The Economist writes: “Diesel fuel made from oilseeds, petrol replaced by ethanol made from corn, sugar or grainor even straw. They’re here and are starting to change energy markets.”

American output of maize-based ethanol is rising by 30% a year. Brazil, long the world leader, is pushing ahead as fast as the sugar crop from which its ethanol is made will allow. China, though late to start, has already built the world’s biggest ethanol plant, and plans another as big. Germany, the big producer of biodiesel, is raising output 40-50% a year. France aims to triple output of the two fuels together by 2007. Even in backward Britain a smallish biodiesel plant has just come on stream, and another as big as Europe’s biggest is being built. And after long research a Canadian firm has plans for a full-scale ethanol plant that will replace today’s grain or sugar feedstock with straw. Output is still tiny compared with that of mineral fuels. But the day of the biofuel has arrived.

The reason is simple. Forget greenery or energy security, the grounds on which governments justify subsidising biofuels. Just take the past year’s soaring price of mineral fuels, subtract the biofuel subsidy, and the answer is plain: for the user, biofuels are currently cheaper. Indeed, in America’s corn (maize) states, locally produced ethanol is close to being competitive even without subsidy; imported Brazilian ethanol could have been so long ago, had not a federal tax credit for ethanol, originally 54 cents per American gallon, been carefully balanced by a 54 cent tariff.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.