“That is the uncertainty. I would think over the longer term the ethanol industry is likely to grow, but in the very short term this proposed cut in the mandate has been disappointing.”
However, Desmond Cheung, manager of the BlackRock World Agriculture fund, points out the US biofuel changes are only a piece of the whole biofuel debate.
Europe has mandated that member states must “achieve at least a 10 per cent share of renewable energy in the total gasoline and diesel consumed in transport by 2020”, with liquid biofuels expected to provide the main contribution to this reduction.
Mr Cheung adds: “In Asia, there is a lot of discussion about Malaysia and Indonesia and whether they should use more palm oil and turn it into biodiesel. A lot of focus is on what governments are doing, but it’s also a question of economics, whether or not the biofuel supply is abundant enough to make it competitive to fossil fuels, which will be a big question for the future.”
Nyree Stewart is acting features editor at Investment Adviser
