LONDON, UK, May 30, 2007.
The United States is the most attractive country in the world for biofuels, ranked slightly ahead of Brazil and Germany.
The inaugural ‘Biofuels Country Attractiveness Indices’ were produced by Ernst & Young to score national markets for ethanol as a gasoline substitute and biodiesel as a substitute for diesel fuel. The analysis complements the consulting firms quarterly reports on the attractiveness of renewable energies in countries around the world, in which biofuels is a component of the scoring.
“In the past 18 months, high oil prices, fears over fuel security and global warming concerns have resulted in rapid growth for the biofuels industry,” it explains. U.S. president George Bush has promised to source 20% of fuel from renewables within 10 years and the European Union has committed to a mandatory target of 10% green fuels in road transport by 2020.
“Growing optimism in the sector has not been lost on investors who are showing an appetite to take advantage of the growth potential and capital requirement of the market with over US$400 million invested in 2006 and analysts predicting a compound annual growth rate for the industry of 30% in the medium term,” it explains. “Recently, biofuels producers have seen their margins squeezed by crude oil prices falling from their 2006 highs, and rising feedstock prices. Corporate and social responsibility issues are also placing pressure on the nascent industry, with concerns around energy’s role in food crop price volatility and the economic pressures to convert rainforest to agricultural land.”
The U.S. sits at the top of the ‘All Biofuels Index’ with a score of 73, due to its recent strength and scale of biofuels development, its high gasoline and diesel consumption and the sophisticated financial markets in the country. It scores 78 for ethanol, 68 for biodiesel and 87 for infrastructure.
Brazil’s high ethanol score and large agricultural economy capable of growing high yield feedstocks place them second at 72, with subordinate scores of 78, 66 and 92. Germany is in third place with 71 overall, and 69 for ethanol, 73 for biodiesel and 81 for infrastructure.
Other countries in the top ten rankings are France (67 overall), Spain (61), UK (58), Sweden (58), Canada (57), Italy (53) and Australia and Thailand tied at 52 overall. China, India, Belgium and Indonesia complete the top-15 list.
Brazil and the U.S. share top spot in the ethanol index, with Brazil enjoying a high yielding feedstock, sugar cane, high blending targets, various tax incentives, and a large production capacity. The U.S. produced more ethanol than Brazil for the first time during 2006, where federal grants for second generation (cellulosic) ethanol have encouraged the market and where high corn prices are expected to soften following record levels of planting this season by farmers.
“Europe continues to be a relatively modest producer of ethanol with its largest producer, Germany, producing just a fraction of the U.S. production during 2006,” the report notes. “Belgium's score suffers due to its low gasoline consumption and Italy's as a result of its low installed capacity.”
Germany tops the biodiesel Index with a long history of governmental and financial support for the industry “but its score would have been higher were it not for last year’s reduction in excise tax incentives, in favour of blending targets, leading to concerns that the market is reaching overcapacity,” the report explains. “France is in second place with an established biodiesel industry currently supported by excise tax exemptions, but with EU blending targets to be met in the future.”
