UN Biofuels Food Fight

World Food Summit Attacks Ethanol

Written by Brian Hicks
Posted June 12, 2008

Dear Friend,

Sam Hopkins originally wrote the following article for Green Chip International premium subscribers, but the second I read it I told Sam he hit the nail right on the head and we had to get it to a wider audience.

The long and short of it is that renewable energy investment can be dizzying. As Sam tells here, politicians are now assailing biofuels as a "hazardous distortion" of the international food trade and even as a "crime against humanity."

But real insight and advantage comes from looking at the big picture and investing with the world in mind.

Sam's going to be over in Europe very soon, visiting companies and exploring new technologies. He'll tell Green Chip International subscribers about them all, with emphasis on ideas that will be lucrative for years—not just until the political breeze changes direction.

Regards,

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Jeff Siegel

A Biofuels Food Fight at the UN

If knee-jerk reactions could power cars and planes, the world's politicians could replace fossil fuels in a matter of months.

At the beginning of June, the United Nations World Food Summit turned into a tag-team tirade against biofuels.

At home, leaders like Egypt's Hosni Mubarak and Mexico's Felipe Calderon are dealing with riots over skyrocketing food prices—increases that many market observers blame on interest in growing crops for fuel rather than human consumption.

I don't need to remind you, but last year around this time you could pick up any major newspaper and read about the wonder and promising riches of ethanol and biodiesel.

Now, politics is turning heads of state against ethanol and other fuels, even though most countries have no better alternative proposals.

At Green Chip Stocks and Green Chip International, we've always promoted the order of operations that will get us off of fossil fuel addiction...

  • First, reduce consumption.
  • Second, start investing in solutions to fill lower energy needs.
  • Third, bring those ideas to market and let technologies and efficient methods compete.

What happened instead was a frenzy to plant as much corn (or sugar, or palm trees) as possible while speculators bid up prices on the world's commodity exchanges.

That market mania—not biofuels being a rotten proposition—is what got us riots.

Biofuels are especially not a bad idea where they are maximally efficient, like in Brazil.

That's where we've recommended Cosan (NYSE:CZZ) instead of chasing corn-based opportunities from North America that produce far less fuel per acre than Brazilian sugar-based ethanol.

Corn is also more water intensive and has far less of a track record than Brazil's national Pro-Alcohol program.

"I am not in favor of producing ethanol from corn," Brazil's President Luiz Inacio Lula da Silva told the gathering of the UN's Food and Agriculture Organization.

He also called blaming biofuels for high food prices an "oversimplification," which we agree with completely.

The resistance of countries with heavy farm subsidies (like the U.S.) to importing more efficient biofuel supplies from Brazil not only hinders fuel progress, it also runs completely against the core tenets of free trade and comparative advantage.

So that's why we're sticking with Cosan and eschewing more speculative, wasteful fuel companies. We are very bullish on household electricity resources like wind energy and solar, and of course technologies to reduce consumption.

But we will never sway in the breeze like political leaders or fickle speculators. Green Chip International is about investing in long-term solutions, and that's how you get real long-term profits.

Kind regards,

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Sam Hopkins

P.S. We're coming out with two new GCI recommendations in the next week, based on Europe's booming renewable energy industry and my upcoming trip to see progress across the pond, first-hand. Don't miss these winning plays and my on-location reports throughout July. Sign up for GCI today.