We need only read the front page headlines of every major newspaper to understand the deepening oil crisis and the worldwide repercussions of supply and demand as it relates to our traditional energy resources. Is it any wonder that renewable sources of energy are gaining in popularity as an alternative resource? Biofuel is one emerging energy source that may help address the supply-and-demand dilemma versus modern world overdependence on petroleum and petroleum-based applications. Furthermore, biofuel advocates stress that biofuels give off cleaner emissions of carbon dioxide and sulfur oxide, two greenhouse gases that are responsible for climactic change and global warming.
The Difference Between Biofuel and Fossil Fuel
The critical difference between biofuel and traditional fossil fuel is the number of years it takes to form. Biofuel is derived from recently dead biological or organic material. Traditional fossil fuel comes from long dead (read: millions of years old) biological organisms. For this reason, biofuel is considered a renewable resource because it can be replenished in a short period of time. Fossil fuel is classified as a non-renewable resource because its reserves are being depleted much faster than it takes to form new reserves.
While biofuel and fossil fuel are carbon-based properties (they both derive from biological matter) biofuel is considered carbon neutral because the energy is derived from plants, which remove carbon dioxide from the atmosphere. Whereas, fossil fuels released carbon dioxide, which has been stored beneath the earth surface for millions of years, into the air. Carbon dioxide emissions are the number one pollutant.
Biofuel comes from a variety of feedstock sources, of which the more common ones are corn, sugar cane, palm, wheat, algae, and jatropha. From these feedstock sources, two popular fuels are produced for transportation and machineries. They are biodiesel and bioethanol. Broken down further, biodiesel is derived from plant oils; bioethanol is derived from fermented starch or sugar crops.
How Are Biofulels Used?
Biofuels can be used in a pure (denoted as B100) or a blended form (denoted as a percentage). Biofuel is the most common fuel used in Europe because European car manufacturers outfit their cars with diesel engines. For most unmodified diesel engines, advocates say blends of up to 20% (B20) are deemed safe. Higher concentrations require modifications to the diesel engine.
Bioethanol is suggested as a substitute for gasoline in vehicles. However, users have to be careful in choosing the proper blend of ethanol. Generally, a 10% blend of ethanol (E10) may be safe to be used in newer cars. Lower concentrations have been used in some older engines without having adverse effects on vehicle fuel lines, but users should consult their car manufacturers to find out if bioethanol is safe for their engines. In some cases, conversions can void the manufacturer warranty.
Proponents Say
Advocates suggest businesses, especially those in the transportation industry will benefit from using biofuels on two fronts: (1) When biofuel prices are more stable than oil prices, companies are in a better position to plan and budget fuel expenditures for the year. (2) Cleaner vehicular emissions may save transportation companies maintenance costs, while helping them meet new government mandated environmental standards.
Opponents Say
Opponents question how governments establish standards, regulations, and mandates and suggest that the underlying motivation for setting certain standards and enforcing mandates is political.
In other words, opponents contend that politicians are showing preferential treatment to their constituents and lobbyists. The end result is that governments, not the economy, are creating winners and losers. If your company or industry falls on the out of political favor side, you may wind up paying higher taxes or incurring higher costs to meet those politically inspired mandates
Car Manufacturer Status
Car manufactures today are being forced to produce more vehicles that are biofuel ready. In addition to using cheaper fuel, both manufacturers and buyers will be given government incentives (in the form of tax credits) to embrace renewable and alternative energy. Studies also suggest that certain types of biofuel (e.g., biodiesel) can make engines last longer when users maintain their cars by using the right biofuel blend.
The Food vs. Fuel Debate
Biofuel does have an underside and has been the subject of a current debate on food vs. fuel. Since biofuel uses plants that are also used in food supply (corn, maize, wheat, sugar cane, and coconut), this raises the question of whether it is appropriate to use food crops to create alternative fuel instead of filling world food demand. The debate has been further intensified as the world experienced what was deemed as a food crisis in 2007. Critics contend that using agricultural land to produce crops to be used in biofuel production led to this crisis.
These issues must be ironed out by policymakers and regulatory bodies to ensure a workable balance between access to energy and all other necessities.
Proponents and opponents come together around environmental and health benefits of going green. Thus the conversion to more biofuels is probably inevitable. Some are very concerned with how that is executed, since the timing of the changes is not clear. Also total direct and indirect costs and what groups benefit and which groups suffer are major concerns. With Congressional leadership dedicated to accelerating greener energy in a way that benefits their constituents and lobbyists (For example, why do tax deductions for trial attorneys help the general public?), there will definitely be winners and losers.
What the biofuels discussion is pointing to is the urgency to begin planning NOW for this inevitability to help protect industries and consumers from rising costs from energy, regulations and taxes.
Bottom line? – Apply this information to improve your profitability, reengineer business models, and strengthen or gain competitive advantage in the marketplace. And apply the free Fiscal Test at http://fiscaldoctor.com/fiscaltest.html.
From Gary W Patterson, www.FiscalDoctor.com Copyright 2008
