Do biofuels make a good investment?

Biofuels are at something of a crossroads. The International Energy Agency says the global production of biofuels has expanded more than sixfold over the last ten years, yet biofuels still only make up around 3% of all road fuel energy. While making fuel from plant matter may, in theory, seem more attractive than using oil, the reality of biofuel production is that it comes with various costs and question marks.

The concerns about biofuels

The world’s most dominant biofuel is corn-based ethanol, and it raises food, land and water issues, due to the demands of growing extra crops for fuel feedstock. There has been much hope and investment in next-gen biofuels. These include cellulosic ethanol and various other complex plant- or waste-based fuels that could overthrow diesel and gasoline without the resource requirements of ethanol.

But these advanced biofuels have not managed to scale up at the rate many had hoped to see. In the USA, for example, there is action being taken to attempt to scale back or repeal a mandate that requires oil refiners to incorporate more and more biofuel into the US transportation industry. Domestic development of cellulosic biofuel has failed to meet government projections, and enthusiasm for ongoing ethanol subsidies isn’t high.

 

Weighing it up

So the question that remains is whether we should continue to invest in biofuels, despite what many will tell you has been rather slow progress thus far – add to that the criticism that biofuel seems to be unable to stand on its own without subsidies from governments. But those who believe in the importance of biofuel investment will argue that die-hard advocates of fossil fuels merely persist with the repetition of outdated claims about homegrown fuels, or that petrol is somehow the cleaner option for the environment.

Reports have illustrated that biofuel production is actually driving farmers to use existing cropland more efficiently, meaning they supply more food and energy than ever without endangering grasslands or forests. And the cost of food is slowly declining, according to recent UN studies.

The case for increasing biofuel production has only become clearer over the last ten years, and the industry now attracts billions of dollars in investment while supporting hundreds of thousands of jobs. It is a terrific prospect for investment, with the recent slow progress only meaning there is greater potential for rapid growth in years to come.

Investing in Biofuels: A Quick Guide

As climate change becomes an increasingly pressing problem and governments push for a move towards renewable energy, biofuels are gaining a considerable amount of interest amongst investors. The term ‘biofuels’ is used to describe a number of fuels that have been derived in some way from biomass or renewable energy sources. Many biofuels are made from other commodities such as used cooking oil (UCO) or sugar, for example.

 

Are biofuels an ethical investment choice? Is the production of biofuels likely to be sustainable?

Western societies are generally renowned for their wastefulness, and the UK is no different. UCO is a fantastic resource for generating precious bio-fuels, but at least 90% of UCO derived from domestic settings is sent to landfill or thrown out as effluent, potentially harming the environment and unsuspecting wildlife.

In this way, investing in biofuels can help go some way towards offsetting this wastefulness and making the most of one of the country’s most significant untapped energy sources. What’s more, recyclable products such as UCO will never be in short supply, so there are no issues surrounding sustainability.

 

What incentives do businesses have to use bio-fuels?

Bio-fuels can be used in a number of commercial applications such as running a fleet of vehicles or powering oil-fired boilers. While uptake of biofuels is not necessarily widespread yet, there are a number of reasons why businesses may start making moves towards this cleaner option. Firstly, of course, the political implications of biofuel use may help boost an organisation’s reputation. There are also various governmental incentives coming into effect that may help boost production and uptake.

What’s in store for the bio-fuels sector in the future?

The biofuel sector is relatively young and is still very much in the stages of rapid development. However, investors interested in green energy solutions that would like to get involved with the sector have a number of reasons to be optimistic.

The market for UCO-derived biodiesel is thought to exceed 250 million litres per year, a number that is set to increase year on year. Indeed, the UK government has committed to generating at least 10% of its transport fuel from biofuels, meaning that demand for the commodity is likely to see substantial increases.

3 unusual avenues of investment you should consider

Everyone has an image that comes to mind whenever investments are brought up. There are the usual suspects; art, classic cars, stocks and shares. The truth of it, however, is that there are many diverse avenues to invest your money into.

If you’re willing to go off the beaten path, you can find much more unusual investments out there. Here are three for you to consider:

Comics

You may think that comics are for kids. But does $3.2 million sound like child’s play? That’s what the comic that introduced Superman to the world brought at a 2014 auction. There is profound value to be found in antique comic books, and the reason is obvious.

Designed for children, most old comics have either been ripped, shredded, drawn all over, or have simply decayed in the last five decades or so. Those that remain in pristine condition, however, fetch considerable prices from enthusiastic collectors.

Literature

For patient investors who have a little more capital to play with, literature can be a valuable proposition. In 2002, the National Library of Ireland forked out $11.7 million for a collection of papers from the writer James Joyce – so there is value in the written word.

While it’s unlikely you’ll find the lost works of Shakespeare in your local charity shop, there are still books out there which reliably make money. First editions are always desirable, as are books signed by the author or other famous people. Remember to always buy based on the book’s condition.

Domain names

While it’s nowhere near as romantic as musty old first edition manuscripts, domain name investment is actually very reliable given the technological climate. Domain investing is basically buying up domain names (website addresses) that businesses would like, then selling them on.

They key is to invest reasonably long term, and to try and think what might be relevant to buyers several years in the future. Remember that not all of the most successful investments deal with purely tangible items. All value is perceived, and the perceived value of a memorable domain name is always going to be high.