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Knock on Wood: Why Trade and Brand Will Trump Tech in the Advanced Bioeconomy

Submitted by on June 23, 2016 – 2:22 pmNo Comment

by Jim Lane (Biofuels Digest)  … So if the advanced bioeconomy is so prevalent and so pervasive, why do we hear so much about the struggles of projects to be built? Why is it so much easier to build wind and solar projects than advanced bioeconomy projects?

Partly, it is because of how investors see the advanced bioeconomy, as a chaotic and dangerous rollercoaster of costs, prices and policy that almost never lands investments on the right side up.

You see, since time immemorial, projects have been funded by debt, and debt is not about hope, as Jeff Passmore tells us. Equity is about hope. Debt, he says, is about track record, and proven technology, and proven markets, and proven policies. Debt is about stability in a world that is increasingly unstable.

For many years, we saw it in the coffee markets. So notoriously unstable that an unstoppable fall in coffee values is said to have driven Brazil’s President Vargas to suicide in 1954.

Yet one of the biggest, best, and most highly valued consumer companies in the world is in the world of coffee. Starbucks. They have discovered the powerful antidote to unstable markets, and that is the power of brands.

Though you may not yet know it, you’ll be building brands now, and for some time to come Brands internalize and communicate to customers all those societal benefits you bring — energy security, food security, jobs and reduced impact from climate change. They encourage consumers to allocate their capital more efficiently to products that solve our problems, both short-term and for the long-term.

Prices have risen from $25 lows to around $50 today, and Saudi energy minister Khalid Al Falih projected earlier this month a $60 price by year end. The US Energy Information Administration is projecting $76 by the end of 2017.

That sounds a little bullish, but it certainly is a sweet spot for the bioeconomy — high enough to make it easier for new technologies to compete in the market, but not so high that it prompts the re-entry of so many swing producers of tight oils, or switching to alternatives such as electric cars or natgas vehicles.

Among government policies in your ask, you focused on R&D help to advanced early-stage technologies, incentives to help with deploying technology at scale, and carbon pricing to internalize the benefits you bring to society into returns for the investors you need.

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