A Government-Mandated Bull Market
By Jeff Clark
December 12, 2006
There’s nothing like the smell of pine needles in the morning.
We put up our Christmas trees last weekend, and now the house smells like the Oregon wilderness. And, yes, I wrote “trees” – as in plural, more than one.
We have five Christmas trees this year. That might be overkill, but Christmas is a big deal in our house. And it’s a big deal for Tom, the man who sells me the trees every year.
“It’s a good business,” Tom says to me. “We plant three trees for every one we cut down. The trees never complain. And the customers are always happy and smiling.”
“And it’s profitable, too,” he said as I handed over a check for the five trees. “But the real money is in the scrap.”
Recycling old Christmas trees is a great business. And it’s about to get even better.
Most people don’t give any thought to what happens after they plop the old Tannenbaum by the curb in early January and wait for the big green truck to come by and take it away. But old Christmas trees are put through a wood chipper and the shredded remains are used as mulch for gardens, as a ground cover to prevent beach erosion, and now… as energy.
As it turns out, wood chips and pine needles are an excellent fuel source for the production of cellulosic ethanol.
Cellulosic ethanol is the redheaded stepchild of the renewable energy business. Corn-based ethanol gets all the press, but as the increasing price of corn renders corn-based ethanol inefficient, cutting-edge companies are pursuing cellulosic ethanol.
Imagine creating energy from yard clippings. That’s what has energy-company executives so excited they’ve called it “the holy grail.”
And the government is right there to help with the funding…
The Energy Policy Act of 2005 contains several provisions designed to spur cellulosic ethanol production:
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It creates a credit-trading program wherein one gallon of cellulosic ethanol or waste-derived ethanol is equal to 2.5 gallons of renewable fuel.
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It creates a loan-guarantee program of $250 million per facility.
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It creates a $650 million grant program for cellulosic ethanol.
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It creates a $550 million Advanced Biofuels Technologies program.
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It targets biomass research and development.
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It establishes a program of production incentives to deliver the first billion gallons of annual cellulosic ethanol production.
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So here we have the potential for a renewable energy product that’s made from otherwise useless resources. It is cheap, highly energy efficient, and now funded by the government.
No wonder Tom is such happy guy.
Best regards and good trading,
Jeff Clark
