this industry. I believe that, the best I can tell, this industry is pretty close to being able to stand on its own," Bodman said at the time.

U.S. ethanol blenders get a separate 51-cent-a-gallon tax credit that runs through 2010.

"I think it's very important that we pursue a policy which gives the U.S. industry appropriate time and protection to develop," Deputy Energy Secretary Clay Sell told reporters at a briefing on the Energy Department's new budget.

"We'll look forward to having those discussions with the Congress, as we always do, as the appropriate policy when the tariff expires," he said.

Brazil's sugar cane sector was disappointed the administration did not use the new budget to modify the U.S. ethanol import tariff.

"The continuing ethanol tariff runs counter to America's open and fair trade rhetoric," said Marcos Jank, president of the Brazilian Cane Sugar Industry.

"It is shocking that developed countries such as the United States continue to tax renewable biofuels from reliable democratic partners while encouraging tariff-free imports of petroleum from unstable regions of the world," he said.

However, the Renewable Fuels Association, which represents U.S. ethanol producers, said the import tariff is needed to encourage investment in the U.S. to develop cellulosic ethanol made from wood chips, switchgrass and other farm and forest waste.

"By removing the tariff ... you will cool the kind of investment you have seen in the industry," said RFA spokesman Matt Hartwig.

(Reporting by Tom Doggett; Editing by Russell Blinch and Christian Wiessner)