The fact that the biofuel sector is experiencing a decline in fortunes should surprise no one.
With oil prices sitting at about $60 per barrel compared to $100 a year ago and the agricultural economy sluggish, it would be more surprising if the biofuel industry was chugging along the same as it has for the past several years.
Recently, the NorAmera BioEnergy Corp. plant in Weyburn, Sask., stopped its ethanol production, citing not only the low oil price and sluggish ag economy but also the loss of federal and provincial tax credits. All of that came on the heels of successive years of high feedgrain prices and local flooding, which limited supplies.
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Across the biofuel industry, manufacturers are being forced to adopt new operating models that no longer assume the high oil prices that once existed. It has left many of them with little wiggle room while attempting to sell into a buyers’ market.
Yet biofuel remains a valuable component of the agricultural industry and for the western economy. We can ill afford to ignore its recent travails.
Those who manage ethanol manufacturing plants understand the cyclical nature of the business. Their industry, like everybody’s, has to be sustainable through the low parts of the cycle if it is to survive for the long term.
And while analysts’ opinions are mixed as to the timing of a turnaround in the oil industry, with some seeing a partial turnaround next year and others seeing it as a more gradual recovery over the next several years, a recovery seems inevitable.
In the meantime, we should do what is reasonable to make sure the gains made in establishing infrastructure and distribution networks during the set-up phases of the early 2000s is not undone.
This doesn’t mean major subsidies or direct financial aid simply because one or two plants have closed. However, we do need to find ways to ensure previous investments aren’t lost.
A recent poll commissioned by the Canadian Renewable Fuel Association suggests there is support among Canadians for some type of help to the industry.
Eighty-eight percent of Canadians polled said they want Canadian-produced biofuel and that government should do more to promote it.
The association has suggested that more support is warranted for research into cellulosic biofuel produced from wood, grasses or the inedible parts of plants we currently use as food crops.
Such action would help lessen criticisms that biofuel diverts production away from food crops needed to feed the world, especially if the research focuses on making ethanol from wheat straw or corn stalks.
The CFRA poll also said that 67 percent of Canadians support increasing the mandated biodiesel blend to five percent from two. The ethanol blend mandate is already five percent, although some provinces have even higher blend requirements.
The poll also reported that 61 percent of Canadians believe climate change is a real event caused by humans and 67 percent said their impression of Ottawa’s response to climate change improved when they learned of the federal biofuel blending mandates. This suggests strong support for maintaining a vigorous biofuel industry in Canada.
Close monitoring and minor policy adjustments as needed to help ease the biofuel industry down the bumpy road ahead are clearly in line with public sentiment.
As well, the importance of protecting an important domestic market for Canadian farmers cannot be understated, given the limited number of grain buyers.
