Peter HazellVisiting Professor

Centre for Environmental PolicyWye Campus

Bioenergy: Opportunities and Challenges

The promise of bioenergy High cost of oil and need for cheaper alternatives Global demand for oil will increase 50% by 2025,

mostly because of fast growing Asian economies Several major oil exporters are politically unstable or

failed states Global climate change and need to reduce carbon

emissions Good way to rejuvenate agriculture and rural

economies. In poor countries an engine of growth. In rich countries a way to reduce the need for farm support policies

Unlike oil, most countries can produce at least some bioenergy

Bio-energy today

Type Use Replaces Raw material

Main users

Ethanol Transport Petrol Sugar

Maize

Brazil and US

Biodiesel Transport Diesel Oilseeds EU, especially Germany and France

Biomass Electricity

Home cooking and heating

Coal, gas and oil

Kerosene

Woody materials, crop and livestock waste

Many

Developing countries

Bio-energy today

Bio-energy already accounts for 14% of total world energy use; 33% in developing countries (70% in Africa) but only 2-3% in industrial countries

Small scale burning of biomass accounts for most household energy use in poor countries.

Biofuels for transport still small; 40% of transport fuel in Brazil but only 3-5% in US and EU and less elsewhere.

Top producers of biofuels in 2005(million liters)

Country Ethanol Biodiesel

USA 16,230 290

Brazil 16,500

China 2,000

EU 950

India 300

Germany 1,920

France 511

Italy 227

Outlook

• By 2010 the EU plans to have doubled the share of renewable energy in its primary energy consumption to 12 %. Biofuels will increase to 5.75% of total transport fuels.

• The US also plans to more than double its current 2% share for biofuels by 2016 but this may accelerate

• Brazil plans to increase biofuels share from 37% to about 60%

• China and India have launched new bio-energy industries

Are biofuels really economic?

At the current oil price of nearly $100/barrel it pays to burn almost anything except oil! Prices will eventually fall again, so we need to focus on the trend price -- $60-70??

• Ethanol from sugar cane is economic at oil prices of $30-35 /barrel (Brazil)

• Ethanol from maize is economic at $55 (US)• Bio-diesel from oilseeds is economic at $80 (EU)• Sweet sorghum??

Do biofuels really save fossil fuels and reduce carbon emissions?

• Fossil fuels are used in the production and distribution of bio-energy, hence need to look at energy ratios. This is the ratio of available energy delivered per liter of biofuel to the total fossil fuel energy used in its production – calculated over the full production cycle.

• What is the net carbon savings over fossil fuels measured per mile of transport -- again calculated over the full production cycle?

Methods vary for calculating energy ratios

• What energy inputs to include. Should, for example, the energy used in making agricultural machines or sustaining farm workers be included or just the energy content of direct inputs like diesel and fertilizer?

• What energy credit to give co-products like cattle feed

Energy balance for ethanol from maize

USDA (2002) estimates for ethanol from maize place the energy ratio in the range of 1.25 to 1.5

But if co-products are excluded then the ratio is around 1.05 to 1.1

But controversy remains

Net energy calculation for ethanol from maize in US (USDA, 2002)

Production phase BTU/gallon

Maize production 21,598

Maize transport 2,263

Ethanol conversion 51,779

Ethanol distribution 1,588

Total energy used 77,228

Ethanol energy content 83,960

Co-product energy content 14,372

Energy ratio w/o co-products 1.08

Energy ratio with co-products 1.27

Energy balance for one gallon of ethanol produced from maize in the US (David Pimental at Cornell University)

BTU×1000

Farm production

(machinery, fertilizers, electricity, transport, etc.)

40,221

Ethanol production 99,119

Total (not including final distribution to petrol stations)

139,340

Ethanol energy content 77,000

Energy ratio 0.55

Energy balances for other fuel typesSource: Worldwatch Institute, 2006

Fuel (feedstock) Fossil energy balanceCellulosic ethanol 2 to 36

Biodiesel (palm oil) ≈9

Ethanol (sugar cane) ≈8

Biodiesel (soybeans) ≈3

Biodiesel (rapeseed) ≈2.5

Ethanol (wheat, sugar beets) ≈2

Ethanol (maize) ≈1.5

Petrol and diesel 0.8

Sweet sorghum ??

• These ratios are improving over time with advances in the technologies for processing feedstock

• They could also be improved by substituting more bioenergy for fossil fuels in production and transport activities, or reducing the use of N fertilizer by using N fixing crops

Net carbon savings

• When blended with petrol or diesel, most biofuels from grains can reduce carbon emissions by 10-30% per mile traveled, and the savings are greater the higher the fuel blend

• Biodiesel from soybeans can save 40%

• Ethanol from sugar cane can save 90%

These carbon savings do not take an alternative land use as the counterfactual when calculating the carbon savings. They assume the same crop would have been grown anyway.

The results would be much worse if, for example, forest is cleared to grow biofuel feedstock, as happens with some sugar in Brazil or oil palm in Malaysia.

The results would be better if woody plantations are established on already degraded lands in India, or if perennial feedstock that sequester large amounts of carbon in the soil replace annual crops

A forthcoming technology revolution?

First generation technologies are constrained by: Bioenergy products are currently subsidiary to the more

primary activities of agri-business (e.g. producing refined sugar, bread, vegetable oils) leading to sub-optimal feedstock and processing technologies

Bioenergy products are fed into existing energy distribution and use systems (e.g. coal fired power stations, petrol engines).

Not yet very profitable or energy efficient to process cellulose rich feedstock, only sugars, starches and vegetable oils

Second generation technologies will be different

The “Holy Grail” is the efficient conversion of cellulose rich biomass into liquid and gaseous energy forms using thermo-chemical processes rather than fermentation. This will allow:

Cellulose rich biomass to be grown on marginal lands that do not compete as much with food

Use of perennial feedstock crops and trees that use far less fossil fuel energy in their production and which sequester large amounts of carbon in the soil

Specialized plant breeding will increase biomass and energy production per hectare for specialized feedstock crops and plantations

Processing costs per litre of biofuel will become much cheaper

Cars and power plants will be designed specifically for new bioenergy products. May eventually see hydrogen and electric cars that provide an indirect way of utilizing woody biomass processed at power stations

All this should lead to big improvements in energy ratios and net carbon savings within 10-15 years

Should governments intervene in bio-energy markets?

Help overcome high set up costs and coordination problems until sufficient scale has been achieved in production, distribution and end uses.

Correct for environmental externalities in the energy market Overcome vested interests in existing technologies (but not creating new

ones!)

Policy instruments include tax rebates on biofuels, carbon taxes, carbon emission caps, mandatory fuel blending, investment incentives, trade protection and public R&D.

A philosophical divide arises over whether it is better to use market assisted approaches or centrally mandated solutions.

For example, if the objective is to reduce carbon emissions then does one impose carbon taxes that reflect the carbon balance of different types of fuels and let markets decide on the best was to meet energy needs, or does government decide on specific solutions and use quotas and mandatory fuel blending to achieve them?

Issues for rich countries?

• Will farm income supports come down as feedstock prices rise? (not so clear in EU with the switch to PES rather than price support). Could these savings pay for bio-energy subsidies?

• Should countries import biofuels if this is cheaper than own production? Current trade barriers are high ($10-15/liter in the US and EU) and not on Doha agenda

• Are rich countries building up another costly special interest group; in this case a coalition of large farms, agro-industrialists and the transport sector?

Issues for developing countriesThe biggest issue is the food verses fuel tradeoff. “The amount of grain required to fill one SUV tank once with ethanol

would feed one person for one year in Africa”

• What will happen to world food prices and how will this impact on food deficit countries and the poor?

World maize and wheat prices are already reaching new highs partly as a result of the US’s biofuels program. IFPRI is projecting significant food price increases if there is a global attempt to replace 10% or more of transport fuels by 2010. The OECD and FAO are projecting more modest but sustained real price increases over the next 10 years

• Poor people will suffer and quickly, but will higher prices stimulate agricultural growth and lead to eventual net benefits for the poor? Is this possible in Africa without significant new investment in agriculture generally?

How can developing countries reduce trade-offs between bio-energy crops and food production ?

Develop biomass crops that yield higher amounts of energy per unit of land and water. Biotech could be very useful.

Focus on food crops that generate by-products that can be used for bio-energy and breed for larger amounts of by-products.

Develop and grow biomass in less-favored areas rather than in prime agricultural lands—an approach that would benefit some of the poorest people but which will depend on more efficient conversion of cellulose rich materials.

Invest in increasing the productivity of food crops themselves, since this would free up additional land and water

Remove barriers to international trade in biofuels. The world has enough capacity to meet food needs and grow large amounts of biomass for energy use, but not in all countries and regions. Trade is a powerful way of spreading the benefits of this global capacity while enabling countries to focus on growing the kinds of food, feed, or energy crops for which they are most competitive.

Other issues for developing countries

• Can bioenergy production be made pro-poor (small farmers, local small scale processing, etc.)? Probably yes to meet community and regional energy needs but more difficult for biofuels and commercial power plants

• Can developing countries capture some of the potential benefits of carbon offset markets through biofuels production? There are limited opportunities with the current CDM but this could change after 2012.