UK - Investors need more certainty in order to invest in biofuels, according to Anthony White, founder of investment banking group Climate Change Capital.
White said five-year plans as well as flexible support mechanism were needed to attract investment. He also called for more information post-2012 and a strong carbon signal as an incentive to build the right refineries.
Speaking at the Bioenergy Europe 2007 conference in London today, White said: "biofuels will help tackle climate change as well as secure energy supplies".
But he warned that financiers look at the sustainability of investments and their varying levels of greenhouse gas emissions. He said a potential oversupply of biodiesel and bioethanol caused if all EU targets were hit, for example, through new refineries, also plays on investors' minds.
Regulatory support such as the EU's 2003 biofuels directive, its taxation directive of the same year as well as a common agricultural policy are essential in setting the scene for investments.
National legislation such as the UK's Renewable Transport Fuel Obligation (RTFO) - which will affect fossil fuel suppliers from 2008 and has a target of 5% by 2010 - the country's petrol duty reduction, enhanced capital allowances and its own climate change targets also paved the way for investments in the sector.
The UK, for instance, is obliged that 2.5% of the suppliers' sales will have to come from sales of renewable sources of transport fuel by 2008/09. If they fail to do that they will have to pay a 15p/litre ‘buyout'. The duty exemption will remain at 20p/litre until 2009/10 but fall by 5p/litre in 2010/11 and therefore effectively move the subsidy from the Exchequer to the motorist.
But White said issues such as the recycling of the ‘buyout' and the certification by carbon content remain open.
White advises not to recycle the buy-out fund but instead to increase it. He also says that companies selling biofuels should have certificates according to their carbon footprint, as investors are advised to think of the carbon content of products for example when building a refinery.
He said that biofuel prices are exposed to movements of crop as well as energy prices. White advises investors to carefully choose a crop because biofuels investments are risky due to the influence of two commodity prices and the unclear government policy. He also said they need to be aware of the different interpretation of laws in various countries.
Jussi Nykanen, executive vice president at the GreenStream Network advisory, called for a structured pan-European market for green certificates - similar to the European emissions trading scheme - to harmonise their issue and attract investors.