Volume 6, Issue 5
Published: June 22, 2012
Riding the rollercoaster

The biofuel sector has experienced highs and lows with investors over the past decade. After gaining early momentum as a promising alternative to fossil fuels it fell out of favour as the economy collapsed and biofuel technologies failed to deliver on promises. Yet, as the midway point of 2012 approaches, a new wave of investments are starting to pour in.

 

Biofuel emerged as a promising and attractive investment target in the early to mid-2000s, heralded as the most viable alternative to fossil fuel. With fossil fuel prices – especially oil prices – skyrocketing, investors began to invest generously in alternative energy and became especially enamored with the seemingly limitless potential of biofuel.

 

Government support brought additional capital flow into the sector. Programmes such as Volumetric Ethanol Excise Tax Credit provided between $5.5 billion (€4.4 billion) and $7.3 billion of biofuel subsidies in 2005 alone, according to the Global Subsidies Initiative. But, after venture funding for biofuel peaked in the mid-2000s, the perfect storm of a crashing economy, weakening investor confidence, and unpredictable US clean energy policy led to a sharp pullback in biofuel funding.

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