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Invest In Sustainable Energy Sources

31 Oct
Invest In Sustainable Energy Sources

Growing Demand For Biomass In Europe Creates A Global Opportunity For You

I’ve been focused on agricultural land investments for some time, but, lately, I’ve launched an aggressive new search for new opportunities of this kind. I am more convinced than ever that productive land is the smartest place to be putting your money right now. It is also the best possible store of value and provides the best potential for long-term return.

In my ongoing research, I keep coming across the idea of biomass. I knew about coconut oil as a biomass, for example. What I didn’t know is that Europe intends to be using biomass as a sustainable energy source by 2020. The target is for 20% of energy to be produced by renewable sources, and half to two-thirds of that is expected from biomass.

The experts may disagree on the benefits of switching from burning coal to burning biomass (biomass includes wood and bio-residues—that is, things left over from harvesting crops). What doesn’t seem to be in dispute is that Europe will have a shortage of biomass if it intends to meet the 2020 target.

What Is Biomass?

Biomass is a by-product of several forestry products, including robinia, paulownia, and acacia.

I wrote a couple of years ago for my Marketwatch members about a group growing robinia and paulownia in plantations in Europe. In Europe this week, I’m reconnecting with that outfit to see how their plantations are doing. (No harvests would be expected by this time, as the cycle for these trees is 12 years.)

The uses for these trees include fence posts and outdoor furniture. Historically, biomass has been a by-product; however, it could become the main product if the price electric plants are willing to pay for the wood reaches market levels. That’s unlikely, but having some extra income from selling trimmings and cuttings for biomass won’t hurt the returns of these kinds of forestry projects.

The acacia plantation I’m looking at is in South America. If biomass demands in the EU exceed local supply as expected, Europe will need to import biomass. The cuttings and trimmings from the acacia plantations can be turned into wood pellets for that purpose. The main use for the wood is flooring and outdoor furniture. Acacia also has a 12-year harvest cycle.

Twelve years can seem a long time to wait for a return, even compared with most other agricultural crop investments. You have to wait only three to five years to start seeing cash flow from crops such as coconut, coffee, and avocado (assuming you’re planting trees from scratch).

The beauty of forestry versus other kind of crop investments is that the ongoing maintenance requirements (and therefore costs) are less. That helps offset the lack of earlier and annual cash flow. Forestry plantations can also generate carbon credits, which I haven’t looked into yet but will.

My point is that forestry projects have a place in a diversified portfolio and can help build legacy wealth to pass along to your heirs, if that is a goal. The land alone in some cases (a plantation in Europe, for example) can see decent appreciation. And robinia and paulownia will regrow from the stumps once the timber has been harvested, so you can get a second crop without replanting. That’s the kind of forestry crop I like.

Lief Simon

Mailbag

“Lief, thank you for your articles. However, when you write:

“‘Most countries tax their corporate and individual clients based on residence, not citizenship. This means that, if you live somewhere (or, in the case of a company, are domiciled there), you pay local taxes. Frequently, however, the tax applies only to income generated in the jurisdiction. Income generated outside the jurisdiction is not subject to local taxation.’

“Does this apply to gifts or inheritances or only to income? For example, if a U.S. citizen or dual European/U.S. citizen, residing in the United States, receives gifts or inheritance from an EU country (e.g. France), are they obliged to pay French taxes?

“Any information is much appreciated.”

J.K.

The United States imposes an estate tax, which taxes the assets of the estate. Some countries charge an inheritance tax rather than an estate tax. For how France (or any E.U. country) would tax any inheritance you received from a French person, it’d be best to speak with a tax expert in that country. That’s beyond the scope of my expertise.

For France specifically, I’d recommend Jean Taquet and Sam Okoshken ( http://okoshken.com/ ).