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    Finland's Metso Power has won an order to supply Kalmar Energi Värme AB with a biomass-fired power boiler for the company’s new combined heat and power plant in Kalmar on the east coast of Sweden. Start-up for the plant is scheduled for the end of 2009. The value of the order is approximately EUR 55 million. The power boiler (90 MWth) will utilize bubbling fluidized bed technology and will burn biomass replacing old district heating boilers and reducing the consumption of oil. The delivery will also include a flue gas condensing system to increase plant's district heat production. Metso Corporation - September 19, 2007.

    Jo-Carroll Energy announced today its plan to build an 80 megawatt, biomass-fueled, renewable energy center in Illinois. The US$ 140 million plant will be fueled by various types of renewable biomass, such as clean waste wood, corn stover and switchgrass. Jo-Carroll Energy - September 18, 2007.

    Beihai Gofar Marine Biological Industry Co Ltd, in China's southern region of Guangxi, plans to build a 100,000 tonne-per-year fuel ethanol plant using cassava as feedstock. The Shanghai-listed company plans to raise about 560 million yuan ($74.5 million) in a share placement to finance the project and boost its cash flow. Reuters - September 18, 2007.

    The oil-dependent island state of Fiji has requested US company Avalor Capital, LLC, to invest in biodiesel and ethanol. The Fiji government has urged the company to move its $250million 'Fiji Biofuels Project' forward at the earliest possible date. Fiji Live - September 18, 2007.

    The Bowen Group, one of Ireland's biggest construction groups has announced a strategic move into the biomass energy sector. It is planning a €25 million investment over the next five years to fund up to 100 projects that will create electricity from biomass. Its ambition is to install up to 135 megawatts of biomass-fuelled heat from local forestry sources, which is equal to 50 million litres or about €25m worth of imported oil. Irish Examiner - September 16, 2007.

    According to Dr Niphon Poapongsakorn, dean of Economics at Thammasat University in Thailand, cassava-based ethanol is competitive when oil is above $40 per barrel. Thailand is the world's largest producer and exporter of cassava for industrial use. Bangkok Post - September 14, 2007.

    German biogas and biodiesel developer BKN BioKraftstoff Nord AG has generated gross proceeds totaling €5.5 million as part of its capital increase from authorized capital. Ad Hoc News - September 13, 2007.

    NewGen Technologies, Inc. announced that it and Titan Global Holdings, Inc. completed a definitive Biofuels Supply Agreement which will become effective upon Titan’s acquisition of Appalachian Oil Company. Given APPCO’s current distribution of over 225 million gallons of fuel products per year, the initial expected ethanol supply to APPCO should exceed 1 million gallons a month. Charlotte dBusinessNews - September 13, 2007.

    Oil prices reach record highs as the U.S. Energy Information Agency releases a report that showed crude oil inventories fell by more than seven million barrels last week. The rise comes despite a decision by the international oil cartel, OPEC, to raise its output quota by 500,000 barrels. Reuters - September 12, 2007.

    OPEC decided today to increase the volume of crude supplied to the market by Member Countries (excluding Angola and Iraq) by 500,000 b/d, effective 1 November 2007. The decision comes after oil reached near record-highs and after Saudi Aramco announced that last year's crude oil production declined by 1.7 percent, while exports declined by 3.1 percent. OPEC - September 11, 2007.

    GreenField Ethanol and Monsanto Canada launch the 'Gro-ethanol' program which invites Ontario's farmers to grow corn seed containing Monsanto traits, specifically for the ethanol market. The corn hybrids eligible for the program include Monsanto traits that produce higher yielding corn for ethanol production. MarketWire - September 11, 2007.

    Ethanol Statistics, a new industry information resource, reports that U.S. petroleum refiners Citgo and Valero are the top 2 ethanol importing companies in the United States in the first 6 months of 2007. Overall imports were up 7.64% compared to the same period in 2006, from 193,620 gallons to 208,404 gallons. Chevron imported 43% less, whereas Noble and ConocoPhilips' imports were up 255% and 372% respectively. Data are reported in 'The United States Ethanol Market 2007’, which also provides a breakdown of U.S. ethanol production costs and a detailed analysis of U.S. consumption and production. Ethanol Statistics - September 10, 2007.

    The government of British Columbia launches a $100,000 study into the production of biogas, heat, power and clean water from household waste streams. Raw sewage water can be cleaned by microbial fuel cells that deliver electricity as they clean the water; other technologies include classic anaerobic fermentation. Canada.com - September 10, 2007.

    Saudi Aramco in its Annual Review 2006 said that last year the company's crude oil production declined by 1.7 percent, while exports declined by 3.1 percent, compared with the previous year. Crude oil production in 2006 averaged 8.9 million barrels of oil a day (b/d) and exports 6.9 million b/d. Saudi Aramco - September 9, 2007.

    Chinese packaging manufacturer Livan Biodegradable Product Co. Ltd. will build plants in Alsozsolca and Edeleny in eastern Hungary at a combined cost of €18 million by 2009, the Hungarian economics ministry says. The plants, which will employ 800 people, are planned to produce initially 50, 000 metric tons a year of environmentally-friendly packaging material, and double that amount by a later date. Livan will use corn to manufacture biodegradable packaging boxes with similar properties to petroleum-based plastic boxes used in the food industry. Dow Jones Newswires - September 7, 2007.

    South Korea aims to raise biodiesel content in domestic diesel to 3 percent from the current 0.5 percent by 2012, Seoul's energy ministry said today. The government was initially set last year to impose a mandatory 5 percent blend, in line with the level targeted by the European Union by 2010, but the country's powerful refining lobby opposed the move, forcing it to push back the target, according to market sources. Reuters - September 7, 2007.

    Virent Energy Systems, Inc. announced today that it has closed a US$21 million second round of venture financing. Investor interest in Virent was driven in large part by the Company’s continued development of its innovative BioForming process beyond its traditional hydrogen and fuel gas applications and toward the production of bio-based gasoline, diesel, and jet fuels. Virent Energy Systems - September 6, 2007.

    The U.S. National Ethanol Vehicle Coalition (NEVC) announces that 31 models of motor vehicles will be offered in the U.S. with an E85 capable engine in 2008. Chrysler, Ford, General Motors, Nissan and Mercedes Benz will all offer flexible fuel vehicles (FFVs) in the coming year. The NEVC expects 750,000 such FFVs will be produced in 2008. National Ethanol Vehicle Coalition - September 5, 2007.

    GreenHunter BioFuels, Inc., has begun commercial operations with the start-up of a 1,500 barrel per day methanol distillation system. Methanol is an alcohol used to transesterify vegetable oils into biodiesel. The methanol production facility is a key element of GreenHunter's 105 million gallon per year biodiesel refinery, the largest in the U.S., slated for initial operations during the first quarter of 2008. PRNewswire - September 5, 2007.

    GreenHunter BioFuels, Inc., has begun commercial operations with the start-up of a 1,500 barrel per day methanol distillation system. Methanol is an alcohol used to transesterify vegetable oils into biodiesel. The methanol production facility is a key element of GreenHunter's 105 million gallon per year biodiesel refinery, the largest in the U.S., slated for initial operations during the first quarter of 2008. PRNewswire - September 5, 2007.

    Spanish renewables group Abengoa released its results for the first half of 2007 financial year in which its consolidated sales were €1,393.6 million, which is a 27.9 percent increase on the previous year. Earnings after tax were €54.9 million, an 18.6 percent increase on the previous year's figure of 46.3 million euro. Abengoa is active in the bioenergy, solar and environmental services sector. Abengoa - September 4, 2007.

    Canadian hydro power developer Run of River Power Inc. has reached an agreement to buy privately owned Western Biomass Power Corp. in a $2.2 million share swap deal that could help finance development of new green sources of electricity in British Columbia. The Canadian Press - September 4, 2007.

    As of Sept. 1, a biodiesel blending mandate has come into force in the Czech Republic, requiring diesel suppliers to mix 2 per cent biodiesel into the fuel. The same rule will be obligatory for gasoline starting next year. In 2009 the biofuel ratio will grow to 3.5 percent in gasoline and 4.5 percent in diesel oil. CBW - September 3, 2007.

    Budapest's first biofuel station opens on Monday near the Pesterzsébet (District XX) Tesco hypermarket. This is the third station selling the E85 fuel containing bioethanol in Hungary, as two other stations are encouraging eco-friendly driving in Bábolna and Győr. Caboodle - September 3, 2007.

    Canadian forest products company Tembec announced that it has completed the acquisition of the assets of Chapleau Cogeneration Limited located in Chapleau, Ontario. The transaction includes a biomass fired boiler and steam turbine with an installed capacity of 7.2 megawatts. Consideration for the assets consists of a series of future annual payments to 2022, with a present value of approximately $1 million. Tembec - September 1, 2007.

    Innovative internet and cable/satellite channel CurrentTV is producing a documentary on Brazil's biofuel revolution. Biopact collegues and friends Marcelo Coelho (EthanolBrasil Blog), Henrique Oliveira (Ethablog) and Marcelo Alioti (E-Machine) provided consulting on the technical, economic, environmental and social aspects of Brazil's energy transformation. ProCana - August 31, 2007.

    Oil major BP Plc and Associated British Foods Plc won competition clearance from the European Commission on to build a plant to make transport fuel from wheat in Hull, northeast England. U.S. chemical company DuPont is also involved. Reuters UK - August 31, 2007.

    The government of the Indian state of Orissa announced its policy for biofuel production which includes a slew of incentives as well as measures to promote the establishment of energy plantations. The state aims to bring 600,000 hectares of barren and fallow land under Jatropha and Karanj. At least 2 million hectares degraded land are available in the State. The new policy's other objectives are to provide a platform for investors and entrepreneurs, market linkages and quality control measures. Newindpress - August 29, 2007.

    Brazil's state-run oil company Petrobras said today it expects to reach large scale cellulosic ethanol production in 2015, with the first plant entering operations as early as 2011. Lignocellulosic biomass is the most abundant biological material on the planet, making up the bulk of the structure of wood and plants. In a first phase, Petrobras intends to use bagasse as a feedstock. Reuters / MacauHub- August 29, 2007.

    Seattle based Propel Biofuels, is announcing a $4.75 million first round of capital from @Ventures and Nth Power. The money will be used to help Propel set up and manage biodiesel fueling stations. BusinessWire - August 29, 2007.

    BioEnergy International, a science and technology company committed to developing biorefineries to produce fuels and specialty chemicals from renewable resources, announced today the closing of a major US$61.6 million investment that will provide funding for the Company’s three strategic initiatives: generating secure cash flow from its conventional ethanol platform, product diversification through the introduction of novel biocatalysts for the manufacture of green chemicals and biopolymers and the integration of its cellulose technology. BusinessWire - August 28, 2007.

    German company Verbio Vereinigte BioEnergie, the biggest biofuels producer in Europe, says it is considering plans to invest up to €100/US$136.5 million in a biofuel production facility in Bulgaria. The company wants the new facility to be located close to a port and Bulgaria's city of Varna on the Black Sea is one of the options under consideration. If Verbio goes through with the plan, it would produce both biodiesel and bioethanol, making Bulgaria a major source of biofuels in southeastern Europe. Verbi currently produces around 700,000 tonnes of biofuels per year. Sofia News Agency - August 27, 2007.

    Czech brown-coal-fired power plant Elektrárna Tisová (ETI), a unit of the energy producer ČEZ, could co-fire up to 40,000 tons of biomass this year, the biggest amount in the company’s history, said Martin Sobotka, ČEZ spokesman for West Bohemia. ETI burned more than 19,000 tons of biomass in the first half of 2007. The company’s plan reckoned with biomass consumption of up to 35,000 tons a year. Czech Business Weekly - August 27, 2007.

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Tuesday, September 11, 2007

Paper warns against subsidies for inefficient biofuels in the North, calls for liberalisation of market - major boost to idea of 'Biopact'

The case for a 'Biopact' has received another major boost today by the release of a report that assesses the damaging impacts of subsidies and trade barriers for biofuels produced in the North and that calls for a liberalisation of the market. The study was written for the 'OECD Roundtable on Sustainable Development' (no immediate relation with the OECD) and states that biofuels made from low yield crops such as corn or wheat can only play a marginal role in reducing greenhouse gas emissions; such fuels result in increased food prices; and subsidies and trade barriers prevent competitive and climate-friendly biofuels made in the South from entering the market.

The report titled 'Biofuels: is the cure worse than the disease?' [*.pdf] says that only biofuels produced in the South - such as sugarcane or sorghum based ethanol - are effective at reducing greenhouse gases, do not immediately impact food prices, are energy efficient and do not require damaging subsidies.

The logic would thus be to create a pact between the North and the South, in which the North stops subsidizing its inefficient and damaging biofuels and instead imports the sustainable, energy efficient and competitive fuels from the South. The governments of Sweden and the Netherlands have called for such a relationship. They joined forces to commission a OECD study on biofuel subsidies and tariffs which will appear in 2008 (earlier post).

The new paper, written by Richard Doornbos and Ron Steenblik, indeed calls for a liberalisation of the biofuels market, and repeats what many analysts, including top researchers from the IEA, the FAO, the WorldWatch Institute and Biopact, have said:
Liberalising trade in biofuels is difficult but essential for global objectives. Ethanol from sugarcane grown in Brazil is by far the cheapest biofuel today. South America and Africa have a large potential to increase biofuel production.
The world has a huge technical potential for the production of sustainable biofuels. Assessments by scientists working for the IEA put it at around 1400 Exajoules by 2050, under an optimal scenario. This amount can be produced without deforestation and without threatening the food, fodder and fiber needs of growing populations. But the bulk of this potential can be found in Africa and Latin America. A great number of countries there have the capacity to replace all their petroleum fuels with biofuels, with enough sustainable potential to spare to supply overseas markets (earlier post and here).

The question now is: are these fuels going to be produced in an economical, sustainable and socially acceptable way? Will the North open its markets for biofuels made in the Global South?

Subsidies and trade barriers are inefficient
Key to his question is the problem of government policies and subsidies, which play a large role in the financial attractiveness of biofuels production and trade. Domestic production is supported through both border protection and production subsidies:
Production subsidies are difficult to quantify, but are running in the billions of dollars per year (over $7 billion in United States alone). The leading OECD countries producing ethanol apply import tariffs that add at least 25% to the cost of imports. As a result, current trade is only about 10% of the world’s biofuel consumption. This is an inefficient outcome, as biofuels produced in tropical regions from sugarcane and vegetable oils have a considerable cost advantage over those derived from agricultural crops in temperate zones.
Regulations mandating usage or blending percentages and fuel-tax preferences to stimulate production are used by many countries:
:: :: :: :: :: :: :: :: :: :: ::

In most cases these policy measures do not distinguish among biofuels according to their feedstocks or production methods, despite wide differences in environmental costs and benefits. This implies that governments could end up supporting a fuel that is more expensive and has a higher negative environmental impact than its corresponding petroleum product.

Subsidies and trade barriers are not cost-effective
Neither should current biofuel support policies be championed for their supposed capacity to reduce GHGs or improve energy security. The cost of obtaining a unit of CO2-equivalent reduction through subsidies to biofuels is extremely high, well over $500 per tonne of CO2-equivalent avoided for corn-based ethanol in the United States, for example, with other researched countries not performing much better. (Countries in the South do score favorably).

The score is also not very favourable in terms of displacing fossil fuels. In most cases the use of biofuels roughly doubles the cost of transportation energy for consumers and taxpayers together.

Indeed, most current policies fare poorly when measured by their cost effectiveness, and thus court public backlash. Biofuel policies may appear to be an easy way to support domestic agriculture against the backdrop of international negotiations to liberalise agricultural trade, but to measure their cost effectiveness a clear definition of the desired policy objectives is needed.

Subsidies and trade barriers are on a colision course
The current policy response to the environmental consequences of biofuel production is to develop criteria designed to ensure a sustainable production of biofuels. However, biofuel mandates are still targeting ambitious market shares without an in-depth understanding of a sustainable production level and from where this biofuels could be supplied.

There is a serious risk that biofuel quotas for demand are higher than potential sustainable supply, creating a strong incentive to ‘cheat’ in the system.

Liberalising trade in biofuels essential

Ethanol from sugarcane grown in Brazil is by far the cheapest biofuel today. South America and Africa have a large potential to increase biofuel production. Ethanol may also be efficiently produced in South-East Asia and Australia, though the availability of suitable land will place tighter constraints on production there. Production in North America and Europe is considerable in the current market but its long term potential is not sufficient to realise the objectives set.

Trade between the efficient producers and OECD countries is therefore mutually beneficial. Nevertheless, it is also mostly absent as a result of the import tariffs and production subsidies that protect domestic consumers and keep prices artificially high.

Liberalising the market will prove extremely difficult given the Gordian knot with agricultural markets that has since long been characterised by agricultural subsidies, high import tariffs, export subsidies and preferential treatment arrangements. A lack of progress on this front should be translated into a lowering of ambitions.
At the same time, according to Jacques Diouf, Director-General of FAO, bioenergy provides a chance to enhance growth in many of the world’s poorest countries by bringing about an agricultural renaissance and supplying modern energy to a third of the world’s population. This means not only improving export opportunities for developing countries to the industrialised world but, perhaps more importantly, helping them to use biomass to produce their own electricity.
Certification useful but cannot be trusted
Certification of biofuels is a useful tool for promoting sustainable practices, as reliable certification could provide a way to discriminate between the ‘good’ and the ‘bad’. There are, however, serious questions that must be raised about the effects and effectiveness of certification schemes.

First, enforcement and chain-of-custody control could prove to be an enormous challenge, as recent experiences with the certification of wood products has shown. Second, the effectiveness of certification could be undermined by displacement of biofuel products. As long as certification is not a multilateral requirement but conducted on a country by country basis, it will merely lead to a segmentation of the market, not a reduction of unsustainable practices. Third, without a uniform certification scheme exporters will face increasing costs and bureaucratic complexity. A final limitation is that certification schemes do not easily capture knock-on effects on agricultural markets.

Moreover, discrimination of trade on the basis of production methods is highly contentious and has been the nub of several precedent-setting trade disputes at the WTO. Misuse of certification schemes and sustainability standards regulations provide a continuing challenge to fair and indiscriminate trade. The question of if, and under what design criteria, trade rules should be allowed to exclude fuels that fail to meet minimum performance levels from mandatory schemes or preferential tax treatments should be addressed urgently. From an environmental perspective, only worldwide certification that is effectively enforced stands a chance of making a difference.

Selective certification gives the appearance of sustainable production to some while allowing the practice of unsustainable production to continue for others. Though theoretically possible, reliance on certification schemes to ensure the sustainable production of biofuels is not a realistic safeguard.

Policy implications for the near future
To harness the real potential of bio-energy and biofuels an important shift in current expectations and policies is necessary. Based on the findings in this paper, the following policy directions could be debated:
  • The strategic importance of and objectives for first generation biofuels need to be refocused and refined. International organisations such as the IEA, OECD, FAO and World Bank need to continue to adopt a soundly-based, common understanding of the limits of both traditional and second-generation biofuels in their analysis of energy futures.
  • Priority should be given to research into second-generation biofuels — not only their technologies, but also the assumptions regarding the cost and long-term availability of feedstocks. Domestic policy efforts should be redirected from (subsidy) instruments aimed at the deployment of biofuels in general back to the R&D and demonstration phase of advanced biofuel technologies.
  • Further research is needed to verify the environmental benefits for each biofuel production pathway, feedstock and location.
  • Current biofuel support policies place a significant bet on a single technology despite the existence of a wide variety of different fuels and power trains that have been posited as options for the future. National governments should cease to create new mandates for biofuels and investigate ways to phase them out, preferably by replacing them with technology-neutral policies such as a carbon tax. Such policies will more effectively stimulate regulatory and market incentives for efficient technologies.
  • Policy efforts to develop certification of biofuels must be unified. Only a global and coherent approach stands a chance of making a positive difference.
  • Certification of biofuels - and the design criteria to use them in combination with GHG emissions reduction regulations and preferential tax treatments — should be urgently placed on the WTO agenda. A special committee on trade and environment has been created to channel these discussions and could possibly be used to this end.
  • The WTO should also be used to step up efforts to lower trade barriers to biofuels imports, allowing developing countries that have ecological and climate systems more suited to biomass production to use their comparative advantage.
  • More work needs to be done to assess the relative importance of biofuels in developing countries as an export commodity and as a means to provide excess to modern, more efficient and less polluting energy sources. It may be that in many developing country circumstances it would be more productive to channel efforts to developing other forms of bioenergy than liquid fuels. More help should be provided to developing countries in identifying opportunities to use biofuels to enhance economic progress.

The report will be discussed during a meeting of the Roundtable on Sustainable Development, to be held today and tomorrow.

Richard Doornbosch and Ronald Steenblik, "Biofuels: Is the cure worse than the disease?", Round Table on Sustainable Development, Paris, 11-12 September 2007

Biopact: Sweden calls for international biofuels trade - August 11, 2007

Biopact: FAO chief calls for a 'Biopact' between the North and the South - August 15, 2007

Biopact: IEA chief economist: EU, US should scrap tariffs and subsidies, import biofuels from the South - March 06, 2007

Biopact: IEA study: large potential for biomass trade, under different scenarios - May 13, 2007

Biopact:Brazil initiates WTO case against U.S. ethanol and farm subsidies - August 20, 2007

Biopact: Subsidies for uncompetitive U.S. biofuels cost taxpayers billions - report - October 26, 2006

Biopact: A look at Africa's biofuels potential - July 30, 2006


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