“We believe that biofuels will experience a cycle similar to that of the Internet during the dot-com bubble,” said Melissa Stark, senior executive in Accenture’s Energy industry group in a press release. “Initially, there will be a boom followed by a downturn as the realities of practically scaling this market become more apparent. Ultimately, the stable players will emerge after the dust settles.” Accenture is an international consulting firm.
Accenture identified several issues that may affect a biofuel company’s survival—government regulation that advocates carbon dioxide reduction, preferential agricultural policies, and government emphasis on energy source diversification. Technological advances that address transportation, storage, production cost, and any method that addresses cost reduction will also play a role.
“Our research shows that technology is the biggest uncertainty in the future of the biofuels industry. Technology will continue to improve the economics of biofuels development, but it is still uncertain which technologies will have the most impact and what the ultimate scale of the industry will be,” suggested Stark.
Accenture provided a list that might entice business to react and develop new or expand existing industries. Some recommendations are for subsidies to reduce cost or lower taxes for companies that research and develop biofuel technologies, including hybrid cars.
With the growth of biofuels, the proportion of land for food production may be reduced. Expansion of any new industry also has unintended effects on existing related industries.
“Regulation is likely to affect different industries in different ways,” Accenture experts said. “For example, subsidies for biofuels will present new manufacturing opportunities for the automobile industry and could advance the market for new farming technologies.”
One industry that might benefit is the financial services industry. The report suggested that in the long run “new financial markets in carbon-related derivatives” could be established.
The report gave special mention to the HSBC Group and Toyota Motor Co. HSBC, one of the largest banking and financial services organizations in the world, became carbon neutral in 2005. HSBC is also reducing carbon emissions in all of its buildings and buys “green electricity” whenever possible. In 1997, Toyota brought to market the first mass-produced hybrid car called the Toyota Prius. The car has become so popular that Toyota can’t keep up with its demand.
Business Executives Discuss
Businesses must address climate change and help develop a viable industry, said almost half of the surveyed business executives from around the world in the Accenture study. More than 50 percent felt that it would become important five years in the future.
The majority of businesses admitted that they are not yet ready to address the fallout of climate change to their industry.
“Business responses to climate change tend to be fragmented across a range of piecemeal activities,” Accenture said.
Most business leaders foresee climate change as increasing the cost of doing business. On the other hand, a small minority feels that climate change is a good opportunity for developing new businesses.
Accenture’s survey suggests that both internal and external challenges hamper companies. A company’s culture, including its resistance to change, and how to deal with a slew of new regulations may hamper new business development. External influences include innovation, technological advances, cost implications, resource allocation, and developing talent.
Many businesses are concerned with local and international regulatory changes for biofuels. Companies are hesitant to be a forerunner before they are clear as to how regulations may affect their business endeavors.
“Sixty-three percent of businesses see a balance between market-driven and government-driven responses to climate change as being most effective. Where regulation is introduced, businesses would also prefer to see a collaborative approach,” the report said.
Biofuel Success
“We make biodiesel from used cooking oil,” said Kelly King, founder of Pacific Biodiesel Inc., during an interview with the Biofuels Business magazine.
Pacific operates in Hawaii and is selling the biodiesel fuel at $3.99 a gallon. The average gasoline price in Hawaii is around $5.00.
Pacific owns a biodiesel plant in Maui, and co-owns plants in Salem, Ore., and Carl’s Corner, Texas. The company envisions opening more such plants throughout the United States, according to the Pacific Web site. The Pacific plants have the capability to produce up to 10 million gallons of biodiesel per year.
Biodiesel plants “foster rural economic development,” as well as environmental and social benefits. “It’s not just a win-win—it’s a win-win-win-win-win situation,” said Eli Miller, U.S. Environmental Protection Agency (EPA) Region 10 administrator.
