[ASC-media] Media release: global swing to biofuels

JCA Media jca.media at starclass.com.au
Mon Aug 14 02:09:14 CEST 2006

International Association of Agricultural Economists 26th Conference
Gold Coast Convention Centre, Qld, Australia
August 12-18, 2006	   ph 07 5504 4057


August 14, 2006							IAAE 18


Ethanol and biodiesel are set to keep the wheels turning on roads in the USA  and around the world, according to biofuel expert Professor Vernon Eidman of the University of Minnesota.

Professor Eidman is addressing the International Association of Agricultural Economics conference on Australia's Gold Coast today (August 14, 2006). 
"At the present time, ethanol makes up just under three per cent of the US gasoline supply, and biodiesel even less," says Professor Eidman. "But the growth has been impressive, with some five billion gallons of ethanol being produced in 2005-2006."

The rapid growth of demand, and high rates of return for investors, have brought ethanol into the mainstream market, says Professor Eidman, with investment bankers showing serious interest in ethanol as a commodity.

"Up till now the industry has been fairly fragmented with a large number of small producers," he says. This is changing. Marketing to large oil companies, economies in ethanol production and the availability of capital from investment bankers are the forces moving the industry to larger production plants.

Biofuel prices  are particularly sensitive to oil and gas prices, says Professor Eidman.

"Typically, production plants use natural gas,  and a swing in gas prices has an immediate corresponding effect on the cost of ethanol," he says. "The cost of the feedstock - usually corn - also has an immediate effect on the cost of producing ethanol."

In the United States, the major subsidy for fuel ethanol is a $0.51 per gallon blenders tax credit. This effectively lowers the cost of ethanol to the petroleum company. The federal government also provides an additional subsidy  to smaller plants producing less than 60 million gallons per year.

There are also various subsidies and incentives offered by the States, says Professor Eidman.

"As in Australia, different States have different legislation," says Professor Eidman. "Several States have mandated that all petrol sold within the State be blended with a minimum percentage of ethanol, while other States have a partial State excise tax exemption."

Professor Eidman says that the future of biofuel production lies in ethanol from lignocellulosic biomass - that is, the leafy or woody parts of plants.

"Ethanol from grain is limited by the resources available to produce the crops," he says. "But emerging technology will allow much greater quantities of ethanol to be produced from plant waste matter such as straw, wood wastes, and waste paper. 'Bioenergy crops' such as some grasses, willows, and poplars are being investigated for the production of ethanol feedstock.

"The first and second commercial plants producing ethanol from lignocellulosic biomass will be coming into production during the next two years. We expect this industry to be developed slowly over the next decade, with the major development and impact to occur after 2015, he says. A great deal of additional research is needed to make these processes competitive with production of ethanol from grain.

Wind resources to generate electricity have enormous potential to contribute to the nation's energy supply. Both  biodiesel and methane are expected to make important, but rather limited contributions to energy supplies, says Professor Eidman.

The International Association of Agricultural Economists (IAAE) 26th Annual Conference on "The Contribution of Agricultural Economics to Critical Policy Issues" is at the Gold Coast Convention Centre, Qld, from August 12-18, 2006.

More information:
IAAE media centre, Gold Coast Convention Centre, +61 (0)7 5504 4057
Professor Vernon Eidman, University of Minnesota +1 612 624 7253
Media contact: Prof. Julian Cribb, 0418 639245
Conference program & details:

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