An Analysis of the Risk Narrative Disclosed by Publicly Traded Biofuel Firms

Details

• Creators:
  Trejo-Pech, Carlos Omar ; Bista, Bishal ; Yu, T. Edward ; Larson, James A.
• Corporate Creators:
  United States. Department of Transportation. Federal Aviation Administration. Center of Excellence for Alternative Jet Fuels and Environment ; University of Tennessee, Knoxville
• Corporate Contributors:
  United States. Department of Transportation. Federal Aviation Administration. Office of Environment and Energy
• Subject/TRT Terms:
  ASCENT Aviation Fuels Biomass Fuels Diversified Biofuel Firms Focused Biofuel Firms Risk Analysis Sustainable Transportation Z-score
• Publication/ Report Number:
  j.esr.2025.101927
• DOI:
  https://doi.org/10.1016/j.esr.2025.101927
• Resource Type:
  Journal Article
• Right Statement:
  Open Access; https://creativecommons.org/licenses/by/4.0/
• Geographical Coverage:
  United States
• Corporate Publisher:
  Elsevier
• Abstract:
  Given the high level of uncertainty prevalent in the immature biofuels industry, the primary objective of this study was to identify and assess the risk factors that biofuel firms face. The study evaluated the risk factors, or specific risks, reported by biofuel firms to the U.S. Securities and Exchange Commission (SEC) over five years. The analysis was conducted for all firms in the sample, as well as for subsets of focused and diversified biofuel firms. Based on a biofuels industry risk structure derived from previous research, we coded and analyzed 4310 risk narrative disclosures, extracts from firms’ annual reports filed with the SEC. The study evaluated two risk metrics—prevalence and relevance—across 25 specific risks. Risk relevance, the most comprehensive metric, was validated by comparing it with two widely used risk metrics—which measure overall firm risk rather than specific risks—, the Z-score and the debt-to-equity ratio. Identification of risk metrics by quadrants, combined with quantile regression analysis, allowed us to identify the critical risks in the biofuels industry. The critical risks, particularly for focused biofuel firms, were biofuel regulation, biofuel markets, feedstock markets, conversion technologies, profitable operations, financing, and risk management. To a lesser extent, environmental and contracting risks were critical. The results of this study can guide policymakers and firm managers in developing a compelling policy mix and strategies to address the challenges faced by the biofuels industry.
• Content Notes:
  This is an open access article under the terms of the Creative Commons Attribution 4.0 International (CC BY 4.0) license https://creativecommons.org/licenses/by/4.0/. Please cite this article as: Carlos J.O. Trejo-Pech, Bishal Bista, T. Edward Yu, James A. Larson, An analysis of the risk narrative disclosed by publicly traded biofuel firms, Energy Strategy Reviews, Volume 62, 2025, 101927, ISSN 2211-467X, https://doi.org/10.1016/j.esr.2025.101927.
• Format:
  PDF
• Funding:
  13-C-AJFE-UTENN-016
• Collection(s):
  Federal Aviation Administration
• Main Document Checksum:
  urn:sha-512:d3c11e76eb7ffc8588d7cb41759f7f28009d55b4dabb1d6bb5b24c12fcac948072bb2db35c07ce4dd12bc75766409a85c24d04360d174718749950f5e1a60739
• Download URL:
  https://rosap.ntl.bts.gov/view/dot/89580/dot_89580_DS1.pdf
• File Type:
  [PDF - 1.97 MB ]