Europe’s Biofuel Dilemma - Politics Versus Environmentalists Versus Business

Implications: The EU Biofuel marketplace is in trouble! Politicians are definitely not businesspeople. Do good-ers are not either. Questionable science yields bad information which drives bad decisions. Tax revenues ultimately drive politicians, so we just go round-and-round back to where we started with little real impact. The ongoing issues will change the approach of renewable fuel in the US and in Europe - albeit slowly.

Analysis: Have any of us really seen a good run government business? OK - there are a couple exceptions. As an active participant in the Biofuel industry over the last several years, I must say that things have changed from where they started. I also must admit I was around during the Gasohol attempts in the ‘70’s, so there is that history, too.

The European market is of special interest to me because of the heavy market penetration of diesels there and therefore potential Biodiesel usage. One solution to CAFÉ standards in the US are more diesels. Many EU localities built Biodiesel production facilities under the umbrella of mandates and tax policy along with the mentality “Build it and they will come.”

There have been problems from the start similar to that already experienced on a small scale here in the US. Even without the environmentalists, the EU basic business model for Biofuels shares the same problems as here including feedstock, logistics, integration, retail points of sale, etc. We won’t even get into the politics of the food versus fuel feedstock debate. We then throw in the EU tax implications that just add to the problems.

Even if we minimize the logistics / integration issues addressed, there are others. For example, ConocoPhillips is trying to feed the EU marketplace with Renewable Diesel from their Whitegate Cork, Ireland refinery, but still have feedstock cost / availability problems. Renewable Diesel is a better solution for developed countries, which also has the tax issues. The direction of environmentalists / carbon balance / tax decisions may be too much for the EU. Additionally, it is not a sustainable business model as is.

Does this bode well for the EU Biodiesel world? Nope! Sorry for those investors who put money into it there…. Those plants may be good to move to developing nations - being the optimist I really am. Same holds true for us in the US.

Additionally, the business community will ultimately figure out the best approach - not politicians or special interest groups!