Thursday, June 23, 2005

Sweet Addiction

The European Commission could be on the verge of doing three useful things: helping the environment, helping innovation and helping the petchem industry with feedstock

We have a situation in Europe, where farmers in the Eastern part of England, in the Netherlands and Germany grow sugar beet. To ensure these people get a ‘reasonable price’ for their sugar beet the price of sugar in Europe is managed under a European agreement that goes back to at least 1968.

According to Europa Bio, the price of sugar in Europe is about twice the global market price and is
being investigated by the European Commission and is considering cutting the price of sugar by 39% over the two years between 2006 and 2007. This featherbedding of farmers has hobbled some of Europe’s brightest sunrise industries in biotechnology.

Unlike traditional chemical routes to products such as vitamins and enzymes, biotechnology uses sugars not oil as its feedstock. So to some extent the business has followed cheap sugar.

Companies in the sector have already moved polylactic acid production out of Europe and into China. It was cheap sugar not cheap labour that propelled the move. There is a real risk that Brazil and the US, which have cheap, accessible sugar could become world hubs for the business.

So Europeans could be paying for sugar in three ways, through tax, through the till and they could loose a highly taxable industry to other parts of the world.

Apart from these high tech uses of sugar, it is a good starting point for bio-ethanol. That's alcohol from fermentation. The commission has set targets that around 6% of all the motor fuel sold in the EC in 2010 should be bioethanol. Stimulating that business needs infrastructure and cheap feedstock. Cutting the artifcicially high price of sugar will help cut greenhouse gasses and increase the availability of petchem feedstocks that are curretnly burnt in petrol.

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