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 Economic TagsBiodiesel
Canola
Corn
Economic
Ethanol
Lignocellulosic
Marine Oil
Soybeans
Tallow
Wheat
Yellow Grease
 Economic, Financial, Policy Analysis Biofuels, Pha
 Prepared April 2005
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The transportation sector represents the single largest source of Canada's greenhouse gas (GHG) emissions, accounting for about 27% of the total. Emissions from transportation are growing faster than the national average and are forecast to exceed the 1990 levels by over 25% in 2010 and 40% by 2020. Two transportation fuels that are manufactured from biomass feedstocks have been gaining momentum as suitable fuels for use in gasoline and diesel engines, either as neat fuels or in various blends. These fuels are ethanol, manufactured from grains and lignocellulosic feedstocks, and bio-diesel (methyl esters) manufactured from virgin vegetable oils, re-cycled oils, and animal fat.

The 2003 Climate Change Plan for Canada included $154 million to be invested in measures to support Canada's efforts to reduce GHG emissions from transportation. The funds will support the industry to increase the supply of renewable alternative fuels, such as ethanol and bio-diesel, and the commercial transportation sector to make greater use of these fuels.

The Federal Government included a production goal of 35% of Canadian gasoline to be blended with 10% ethanol by 2010 in its Climate Change Action plan. In 2010, this will likely require 1.5 billion litres of ethanol. They have also established a $100 million Ethanol Expansion Program to assist with the construction of new ethanol plants in Canada. The funding under the Ethanol Expansion Program is part of a larger bio-fuels strategy that also includes the extension of the National Biomass Ethanol Program, research and development under the biotechnology component of the Technology and Innovation Strategy and an investment in bio-diesel.

The Federal Government has included a production goal of 500 million litres of biodiesel by 2010 in its Climate Change Action plan. They have also established an $11.9 million fund that will support research and provide incentives for industrial-scale biodiesel pilot plants, and support demonstrations of its effectiveness to encourage broader use of biodiesel.
In addition to encouraging increased production, the Government of Canada is also promoting greater use of ethanol and biodiesel. In partnership with several gasoline retailers, the Government of Canada is launching a consumer awareness campaign that will promote the benefits of ethanol-blended gasoline to Canadian drivers. There are currently more than 1,000 retail locations selling ethanol-blended gasoline in Canada.
There has been little economic and financial analysis of these fuels within a Canadian context. The few published and unpublished studies carried-out so far for the public sectors have dealt mostly with potential socio-economic impacts and have attracted little interest from the investment community due to their lack of focus on profitability, both short and long term. More detailed feasibility studies have been performed for individual private sector clients but these have not been widely disseminated. Policy and decision makers, financial institutions, and other economic players need the more detailed, formal analysis framework in order to make investment decisions regarding the development of these fuels.

Some essential topics that will be addressed in this work are:
·The appropriate policy and regulatory environment under which investments will flow into ethanol plants;
·The likely source of these investments;
·And the industry structure that will lead to a viable and competitive industry in the longer term.

Much work remains to be done in this area to establish a purely Canadian perspective, if Canada is to entertain the notion of building a bio-based economy as part of its future.

The development of a biofuel industry will require a great deal of investment on behalf of fuel suppliers, fuel marketers, and many levels of governments. The federal government's role will be to encourage the development of the biofuel industry through the implementation of sensible regulatory and policy tools based on sound analytical work. This work will form a foundation for the development of those tools.

Objective and Approach

The primary objective of this study is to assess the current and future economics of ethanol plants in Canada and to develop estimates of demand, supply, and prices (costs and selling) of this fuel. The results are then used to develop a template-like analytical tool for various models of ownership structure, to help assess the financial performance of various types of fuel ethanol (regional and feedstock specific) plants across Canada.

The work was carried out in Phases and stages. This report covers Phase 2, for fuel ethanol and biodiesel.
Phase 2 of the work focuses on quantifying the effects of ethanol and biodiesel production and use from a full cost accounting perspective. The work includes:
·A literature review of existing full cost accounting studies on biofuels.
·Descriptions of the relative benefits and costs of biofuel production within the context of greenhouse gas emissions, air quality, safety risk, employment and tax benefits and resource use.
·Identification of case studies that would optimize the benefits from a full cost accounting perspective.
·Identification of the gaps in the existing understanding of full cost accounting and how they might be addressed in the future.

Tags: Biodiesel - Economic - Ethanol
 Cost Effectiveness Methodology and Results
 Prepared March 2005
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The results of the emission analysis of the various fuel pathways provides useful information for the comparison of pathways but it does not provide any information about the cost of one pathway versus another. It is important not only to be able to reduce emissions from the transportation sector but to do so in a cost effective manner. The function of the cost effectiveness calculations in GHGenius is therefore to integrate information on the relative costs of alternative fuels and vehicles with the emissions results produced by the model to arrive at the cost of greenhouse gas emission reductions achieved by the pathway.
The goal of this work was to enhance the functionality of the cost effectiveness calculations. The specific actions undertaken to achieve this were:
1. In version 2.5 of the GHGenius model, fuel costs and operating and maintenance costs were discounted but at different rates. The cost effectiveness is then discounted as well. The discounting of the fuel costs and the operating and maintenance costs have been removed and now the model just discounts the cost effectiveness.
2. There were a number of intermediate calculation results shown on the cost effectiveness sheets that did not add any useful information. These have been removed to simplify the presentation. The calculations in the final result cells have been changed to draw the data from other locations in the model rather from these intermediate result locations.
3. The lifetime vehicle mileage was chosen automatically based on average mileage accumulation rates and the economic life of the vehicle. This has been changed to a user specified value so that special cases such as high mileage vehicles can be modelled. Some of these high mileage vehicles should offer the most cost effective GHG reduction opportunities.
4. The cost effectiveness calculations were designed on a pre-tax basis. This was done to facilitate the comparison of pathways on a purely fuel and vehicle cost basis. This is done because many alternative fuels currently benefit from excise tax and in some cases provincial tax exemptions. In some cases however, where there is an incremental vehicle cost but gasoline or diesel fuel is still used, it is important to consider the implication of fuel taxes in the calculation. The provision for adding fuel taxes to the cost determination was included so that the model can calculate the cost effectiveness from both perspectives.
5. The fuel costs for crude oil derived fuels is now calculated from a user set crude oil price. This allows for rapid analysis of the impact of changing oil price scenarios.
6. There are market relationships between crude oil and its primary products, natural gas, propane and the fuels made from them. A means of linking all of these fuels back to the price of crude oil was explored. Data was collected and analyzed on the recent historical relationships between these products.
7. While it was not possible to link all of the fossil fuels together, it was possible to create some “caution messages” for the user. For example, hydrogen from the SMR pathway could have the feedstock calculated by the model from the price of natural gas and this cost could be compared to the user input value. This could not be done for every fuel but it has been done for a number of them.
8. There is much more information in existence today concerning the production economics of many of the alternative fuels than there was in 1999. Improved estimates of this data should be available in the near future. The information from the recent work on biofuels should be able to be used for the prices of ethanol and biodiesel.

Tags: Economic
 Economic, Financial, Policy Analysis Ethanol
 Prepared November 2004
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The Federal Government included a production goal of 35% of Canadian gasoline to be blended with 10% ethanol by 2010 in its Climate Change Action plan. In 2010, this will likely require 1.5 billion litres of ethanol.

They have also established a $100 million Ethanol Expansion Program to assist with the construction of new ethanol plants in Canada. The funding under the Ethanol Expansion Program is part of a larger bio-fuels strategy that also includes the extension of the National Biomass Ethanol Program, research and development under the biotechnology component of the Technology and Innovation Strategy and an investment in bio-diesel.

There has been little economic and financial analysis of ethanol within a Canadian context. The few published and unpublished studies carried-out so far for the public sectors have dealt mostly with potential socio-economic impacts and have attracted little interest from the investment community due to their lack of focus on profitability, both short and long term. Policy and decision makers, financial institutions, and other economic players need the more detailed, formal analysis framework in order to make investment decisions regarding the development of these fuels.

The primary objective of this study is to assess the current and future economics of ethanol plants in Canada and to develop estimates of demand, supply, and prices (costs and selling) of this fuel. The results are then used to develop a template-like analytical tool for various models of ownership structure, to help assess the financial performance of various types of fuel ethanol (regional and feedstock specific) plants across Canada.

The work was carried out in Phases and stages. This report covers Phase 1, for fuel ethanol. A similar report has been prepared for biodiesel.

The specific objectives of Phase 1, Stage 1 were to:
· Review literature on economic and financial performance of ethanol plants.
· Identify successful plants and reasons for success.
· Quantify feedstock resources and production costs.
· Develop a comprehensive financial model.
· Develop a supply curve.

The objectives of Phase 1, Stage 2 were to:
· Identification of market barriers.
· Evaluate policy tools including.
o Government capital investment
o Favourable tax treatment
o Infrastructure investment
o R&D funding
o Renewable content mandates
o Emission taxes
· Examine the potential for regionalization of tools.
· Quantification of levels of support required.
· Investigate other approaches to market development.

Phase 1, Stage 3 of the work focuses on the international aspects of a developing ethanol industry and considers the threats and opportunities that international trade in biofuels presents. The specific tasks of this stage include:
· Identification of the level of international trade.
· Production cost comparison with the potential exporters of fuel ethanol.
· Analysis of the import alternatives that ethanol users in Canada would face.
· Evaluate the impacts that ethanol imports might face and identify measures that might mitigate the impacts.
· Evaluate the impact of trade agreements on enabling or disabling Canadian industry competitiveness.

The next phase of the work will include some GHG analyses.

Tags: Corn - Economic - Ethanol - Lignocellulosic - Wheat
 Economic, Financial, Policy Analysis Biodiesel
 Prepared November 2004
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The Federal Government has included a production goal of 500 million litres of biodiesel by 2010 in its Climate Change Action plan. They have also established an $11.9 million fund that will support research and provide incentives for industrial-scale biodiesel pilot plants, and support demonstrations of its effectiveness to encourage broader use of biodiesel.

There has been little economic and financial analysis of biodiesel within a Canadian context. The few published and unpublished studies carried-out so far for the public sectors have dealt mostly with potential socio-economic impacts and have attracted little interest from the investment community due to their lack of focus on profitability, both short and long term. Policy and decision makers, financial institutions, and other economic players need the more detailed, formal analysis framework in order to make investment decisions regarding the development of these fuels.

The primary objective of this study is to assess the current and future economics of bio-diesel plants in Canada and to develop estimates of demand, supply, and prices (costs and selling) of this fuel. The results are then used to develop a template-like analytical tool for various models of ownership structure, to help assess the financial performance of various types of biodiesel (regional and feedstock specific) plants across Canada.

The work was carried out in Phases and stages. This report covers Phase 1, for biodiesel. A similar report has been prepared for ethanol.

The specific objectives of Phase 1, Stage 1 were to:
· Review literature on economic and financial performance of biodiesel plants.
· Identify successful plants and reasons for success.
· Quantify feedstock resources and production costs.
· Develop a comprehensive financial model.
· Develop a supply curve.

The objectives of Phase 1, Stage 2 were to:
· Identification of market barriers.
· Evaluate policy tools including.
o Government capital investment
o Favourable tax treatment
o Infrastructure investment
o R&D funding
o Renewable content mandates
o Emission taxes
· Examine the potential for regionalization of tools.
· Quantification of levels of support required.
· Investigate other approaches to market development.

Phase 1, Stage 3 of the work focuses on the international aspects of a developing biodiesel industry and considers the threats and opportunities that international trade in biofuels presents. The specific tasks of this stage include:
· Identification of the level of international trade.
· Production cost comparison with the potential exporters of biodiesel.
· Analysis of the import alternatives that biodiesel users in Canada would face.
· Evaluate the impacts that biodiesel imports might face and identify measures that might mitigate the impacts.
· Evaluate the impact of trade agreements on enabling or disabling Canadian industry competitiveness.

The second phase of the work will have some analysis related to GHG emissions.

Tags: Biodiesel - Canola - Economic - Marine Oil - Soybeans - Tallow - Yellow Grease
(S&T)2 Consultants Inc. 2004 Important Notices