Biofuels present and future economics
The present and future economics of biofuels produced from agricultural commodities in Western Canada are presented. Biodiesel, ethanol, biogas and biomass burning are the main biofuels that are or will be produced from agricultural commodities or biomass. Although the biofuels are very different in the properties and use characteristics there are a number of aspects that are common to all biofuels. First, the delivered cost of the feedstock to the plant gate represents a high proportion of variable cost. Second, reliability of supply at the farm level as farmers are allocating their land resource to the highest return given production constraints. The biofuel crop or cropping system has to offer a competitive net return compared to competing land uses. Third, reliability of supply at the market level as biofuel manufacturers are competing with other uses for the feedstock. Fourth, high per unit capital cost of manufacturing the biofuel relative to the manufacture of competing products in markets where economies of scale exist. To date market entry in Canada has mainly been the result of regulation. However, the market for the product, by-products and co-products will determine the economic feasibility of producing a biofuel in the long run. The crude oil market, animal feed market and the carbon market will have major influences on the future profitability of biofuels.
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