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The green movement has created a plethora of buzzwords. One of the popular phrases is emissions trading. And for good reason. Businesses, traditional and emerging, will soon be affected by this indirect carbon tax depending on where they fall in the supply chain.

One possible regulatory system for limiting future carbon dioxide emissions is a cap-and-trade system. Under this system, permits to produce carbon dioxide emissions are issued by the government and then sold and traded in the marketplace. Total carbon dioxide emissions (represented by the number of permits) are capped, and the market is allowed to set the price of those emissions (as opposed to the carbon tax system where the price is set by law and the market determines the total carbon emissions). The underlying motivation of the system is to achieve desired emissions reductions in the most economically efficient manner possible.

There is a variety of emissions trading proposals that differs in the details and in how draconian the measures are. One of the biggest points of variation is how the allocation of permits is handled. The emissions trading scheme instituted in the European Union allocated permits in most countries by a process called grandfathering. In this scheme, permits were awarded (for free) to existing firms based on the portion of national emissions they had created in the past. Firms could then freely trade the permits they had privately been awarded (through brokers, mind you), or in spot markets, where goods are sold for cash and immediate delivery.

A criticism of this cap-and-trade system has been that it has created huge profits for some firms that have produced the most emissions in the past. These firms have received a large number of permits and have been able to reduce their emissions more cheaply than the cost of permits. This has allowed them to make a large profit off the excess permits they could sell. Other proposals have used an auction scheme of allocation where firms bid on permits to buy them from the government. Under this scheme, the auction price of permits is essentially a tax, with the proceeds going to the government. Some of you may already be raising an important point: How much additional costs (read: overhead) the politicians pile on this tax for their friends and lobbyists affects how well the process works, or does not work.

Of primary concern for business planning is how an emissions trading scheme will affect the price of energy and transportation fuel. Unlike a carbon tax, where determining the cost is relatively straightforward, it is a much more difficult and complicated task to determine the costs imposed by an emissions trading scheme.

The cost of permits, which determines the increase to the cost of energy and transportation, depends on several variables in emissions trading schemes: the number of permits issued, whether the scheme covers one nation or is international, whether the use of carbon sinks (natural systems to soak up and absorb carbon dioxide, such as planting trees) is allowed, or whether a company can pay for carbon offsets in a country not covered by the trading scheme to meet its limitation.

International schemes have the advantage that emission reductions can be made in those countries where they are cheapest, while firms in those countries can sell their permits to firms in other countries where the cost of reducing emissions is higher. Allowing for the purchasing of carbon offsets in countries not covered by the scheme can have the same effect, as will allowing for the use of carbon sinks.

Some proposed schemes, such as one recently proposed in the U.S. Senate, consider a safety valve mechanism. The idea behind this is to make the system a hybrid emissions trading/carbon tax system. Permits are issued to limit total emissions, and these are traded among firms as needed. However, if the price of permits rises above a certain threshold, firms can then buy excess permits from the government at the threshold price. This amounts to an emissions trading system with a price cap. The advantage of this scheme is that it gives policy makers flexibility. They can set the number of permits and the price cap in such a manner as to achieve whatever exact policy they want from a pure carbon tax to a pure emissions trading system, all with a single mechanism.

Depending on the specifics of the trading scheme, and the specific nature of a given firm, emissions trading represents either a potential profit or a potential cost. Under any emissions trading scheme, the costs of energy and transportation will rise, just as it will under a carbon tax scheme. Some firms will be able to cover these costs with profits made from selling excess permits, while others (particularly heavy industry) will be hit with even higher costs. The key is to know where you stand and try to keep your options open as much as possible since it is likely that in the next administration and congress, there will be either a carbon tax or an emissions trading scheme in place.

What all this carbon tax debate is pointing to is the urgency to begin planning NOW for emissions trading inevitability to help protect your business from rising energy and transportation costs.

Bottom line? Apply this information to improve profitability, reengineer business models, and strengthen or gain competitive advantage in the marketplace. And you can apply the free Fiscal Test at http://fiscaldoctor.com/fiscaltest.html.

www.FiscalDoctor.com to Stop Profit Leaks Copyright 2008

The green movement has created a plethora of buzzwords. One of the more popular phrases is “carbon tax.” And for good reason. Businesses, traditional and emerging, will soon be affected by a carbon tax depending on where they fall in the supply chain.

Wikipedia defines a carbon tax as a direct tax on carbon dioxide emissions, which is generated as a byproduct of combustion of fossil fuels, among other processes. Expanding on this definition, a carbon tax can be seen as an excise tax on the sale of fossil fuels at a particular point in the manufacturing supply chain.

The amount of the excise tax would vary for different fossil fuels because it’s based on the amount of carbon dioxide emitted by each fuel (which is a precisely known quantity) and would take the form of a fixed fee per ton of carbon dioxide emitted. For example, coal would have a higher tax rate per kilowatt (kWh) of energy produced than would natural gas for electricity generation. Similarly, diesel and gasoline prices would experience different increases because of their differing emissions per gallon.

The two major uncertainties regarding future carbon tax policies will be where in the fossil fuel supply chain the tax will be applied and what the precise amount per ton of carbon dioxide emitted will be. Based on past proposals, the risks and benefits can be high.

For example, one proposal advocated by the Carbon Tax Center favored applying the excise tax on the transaction between producers (oil wellheads, gas wellheads, coal mines) and their direct customers (refiners, pipelines, coal shippers). Another proposal favored applying the tax on the end sale to the consumer of the fossil fuel (homes and businesses that use electricity or drivers buying fuel for transportation).

How different countries decide on the amount of the tax itself shows considerable variation as well. Currently, Sweden has a tax of $150 per ton of carbon dioxide emitted. British Columbia is introducing a tax rate of $10 per ton of carbon dioxide emitted starting this month (July 2008).

Some proposals are making a case for a low tax initially, such as $25 per ton of carbon dioxide emitted that is then increased incrementally every year. Other proposals are suggesting the proper carbon tax of $30 per ton, representing a price that supposedly will account for the environmental costs due to carbon dioxide emissions.

It’s important to keep in mind that a carbon tax will have an impact on the price of transporting goods from one destination to another. Consider that a tax of $100 per ton of carbon dioxide emitted will add $0.268 to the price of a gallon of gasoline and $0.305 to a gallon of diesel fuel, again based on information from the Carbon Tax Center.

At current fuel prices, this is a little more than a 5% increase in transportation fuel costs, something that consumers should keep in mind when making decisions about future vehicle purchases. For electricity usage, a carbon tax of $100 per ton of carbon dioxide emitted will mean an increase of $0.104 per kW-hr from coal, $0.087 per kW-hr from petroleum, and $0.057 per kW-hr from natural gas.

This is very large increase in the cost of electricity from fossil fuel sources, and these three sources comprise 70.5% of U.S. electricity generation. This means that if a carbon tax becomes law, you can expect and therefore must prepare for a rise in your electricity costs.

While there are no carbon tax proposals presently before Congress, carbon tax legislation is becoming an increasingly hot issue for green movement activists, as well as Congressional leadership. During the next presidential administration and the next Congress, it’s highly likely that carbon tax legislation will be introduced and possibly enacted.

Thus, it’s important to begin planning now to take into account the rising costs that such a tax will produce. An interesting side bar is that many carbon tax proposals claim to be revenue neutral. To this end, some proposals will feature decreases in individual and corporate income taxes paid for by taxes on the use of fossil fuels.

What this means is that those companies that move away from high-polluting fossil fuels the most depending on the exact implementation of the carbon tax might benefit from decreased tax rates, which could mean overall savings for some companies, depending on their specific energy needs.

What all this carbon tax debate is pointing to is the urgency to begin planning NOW for this “inevitability” to help protect your business from rising energy and transportation costs. One thing is certain! Congressional leadership is not going to be there for you.

Bottom line? Apply this information to improve your profitability, reengineer business models, and strengthen or gain competitive advantage in the marketplace. And you can apply the free Fiscal Test at http://fiscaldoctor.com/fiscaltest.html.

www.FiscalDoctor.com to Stop Profit Leaks

The green movement has created new marketplace opportunities with the emergence of intelligent green software. Industries, traditional and emerging, will soon be affected by the adoption or disregard of such technology as they move into some version of energy peak load or variable electrical pricing (where the current price is determined by the power load on the grid).

In the not-so-distant future, companies will need to prepare for the application of intelligent green software that will automatically manage specific aspects of production, distribution and consumption of electricity. This technology will enable energy customers (whether they are industrial, commercial or residential) to make smart decisions about their energy usage to cut electric bills and electricity consumption to just what they need. The good news is that this technology will not only help foster the production of efficient, smart appliances, but it will also encourage consumers to become more energy conscious and therefore more energy efficient.

The basic premise is simple. There will be devices that will automatically turn certain appliances on and off under conditions specified by the consumer. If you combine this with variable pricing in electricity and allow consumers to make decisions about which appliances to run based on the cost of running them, then you have a potential for consumer cost savings as well as power consumption reduction.

Such relatively simple devices are a significant part of smart grid technology proposals, though some proposals go even further. Some propose that the devices be used for energy suppliers as well as energy consumers. In the smart grid context, such devices can be powerful leveraging tools for consumers, enabling them to sell back power to the utilities if they have generating capacity themselves (such as from rooftop solar panels) or if they use plug-in hybrid cars.

These devices may even give consumers the capability of arranging with the utilities to buy power at a low price when the load on the grid is low, and sell it back to the utility at a higher price when the load on the grid has risen. Interestingly this benefits the utilities, since widespread adoption of such measures can save them building new plants to meet peak capacity needs.

Surprisingly, much of this technology has already been developed. It simply needs to be deployed. Test programs have shown consistent success, such as the GridWise Olympic Peninsula project, a study done by the Pacific Northwest National Laboratory. In this study, households were given digital thermostats and computer-controlled water heaters and dryers. The participants would then set the power usage of the devices based on the price of electricity at any given moment. For example, they would set the target temperature for their house, an acceptable range of variation, and their price tolerance (to the changing price of electricity). Every few minutes the devices would adjust their power usage based on the current price of electricity.

The test found that these households saved more than 10% on their yearlong electricity costs. But what energy policy planners found to be most revealing was not so much that the residents were able to reduce their consumption and save money but more surprisingly how the devices encouraged participants to alter their attitude and behavior to decrease their consumption because they now had the tool to actively monitor their consumption. This reinforces the notion that feedback is the best motivator to get people to change their habits. Weighing oneself on a scale is a perfect example of how a device can motivate people to lose weight.

From the electric utility’s point of view, new startups like Grid Net are working to develop the software that will make full smart grid systems a reality. The software systems being developed for use by the power utilities take advantage of modern computing and networking technologies to increase the information available to utilities about the state of the power grid.

The ultimate goal is to build power grids that can manage their own load spikes automatically, with spare generators being brought online via software triggers (say when the alternating current frequency dips below a certain level, which is a sign of high load on the grid), or power being transferred from other parts of the grid to meet demand in nearby areas, all without human intervention).

At present, few of these software technologies are deployed or even easily purchasable. While in some cases, the technology is well understood and well developed (e.g., software to power down appliances when the electrical grid is under heavy load), it is not widely available yet for those who want to use it now.

What smart green software is pointing to is the urgency to begin planning NOW for this inevitability to help protect industries and consumers from rising energy costs.

Bottom line? Apply this information to improve your profitability, reengineer business models, and strengthen or gain competitive advantage in the marketplace. And apply the free Fiscal Test at http://fiscaldoctor.com/fiscaltest.html.

From Gary W Patterson, www.FiscalDoctor.com Copyright 2008

The green movement is creating new marketplace opportunities as a result of developing new green technology. One technology is smart grid software. Businesses, traditional and emerging, will soon be affected by how this technology will be deployed and adopted as they move into some version of peak load or variable pricing.

The modern electric grid is hardly modern; it has barely changed in seventy-five years. Most electric grid systems today consist of transmission and distribution networks that connect power plants to end users. These systems rely on centralized power generation and feature bottlenecks and choke points where damage to the infrastructure can disrupt service to thousands of customers if not more. Todays electric grids are poorly equipped to handle the demands of the post-modern economy, which due to the ever increasing use of digital devices requires higher load demands and uninterruptible power.

Part of the problem is information–information in current power systems flows only one way, from consumers to the power utilities. The utilities know what the power loads are and where they are, but they struggle to meet power spikes with marginal success. Consumers have no idea (besides learning about it on the nightly news report) what the load demands on the power grid are and thus are unable to make usage decisions based on that information.

The other part of the problem is logistical: Current power systems rely on centralized generating stations that send power over transmission networks to several distribution substations, which then send power over distribution networks to end users. To meet increased peak demand in local areas excess, generators must be kept on standby so they can be brought online as needed. Power, for the most part, cannot be routed from another area to help meet the demand. Since as much as 10% of total power capacity is needed as little as 1% of the time, this means that a large number of small local emergency generators are needed to meet rapidly changing demand (as larger generators take too long to startup).

Smart grid systems are an attempt to address the shortcomings of the current electric grid by changing the flow of information and logistics. The new grid systems use internet connections between power stations, power meters, and appliances ultimately drawing power to make the flow of information about the state of the grid a two-way process between utilities and consumers. This enables consumers to make better decisions about their power usage; which they can even do automatically via the smart power meters.

Smart grid systems change the logistical nature of the grid from the centralized transmission and distribution system to a decentralized network model where excess power can be transmitted from one area to another as needed. Even better is the ability to use energy storage devices in households (such as plug-in hybrids) and power generating devices such as residential solar panels to supply energy back to the grid during hours of peak demand.

The goal of the smart grid system is to increase the reliability and efficiency of the power transmission systems on two fronts: (1) It decentralizes power generation with households that are both clients and suppliers; (2) It improves power consumption. Consumers are now in the driver seat and are better able make more precise decisions about how they consume power.

Test programs of smart grids have been steadily increasing over the last few years. Enel S.p.A. of Italy built a smart grid serving 27 million Italians in 2005. Essentially Enel invented the concept by installing smart meters that enabled two-way communication between the utility and energy consumers. Austin Energy, a Texas power utility, has been working on a similar initiative to replace all its power meters with smart meters by December 2008.

The GridWise Olympic Peninsula project, a study conducted by the Pacific Northwest National Laboratory, equipped homeowners with digital thermostats and computer controllers on their water heaters and clothes dryers. Participant homeowners were then able to set performance preferences of these devices according to their own preferences. The average household in the study saved over 10% on its yearlong electricity usage. A subset of the program used price-sensitive settings with the price of electricity varying as a function of power load on the grid and the performance of the appliances being set to respond to the price of electricity–these customers saved even more.

For businesses looking to leverage future developments in smart grid technology, it would be worthwhile to review all the power uses in their companies. Gaining an understanding of what power usage can be time shifted as well as coming to an understanding of inventory opportunities to sell power back to the grid will help businesses position themselves to take advantage of green grid technology to lower costs and even gain new revenue streams.

Given that the growing energy crisis is having a dramatic effect on the global economy, there is an urgency to begin planning NOW to help protect your business from rising energy costs.

Bottom line? – Apply this information to improve your profitability, reengineer business models, and strengthen or gain competitive advantage in the marketplace. And apply the free Fiscal Test at http://fiscaldoctor.com/fiscaltest.html.

From Gary W Patterson, www.FiscalDoctor.com Copyright 2008

The green movement has created a plethora of buzzwords. One of the more popular phrases is renewable energy. And for good reason. Businesses, traditional and emerging, will soon be affected by how they will respond to the reality of renewable energy depending on where they fall in the supply chain.

Renewable energy is a term that refers to those potential sources of energy that are naturally replenished, which means that using them does not decrease the amount available in the future. This contrasts with nonrenewable sources (fossil-based fuels) that have a limited supply and will eventually be used up. Renewable energy sources include sunlight, hydrosphere/water cycle, geothermal and some types of biomass and biofuels. Think of energy as a source and electricity as an application.

The mechanisms used to generate electricity from these sources vary considerably. For sunlight, there are photovoltaic technologies that generate electricity directly from sunlight. But there are also systems that use the sunlight to heat an intermediate fluid, which is used to turn turbines to generate electricity. There are multiple ways that water can be used to provide electricity, of which the most commonly used is the hydroelectric dam.

Other systems that produce electricity from water include wave power systems that convert the kinetic energy of waves into electricity, tidal power systems that use the kinetic energy of tidal flows in a similar fashion, and systems that take advantage of the temperature differences between surface waters and deeper waters in the ocean to generate electricity. Geothermal systems rely on the heat of the earth’s interior to generate electricity in various ways, depending on the specific nature of the site. Biomass and biofuels consist of fuels derived from plant and other organic matter, which are renewable depending on the sustainability of the agricultural practices that provide the biomass. Examples include ethanol and biodiesel liquid fuels for transportation, and solid biomass from unused portions of other crops for electricity generation.

Presently, renewable energy sources provide only a small fraction of global energy production, and the majority of this is from biomass burning such a wood (which while renewable in the strictest sense is not environmentally friendly) in undeveloped regions of the world. Renewable energy provides less than 1% of the world’s energy production even though its use is expected to grow rapidly amid rising concerns about global warming and the rising price of oil.

The biggest impediment to the widespread use of renewable energy sources in the past has been its price compared to the price of coal, natural gas, and petroleum. At present, wind energy costs $0.04-$0.08 per kWh, while coal costs $0.04 per kWh. Other renewable energy sources are even more expensive, such as solar thermal at $0.12-$0.34 per kWh and solar photovoltaic at $0.25-$1.60 per kWh. Water sources vary in cost from being cheaper than coal to costing three times as much. This cost differential, however, is narrowing as the price of oil rises and new technological innovations are bringing down the prices of renewables.

Looking forward, the increasing likelihood of carbon taxes or emissions trading schemes being implemented in much of the developed world means that the cost of generating electricity from coal, natural gas, and petroleum will rise even more precipitously, which will make renewable energy even more attractive for future development.

The future of renewable energy depends on how government energy policy will develop over the course of the next presidential administration and congress. Will carbon taxes or emissions trading schemes be enacted to limit greenhouse gas emissions? Will green grid technologies become widespread? Will the development of new oil supplies be allowed? All of these possible scenarios will affect the future deployment of renewable energy technologies.

As an example, consider the application of rooftop solar photovoltaic systems. Not only will these systems provide electricity to homes and businesses, but they can even be used to sell energy back to the power utility. Farmers and ranchers can plant wind turbines on land unsuitable for growing crops. The widespread use of smart grid technologies can become a major method of decentralizing power generation.

Similarly, if emissions trading schemes are enacted, then the rising cost of carbon-producing energy sources will force a shift to renewable energy technologies for large portions of our energy needs. This is deemed so likely that many believe that renewable energy technologies will be the next major industrial boom, similar to the computer technology revolution of the 1980s and the internet revolution of the late 1990s. Increasingly, large quantities of venture capital are pouring into renewable energy companies in expectation of just such an outcome.

How you position your firm to take advantage of the probable boom in renewable energy depends on your business’s energy needs and usage. If green grid technology becomes widespread, the opportunity presents itself to businesses to become both an electricity consumer and a supplier. If carbon taxes or emissions trading systems drive the move away from petroleum transport fuels to biomass transport fuels, it is important to be prepared for that as well.

As the renewable energy debate gains momentum, NOW is the time to prepare for its eventual inevitability to help protect your business from rising energy and transportation costs.

Bottom line? – Apply this information to improve your profitability, reengineer business models, and strengthen or gain competitive advantage in the marketplace. And apply the free Fiscal Test at http://fiscaldoctor.com/fiscaltest.html.

From Gary W Patterson, www.FiscalDoctor.com Copyright 2008

As I’ve said before, every business on the planet is in the business of MARKETING.

Yes, that includes you.

First and foremost you are a marketer, second you are an investor. You must know how to get leads in order to even have a chance to put your investment knowledge into action.

So, to get private money lenders for your real estate investing business you must find the people who have money.

Who Has Money?

* Your Family and Friends -

Do you have family members who have money that they are earning between 0-5% on? I’m sure you do. Do you think they would want to double the rate of return on their money? I bet they would.

So, why not bring the opportunity of becoming a private lender for your real estate business to your family members first, so you can help your family become more wealthy in the process? Many people hate to ask family members for money… this is a common thing; however, why would you feel uncomfortable helping your family members make more money? You shouldn’t.

The first property I bought (and still own) was bought with 100% private money. A 95% first mortgage (seller carried), and a 5% second which was borrowed from my father. My father is earning 6% on his money rather than 3%, the property cash flows and has gone up in value… if for some reason I screw up and don’t pay my dad (not going to happen), he is in 2nd position on a property with over $100k in equity. It is a no lose for him… and great upside for me.

* Other Real Estate Investors and Businessmen -

Other successful real estate investors have money… and often like to lend out their money to other investors. These are often great private money investors to have on your side because as you’re starting out, they can help you analyze deals… and teach you a ton as you grow as an investor. Also, successful businessmen are great because they know the security that real estate can hold, and know that when the loan is structured correctly they are protected with very little downside.

Talk to other investors and business people that you know and let them know what you do, and that you can provide them real estate secured returns of 9-12% (or whatever you are willing to pay) when they become a private money lender for your company. If there are holes in your presentation or your business model, they’ll likely point them out, which will help you to make your business stronger over time.

* People Nearing or in Retirement -

Think about it… who has a bunch of money just sitting around? Well, people either in or nearing retirement (people 10-15 years away from retirement, up to people who are already retired). Even better, the stock market today sucks and I’ve personally seen many people move their money from the volatile stock market and place the funds in “more secure” investments like CD’s, gold, etc.

It’s your job to find these people and present them another option to lend money to your company for a much better annual return (usually private money lenders are paid between 8-12%). Show them that you know what the heck you are doing, that the risk is relatively low with the strict buying guidelines your company employs, and that you are looking for long term relationships with lenders who want the same.

These people can move their under performing investments (401k, IRA, etc.) into your short term private money loans. It’s a win-win. Again, you as the investor need to be honest with the private money lender, and you need to make responsible decisions on the properties that you invest in.

That’s just a short list of people who you should be going after to recruit as private money lenders for your real estate investing business.

Marketing to these people can be everything from simply handing them your business card that has a blurb saying you are looking for private money lenders who want to earn 10% secured by real estate, and to call XXX-XXX-XXXX or visit www.yoursite.com for more information

… to sending out mailers to a list of retirees… to teaming up with a financial planner, to putting on free seminars about the opportunity, etc.

***FYI, I am not an attorney, and don’t claim to be. I am just throwing out ways you may be able to market to potential private money lenders, to my knowledge they are legal, but advise your attorney before you use any of them.***

Here are a few ways you can get in touch with potential private money lenders:

* Ask sellers of the properties you buy if they’d be interested in becoming a lender for your company
* Talk to family about the opportunity and ensure to structure the deal so they virtually can’t lose, and that the risk is on you (unless you want to lose a family member if a deal goes south)
* Ask other investors at real estate investing clubs in your area
* Put up a website and get it optimized in the search engines (we’re creating a training session on this)
* Network at events (chamber of commerce, etc.) and let people know what you do, and how they can be involved
* Send out postcards to a list of people with over $500,000 net worth (you can buy lists from companies who can break it down by net worth and other factors)

Really, there are endless ways to recruit potential private money lenders; however, in my experience… the best ways are to network, let people in your area know what you do, create a website which educates potential lenders, and get referrals from happy investors.

Trevor Mauch is an investor and founder of The REI Brain (www.thereibrain.com. Trevor focuses on multi-family income properties and has plans on moving more into the commercial real estate. Visit http://www.thereibrain.com/newsletter for more honest, unbiased, and actionable REI information.

No company and/or industry today are immune from the escalating cost of crude oil. In an effort to address this growing concern, companies are seeking alternative, cost-effective ways to make every drop of fuel count. Although biodiesel is not a new type of fuel, its use has not been widely considered up until now. Today, its popularity is rapidly growing as an alternative to petroleum-based fuel that can be used in various blends in unmodified diesel engines.

Biodiesel comes from vegetable oils that undergo transesterification, a chemical process that extracts methyl or ethyl esters from the oil. This extraction can be used as fuel, either in a pure or blended form. The oils come from renewable, organic sources, such as coconut, soybean, grape seed, jatropha, or from waste vegetable oil.

In an effort to promote the development and use of alternative fuels, the United States government provides incentives and tax credits to producers and users of renewable and alternative fuel, such as biodiesel. For example, the U.S. Department of Energy (DOE) has been drafting policies that will mandate private fleets and government vehicles to replace their vehicles with those that are ready for alternative fuel (read: diesel vehicles must be biodiesel ready).

The Pros – Biodiesel is commercially available at many pumps throughout the United States as a blend with petroleum diesel. Proponents say blends of up to 20 percent (B20) may be used in most conventional diesel engines, before costly modifications are needed. Advocates assert that there is no significant difference between biodiesel and petroleum diesel when it is blended properly. In fact they argue that biodiesel provides the same mileage, torque, and horsepower that petroleum diesel provides.

Proponents stress the many advantages of using biodiesel in vehicles. For starters, it is a cleaner fuel that reduces carbon dioxide emissions up to 80%. With new regulations, biodiesel has almost zero sulfur dioxide content. Studies also suggest that lower blends of biodiesel are more fuel efficient, which makes car engines last longer. In addition, biodiesel is less of a noise pollutant in diesel engines because of its high octane ignition rating. This means biodiesel can make cold starting easier since it heats up more easily than petroleum diesel.

The beneficiaries of biodiesel will be fleet vehicles and the public transportation sector. As oil prices have increased dramatically over the past year, biodiesel is becoming a more appealing alternative because it is cheaper to produce and is more environmentally sound. In addition, the price of biodiesel may be more stable than petroleum diesel. For example, lower blends of biodiesel (B2, B5, and B10) can cost less than petroleum diesel. B20 is sold at almost a similar price to petroleum diesel, but prices are expected to decrease as petroleum prices increase in the world market while local producers and supply of biodiesel increase.

The Cons – Opponents stress that biodiesel has different solvent properties that can break down deposits in the fuel lines where petrodiesel has been used. If and when gas stations start offering biodiesel, opponents say they will need to replace fuel lines. Opponents expand their argument by stating that biodiesel can also degrade rubber components, which means that rubber fuel pumps and seals will also need to be replaced with a synthetic rubber. This is not great for consumers whose warranty may not apply if they convert to biodiesel.

One of the problem advocates gloss over, however, is that although there are good number of biodiesel suppliers in some states, other states still do not have enough suppliers and producers of biodiesel to justify the switch to biodiesel vehicles. Currently, northern central states like Minnesota, Michigan, North and South Dakota, Nebraska, Iowa, Illinois, Kansas, and Missouri have several suppliers of biodiesel. In other states, only selected suppliers provide biodiesel to local pumps, suggesting that the proposed government mandates do not realistically consider the impact and consequences of this mandate on states where suppliers and producers are low.

Investors are quick to point out that there must be a growing demand in other states in order for businesses to justify investing in distribution facilities in other locations. That said, with petroleum prices expected to continue to rise, proponents believe that consumers will consider switching to biodiesel and other alternative fuel, thus creating a demand. With rising demand, gas stations are expected to install more pumps that carry biodiesel.

While the conversion to using more biofuels appears to be inevitable, some question how the conversion will be executed. Timing and associated costs of the changes are still not clear. There is also the issue about the direct and indirect costs of converting compounded by the question of which groups will benefit and which groups will suffer. With congressional leadership favoring the acceleration of greener energy that clearly benefits their constituents and lobbyists, there will definitely be winners and losers.

In the final analysis, the biodiesel debate points to the urgency for businesses to begin planning NOW for the inevitability of a greener world, with its intended and unintended consequences. Will you be prepared?

Bottom line? – Apply this information to improve your profitability, reengineer business models, and strengthen or gain competitive advantage in the marketplace. And apply the free Fiscal Test at http://fiscaldoctor.com/fiscaltest.html.
From Gary W Patterson, www.FiscalDoctor.com Copyright 2008