Subsidies are a stupid idea. Corn-based ethanol is a stupid idea. Subsidising corn-based ethanol was perhaps the most stupid idea of the last ten years.
As much as one third of US corn has been wasted making ethanol this year. This has directly caused food inflation all around the globe.
This trend is now coming to an end.
Since April this year it was mandatory to blend ethanol with petrol across the EU. This stupid rule contributed the rise in food prices across the world. There have been food riots in Haiti, Egypt and elsewhere. Poor people really have been starving.
European Commission rules said that 10% of all vehicle fuel must come from renewable sources by 2020. But it did not specify how much should come form biofuels.
Yesterday, the European Parliament's industry committee said it would keep the overall 10% target. But it now requires that at least 40% come from other sources apart from corn-based ethanol.
The decision is likely to favour one of the companies in my portfolio. It has the most advanced second-generation biofuel project in the world.
Alternative energy is not a significant contributor to earnings at the moment. But it will be.
These fuels do not compete with food production for agricultural land. But another five to ten years of research is needed before they will be commercially available.
Despite the technology’s promise the task is not easy. It will be some time before second-generation fuels are available to the masses. But this work is important.
So far, no company has yet managed to deliver full-scale commercial production of cellulosic ethanol, although there have been demonstration plants.
To discover more about my Smart Commodities newsletter click here.
Regards,
Garry White
Editor
Smart Commodities UK
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Fleet Street Publications is authorised and regulated by the Financial Services Authority Reg No. 115234. www.fsa.gov.uk/register