Biofuel sustainability questioned

June 20, 2007
A new report from London-based consulting firm Arthur D. Little is throwing a cold pail of water on the long-term viability of biofuels.

A new report from London-based consulting firm Arthur D. Little is throwing a cold pail of water on the long-term viability of biofuels.

“Many see transportation biofuels as a way of reducing carbon emissions in the face of climate change and of mitigating the volatility of the world energy markets,” said Roger Hill, head of Arthur D. Little’s global energy practice. “But the question arises: given dependency on high oil prices and political support, are transportation biofuels economically sustainable?”

Hill, who helped author Little’s global study, titled Sustainability of Transportation Biofuels, said the biofuel market thrives in countries that have the most favorable political incentives matched with the availability of cheap feedstocks. “But long-term survival of the various biofuel options is far from clear, as virtually all are dependent on government support and/or high oil prices,” he stressed.

Despite current government support, Hill said there are uncertainties regarding the long-term sustainability of biofuel technologies and applications, mainly as they are cost competitive only in times of high oil prices.

“Also, the competition between fuel crop and food crop needs and the impact on biodiversity may lead to withdrawal or reduction of government support in the long-term,” he added. “Finally, there is uncertainty regarding those who will be the active players in the value chain. For instance, will there continue to be on-off joint ventures supported by private equity? Or will the market be dominated by energy majors and others?”

These ambiguities, Hill said, make investors more skeptical about the potential for making long-term profits by investing in biofuels. He stressed that to make the right investment choices potential investors, suppliers and policy makers must have in-depth, independent data covering all aspects of the bio-fuels debate.

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