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Giving Biofuels A Boost: Collaboration For Bioenergy Development
by Christopher J Brigham 11 July 2013 Ideally, successful biofuel development will rely on existing infrastructure, both to transport the fuel to the consumer and to utilise the fuel to generate power. Christopher J Brigham Partnerships between academia and industry on both sides of the Atlantic are key in bioenergy development, writes the University of Massachusetts ’ Christopher J Brigham… Alternative fuels, especially biofuels, are currently hot topics in both the academic and private sectors throughout the world. In many cases, an innovative idea in academic research will become the next revolutionary industrial process, and in some cases, the next potential global solution. I have previously stressed the notion that the academic scholars of today are the innovators and entrepreneurs of tomorrow. As in spheres such as information technology, space, and economics, the next generation of powerful, marketable ideas in biofuel production and technology will come from the universities and institutes of technology. Scientists, politicians, business leaders, and other citizens from both the US and EU offer a myriad of views on global climate change and how this problem will be mitigated in the coming years. Increasingly, biofuel alternatives to petroleum are being developed, such as the use of sugarcane-based ethanol in Brazil. Ethanol, as an inefficient and somewhat problematic biofuel, is really only effective if the proper infrastructure is developed along with it (which has been done in Brazil). Ideally, successful biofuel development will rely on existing infrastructure, both to transport the fuel to the consumer and to utilise the fuel to generate power. There has been an increased focus in the US on researching cost-effective production of biofuels that are compatible with existing transportation infrastructure. This focus is driven by a renewed focus on funding of scientific research in the US, including the American Reinvestment and Recovery Act (ARRA) , which produces funding opportunities for academic and private sector researchers. ‘Fossil fuel consumption remains high’ In both the US and the EU, fossil fuel consumption for energy remains high. Given the concentrated efforts of EU nations to shift to other sources of energy (wind power, solar energy, biodiesel, etc.), the EU-27 have slowed any increase in petroleum consumption, if not altogether halted it. In the US, fossil fuel consumption has decreased somewhat in recent years, but petroleum-based fuels still dominate the US energy consumption landscape. Keeping in mind the EU and US reliance on foreign sources of oil, uncertainty about the size of a finite supply of fossil-based petroleum, and the increasing demand for renewable products, it makes sense for biofuels to be offered as an alternative fuel source, especially for powering motor vehicles. It should be said that ‘alternative’ fuel source does not mean ‘replacement’ fuel source. We must respect the notion that the Earth’s petroleum supply is large enough to sustain our current habits, perhaps for the entirety of our lifetimes, but also prepare for the possibility that the fossil fuel supply is indeed finite. Academic institutions are major players in biofuels research innovation. Many patents and other intellectual property have been developed as a result of academic research on bioenergy. Currently, programmes like Advanced Research Projects Agency – Energy (ARPA-E) in the US are funding innovative and transformative research in many different aspects of the energy space, from biofuels to rethinking the way the energy grid operates. Similar programmes have been established in the EU, focusing on valorisation of waste biomass, biodiesel production, and other relevant topics. While funds from these programmes go mainly to academic institutions, fostering the next wave of innovation, there is also opportunity for partnership with the private sector. This could be crucial for the development of ideas in bioenergy and bringing them to market. Transatlantic collaboration I propose a partnership in biofuels research and development that has been largely underexplored, if not unexplored: the opportunity for US and EU universities to work together to address the challenge of creating an affordable and efficient bioenergy infrastructure. In a global economy, continued cooperation among respected global institutions is a must. A pooling of resources between the US and EU could have economic and even political advantages for the nations involved, and could help shape the energy future on both sides of the Atlantic. Christopher J Brigham PhD Assistant Professor University of Massachusetts Dartmouth www.umassd.edu [This article was originally published on 1 st July 2013 as part of Science Omega Review Europe 02] Read more: http://www.scienceom…t#ixzz2Yk2V4ZrS Continue reading
Global Investment Falters But Tax Havens Prosper, U.N. Finds
By Tom Miles GENEVA | Wed Jun 26, 2013 6:05pm BST (Reuters) – Efforts to stop companies syphoning money through tax havens are failing and offshore centres increased their share of foreign direct investment (FDI) again last year, according to a U.N. report. “Tackling offshore financial centres alone is clearly not enough, and is not addressing the main problem,” said the annual World Investment Report, published on Wednesday by economic thinktank UNCTAD. While investment sinks in many economies, one country is enjoying above all is enjoying a boom: the British Virgin Islands, with a population of 30,000, is now the fifth biggest recipient of FDI in the world, the report said. The Caribbean archipelago welcomed almost $65 billion (42.4 billion pounds) of inward investment flows in 2012, just less than fourth-ranked Brazil , and 10 times the amount of FDI it received in 2006. FDI flows to such offshore tax havens have soared in the past five years, rising from an average of $15 billion in 2000-2006 to $75 billion per year in 2007-2012, the report said. “Tax haven economies now account for a non-negligible and increasing share of global FDI flows, at about 6 percent,” the United Nations thinktank said. Meanwhile, traditional FDI – cross-border corporate acquisitions and overseas expansions – has slumped. Among the worst hit are rich euro zone countries such as Belgium, which attracted $103 billion in 2011 but lost money in 2012 as existing investors sold up. The Netherlands saw a similar but smaller reversal, while Germany ‘s $49 billion haul of FDI in 2011 shrivelled to less than $7 billion in 2012. Global foreign direct investment shrank by 18 percent to $1.35 trillion in 2012 and is likely to remain at a similar level this year, the report said. UNCTAD forecasts global flows of $1.6 trillion next year and $1.8 trillion in 2015. In tax havens, the vast majority of FDI flows do not go into projects based in the country. Instead they are redirected back to the source country, a process known as “round tripping”. “For example, the top three destinations of FDI flows from the Russia n Federation – Cyprus, the Netherlands and the British Virgin Islands – coincide with the top three investors in the Russian Federation,” the report said. That could mean that global FDI is actually even weaker than it appears, since a growing proportion is simply round-tripping. Even more money is channelled through “special purpose entities” (SPEs). Firms set up these foreign affiliates for specific purposes such as managing foreign exchange risk or facilitating the financing of an investment. Money flowing to SPEs in just three countries – Hungary, Luxembourg and the Netherlands – amounted to $600 billion in 2011, dwarfing the $90 billion of flows to tax havens. Those countries’ SPE flows were not counted as FDI in the report. However, the report said SPEs were gaining importance relative to FDI flows and anecdotal evidence showed that most of the money sent to SPEs was invested in third countries. Still more tax is avoided through cross-border transfer pricing schemes, which companies can use to shift profits into low-tax jurisdictions and show apparent losses in high-tax markets, the report said. Despite the OECD trying to stem the flow of FDI to tax havens, the overall flows to tax havens overall “do not appear to be decreasing”, the report said, partly because big companies still needed somewhere to park their cash mountains. “Efforts since 2008 to reduce flows to OFCs (offshore financial centres) have coincided with record increases in retained earnings and cash holdings,” the report said. Also, although big investors such as Japan and the United States had succeeded in cutting the amount of flows to tax havens, many non-OECD members had now taken their place, ensuring the flows to tax havens continued and grew. The report called for a discussion of corporate tax rate differentials between countries, extraterritorial tax regimes and tax levied on repatriated earnings . “Without parallel action on these fronts, efforts to reduce tax avoidance through OFCs and SPEs remain akin to swimming against the tide,” the report said. (Reporting by Tom Miles; Editing by Ruth Pitchford) Continue reading
Investing In Agriculture – July 2013
Published by Investment Adviser | Jul 01, 2013 The term agriculture usually brings to mind crop prices and the effects of drought or flooding on harvests, but the sector is more diverse than many realise, and weather is not the main driver of investment trends. Instead, the biggest effect on agriculture investing is the improving living standards and changing food habits of the populations of emerging and developing countries. Jake Robbins, manager of the Premier Global Alpha Growth fund, says: “As people become wealthier they are shifting their diet from basic crops, such as rice and potatoes, and eating a lot of meat. So as the demand for meat rises the demand for crops rises almost exponentially. “That is the biggest driver. We saw in 2007-08 that when supply cannot meet demand, you get huge spikes in the price of crops and meat.” Skye Macpherson, portfolio manager, global resources at First State Investments, agrees that this trend is leading to increased demand for many agricultural commodities such as dairy, sugar and meat. She adds: “Interestingly, higher meat consumption is having a multiplier impact on grain demand as animals are quite inefficient converters of grain. Impacting the listed agricultural equities is ongoing M&A in the sector, as unique and high-quality assets are being consolidated. “Most recently we saw activity in the Australian grain-handling industry with ADM bidding for GrainCorp, and in the US pork production sector, Shuanghui International bidding for Smithfield Foods. The sector is also growing, with numerous IPOs and capital raisings taking place in the past 12 months.” Mr Robbins adds that M&A activity has also been seen in Brazil and Norway, highlighting the fact that industry players value these businesses higher than the market does. This is because both the input cost for the grain to feed the chickens and the price you sell the end product for can fluctuate widely. “So it is difficult to predict what earnings will be in a quarter or any given year, so while the long-term trends are very positive because the short-term earnings are very unpredictable, the stockmarket doesn’t like that and so tends to value them quite lowly.” But while changing food habits is one trend, food supply in general and the effect of freak weather remains a factor in the sector, with crops one of the most popular investments. Mr Robbins notes the ‘blue-chip’ option in this area is Monsanto, which develops genetically modified seeds to increase crop yield. “The only problem is we look at stocks for growth, quality and value, and it has got loads of growth and quality but it always looks very expensive, so we haven’t managed to buy that yet.” Instead, as a cheaper way to get exposure he highlights Bayer, a German pharmaceutical company with a division focused on crop sciences that has been growing very quickly. Mr Robbins adds: “Last year was very poor in terms of the harvest, particularly in America as they had a huge drought and a lot of corn was ruined. So currently corn inventories globally are very low. It will take several years of good harvests to rebuild those inventory levels… so we do like corn and any exposure is positive.” Ms Macpherson adds that from a valuation perspective, it has been a volatile 12 months for the sector, but one that has created opportunities. “A significant drought in the US saw soft commodity prices like corn, wheat and soy skyrocketing in the middle of 2012, only to sell off towards the end of the year and into 2013 on expectations that both South America and the US would harvest large crops.” However, Desmond Cheung, co-manager of the BGF World Agriculture fund, warns that investors can get very fixated on crop price developments when a lot of sentiment is already factored in improved supply and lower prices. “Investors should not really be taking the view that the market does not understand the supply improvement. In the past two to three years we feel people look at crop prices as a gauge on whether or not this sector is attractive, but it actually misses out a big part of the investment universe. “We think there is a lot of exciting medium-term development, especially in downstream and midstream firms that would offset some of those firms investors would have in the upstream sectors.” When looking at agriculture, it’s clear there are opportunities globally and with increased M&A action, investors need to take a look at the wider picture instead of only focusing on crop prices. Nyree Stewart is deputy features editor at Investment Adviser Continue reading
