A Global View of Bioenergy Markets and
                Trends


                    Don Roberts
               CIBC World ...
Economic Drivers of Biofuel Production


Four key variables drive the economics of biofuel production
1. The price of oil ...
Global Biomass Financing
                                                              Global Biom as s Financing, By Se c...
European Union


•   The EU-25 has agreed on a binding target to reach a 20%
    share of renewable energy source in total...
European Union


United Kingdom:
•   GHG emission reduction targets amongst the most aggressive in
    EU.
•   By 2020,
  ...
Global Wood Pellet Trade (Tonnes)




                              Source: New Energy Finance, CIBC World Markets.

Europ...
Convergence Of The Markets For Fuel, Food And Fiber


 A key driver of the bio-economy.

 Convergence is occurring for a r...
Biofuels & Feedstock Prices
                          450

                          400

                          350
  ...
Shifts In Land-Use

Secular rise in fuel, food and fiber prices will trigger changes in
land-use patterns.


Historically,...
Shifts In Land-Use

    We think some of the best forest land will be under pressure for
    conversion to either food or ...
Where Is The Land Coming From — 2030?
              How To Balance The Demand?

                                      Avai...
Central to all bio-energy strategies is a competitive price for delivered
biomass……. This is especially true with the curr...
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Don Roberts: A Global View of Bioenergy Markets and Trends

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Day 2, Session 5: The role of tenure and governance in climate change mitigation and adaptation

Presentation by Don Roberts, Managing Director, Canadian Imperial Bank of Commerce

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  • IF FUNDS ARE INVESTED IN OBTAINING RENEWABLE ENERGY AND IN FACT,2/3 OF THE RENEWABLE ENERGY IS EXPECTED TO COME FROM BIOMASS,THEN WHY SHOULD AFRICA BE LEFT OUT OF CONCERN SINCE WE HAVE THE VEGETATION TO EASY ACCESS OF THIS ENERGY?
    I AM EMMANUEL KUMAH
    (SMITHNEL_2008@YAHOO.COM)A LEVEL 300 STUDENT OF THE UNIVERSITY OF GHANA,LEGON PURSUING FURTHER STUDY IN THE FIELD OF AGRICULTURE
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Don Roberts: A Global View of Bioenergy Markets and Trends

  1. 1. A Global View of Bioenergy Markets and Trends Don Roberts CIBC World Markets Inc. Don.roberts@cibc.ca International Conference on Forest Tenure, Governance and Enterprise: New Opportunities for Central & West Africa. May 25-29, 2009 Yaounde, Cameroon
  2. 2. Economic Drivers of Biofuel Production Four key variables drive the economics of biofuel production 1. The price of oil (the main substitute); 2. The cost of the feedstock (50%-80% of the variable cost); 3. The conversion technology; and, 4. Regulations, which stimulate demand. At present, all four of these variables are in a state of flux. Don Roberts 613-564-0827 don.roberts@cibc.ca CIBC World Markets Inc. 2
  3. 3. Global Biomass Financing Global Biom as s Financing, By Se ctor (Q1/05 - Q1/09) (US$M ) $3,000 $2,500 Total Invested (US$) $2,000 $1,500 $1,000 $500 $0 Q1/05 Q2/05 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 VC&PE Asset Finance Public Markets Source: New Energy Finance, CIBC World Markets Inc. The crisis has caused financing in the emerging biomass-based energy segment to plummet – down from almost $3 bln. in Q2/08 to $0.5 bln. in Q1/09. Is this just a short-term drop? We think so. Don Roberts 613-564-0827 don.roberts@cibc.ca CIBC World Markets Inc. 3
  4. 4. European Union • The EU-25 has agreed on a binding target to reach a 20% share of renewable energy source in total energy consumption by 2020 (currently ~7%): – ~2/3 of the renewable energy is expected to come from biomass. – If enforced, Poyry/McKinsey study forecasts a 200 million m3/year-260 million m3/year wood deficit in Europe in 2020. – More recent ECE/FAO study forecasts a wood deficit of 320 million m3/year-450 million m3/year to meet both the energy objective and support a growing wood-based industry. – If the target is enforced, expect meaningful upward pressure on global wood/biomass prices. Don Roberts 613-564-0827 don.roberts@cibc.ca CIBC World Markets Inc. 4
  5. 5. European Union United Kingdom: • GHG emission reduction targets amongst the most aggressive in EU. • By 2020, • Renewable energy’s share to 15% from ~1% in 2006 • Electricity from renewables to 35% from ~5% in 2007 (if draft target confirmed) • Twelve projects are already under various stages of development, with the capacity to generate 2.7 GW of biomass energy. • Equates to ~12 milion ODMT of pellets, or 20 million tpy of green wood chips. • Equivalent wood requirements of 4 world-scale pulp mills. Don Roberts 613-564-0827 don.roberts@cibc.ca CIBC World Markets Inc. 5
  6. 6. Global Wood Pellet Trade (Tonnes) Source: New Energy Finance, CIBC World Markets. Europe sources the bulk of its wood pellets from Canada, but Australia and the U.S. will soon become important sources as well. Three potential sources which we think are underestimated are Brazil, Russia and Africa. Don Roberts 613-564-0827 don.roberts@cibc.ca CIBC World Markets Inc. 6
  7. 7. Convergence Of The Markets For Fuel, Food And Fiber A key driver of the bio-economy. Convergence is occurring for a range of reasons, but all related to security (and driven by anxiety): — Environmental Security: i.e., combat climate change — Economic Security: i.e., protection against the rising real price of oil — National Security: i.e., diversification of energy supply — Food Security: i.e., access to food at reasonable prices — Political Security: i.e., secure political support at local level by rural development Don Roberts 613-564-0827 don.roberts@cibc.ca CIBC World Markets Inc. 7
  8. 8. Biofuels & Feedstock Prices 450 400 350 Index March 2000=100 300 250 200 150 100 50 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Mar-00 Sep-00 Dec-00 Mar-01 Sep-01 Dec-01 Mar-02 Sep-02 Dec-02 Mar-03 Sep-03 Dec-03 Mar-04 Sep-04 Dec-04 Mar-05 Sep-05 Dec-05 Mar-06 Sep-06 Dec-06 Mar-07 Sep-07 Dec-07 Mar-08 Sep-08 Dec-08 Mar-09 Corn (USA) Ethanol (USA) Gasoline (USA) Non-Conifer Roundwood (Brazil) Palm Crude Oil Source: Wood Resources International, Bloomberg, and CIBC World Markets Inc. lConvergence of the “3F” markets in the sense that the feedstocks will trade on the basis of their energy equivalency. The price of oil is expected to become a support price for cereals, oilseeds and lower-quality wood. Prices of all of the major feedstocks rose significantly, especially from 2006 to Q2/08 – outpaced gasoline & ethanol. Financial crisis has caused all of the biofuel and feedstock prices to fall, although wood has fallen the least. Don Roberts 613-564-0827 don.roberts@cibc.ca CIBC World Markets Inc. 8
  9. 9. Shifts In Land-Use Secular rise in fuel, food and fiber prices will trigger changes in land-use patterns. Historically, land kept under forests for two main reasons: 1.Owners want the production of some non-market good or service. 2.The land can’t make it in agriculture. Convergence is expected to have the largest impact in the southern hemisphere since they enjoy higher crop yields and have lower land and labor costs. Don Roberts 613-564-0827 don.roberts@cibc.ca CIBC World Markets Inc. 9
  10. 10. Shifts In Land-Use We think some of the best forest land will be under pressure for conversion to either food or bio-energy crops. — To palm oil in S.E. Asia — To dairy in New Zealand Expect greater land-use conflicts in many regions due to rising demand relative to potential supply. Biomass for bioenergy is generally “poorer quality” fiber – often left to the rural poor with no property rights The development of the bioenergy sector can turn into either a “bad news” or “good news” story for the rural poor – it depends on the policy response and institutional framework. Don Roberts 613-564-0827 don.roberts@cibc.ca CIBC World Markets Inc. 10
  11. 11. Where Is The Land Coming From — 2030? How To Balance The Demand? Availability 250―300 million ha Industrial Forestry 25 million ha Agriculture Bio-energy Demand 290 million ha 200 million ha Chemical Heat and Industry 515+ million ha demand > Electricity 250-300 million ha supply ? ? Source: S. Nilsson, IIASA. Don Roberts 613-564-0827 don.roberts@cibc.ca CIBC World Markets Inc. 11
  12. 12. Central to all bio-energy strategies is a competitive price for delivered biomass……. This is especially true with the current economic turmoil Thank you. Don Roberts 613-564-0827 don.roberts@cibc.ca CIBC World Markets Inc. 12

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