Summary Remarks

1

• Summary Remarks
• Economics and Policy Session
• Biofuels for Aviation Summit
• Moderator Harry S. Baumes, Ph. D.
• Associate Director
• Office of Energy Policy and New Uses
• September 2, 2009

2

• Carbon and Greenhouse Gases
• Brent Gloy, Ph. D.
• Associate Professor, Cornell University
• Zia Haq
• Senior Analyst, Dept. of Energy

• Sustainability and Greenhouse Gases
  
  
• William Meyers, Ph. D.
• Professor, University of Missouri
• Co-Director of FAPRI-MU
• Neilsen Conklin, Ph.D.
• President, Farm Foundation
• Gregory Graff, P.h. D.
• Assistant Professor, Colorado State University

• Food versus Fuel and Greenhouse Gases
• Joe Outlaw, Ph. D.
• Professor, Texas AM University
• Wally Tyner, Ph. D.
• Professor,Purdue University
• F. Larry Leistritz, P.h. D.
• Distinguished Professor, North Dakota State
  University

3

• Questions
• Carbon and Greenhouse Gases
• Will current legislation on controlling
  carbon/greenhouse gases be effective? How will it
  impact the biofuels industry?
• What are the economic factors determining land
  use and how are they changing?
• Sustainability
• What are the non technical factors to be
  considered in deciding between oil, starch or
  cellulose based systems for aviation fuels
  production?
• What kinds of production, delivery and processing
  systems are sustainable?
• How do economists define sustainability?
• Food versus Fuel
• What are the food/fuel issues for aviation
  biofuel production?
• What government policies (federal and state) can
  accelerate biofuel for aviation production and
  combat food/fuel issues?
• How can the Air Force contribute to developments
  in technology, organization and policy that would
  accelerate aviation biofuels development?

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Carbon and Greenhouse Gases

• Contrast Past Growth Biofuels with Second
  Generations Feedstocks/Biofuels (alternative
  fuels)
• Producers of Feedstocks and Biofuels must make
  profit or be incentivized to produce
• First Generation Fuels and Feedstocks
• Economics supported growth cheap corn and high
  energy costs
• Proven Technology knew how to make ethanol and
  biodiesel on commercial scale
• Policy Supported Growth EPACT 2005 and EISA
  2007
• Financial Sector willing to provide capital for
  investment
• Second Generation Cellulosic
• Economic environment not as favorable lower
  energy cost and higher commodity prices,
  fluctuating commodity prices, financial crisis
  and recession
• Technology is not proven, not tested on
  commercial scale
• Policy is uncertain or wavering, GHG emissions
  and climate concerns
• Financial sector not willing to provide capital
  in the current environment

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Carbon and Greenhouse Gases

• Carbon and Greenhouse Gases
• Too narrow scope there are at least 7 GHG,
  reducing one may create problems with others
• Formally we are trying to incorporate
  externalities that were not or may not have been
  considered in the decision making process
• Identify both environmental costs and benefits to
  produce feedstocks and biofuels, and markets are
  either thin or do not exist for these
  externalities
• Life Cycle Analysis, Indirect Land Use, and GHG
• LCA results sensitive to assumptions and
  methodology
• Technology Change
• Affects feedstock production, conversion and
  economics of market
• Disemenation and adoption cultural practices,
  conversion, supply chain and end use markets

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Sustainability

• Economists Like to Allocate Resources to
  Alternative Uses
• Market efficient allocation system markets can
  (given sufficient time) determine feedstocks and
  alternative fuels (regional differences likely).
  Make a product for a cost and sell that product
  for a price
• Environmental goods and services not well
  defined and markets not well developed or
  non-existent
• Need to internalize all benefits/costs to make
  investment decision
• Manage Risk role for government in these
  enviromental goods and services markets?
• Questions to consider with regard to
  sustainability RISK MGMT
• What is it we want to sustain?
• How long do we want to sustain it?
• With what level of certainty do we want to
  sustain it?

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Sustainability

• Integrated Systems Approach Required
• Renewable Energy, Climate and Sustainability all
  spoken in the same sentence need to consider
  jointly or simultaneously
• Regionally different or multiple feedstocks
  perhaps mulitple alternative fuels (demand or end
  use considerations)

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Food versus Fuel

• Hot Spot or Hot Topic There will be others
• Land used to produce biomass that can be used
  for transportation fuel production. EISA places
  constraints on that production land that can be
  used and meeting GHG threshholds.
• Land use need to understand international
  adjustment
• Third general feedstock/fuel Algae needs water
  could be a hot spot issue
• Food versus fuel issues not well understood by
  most. USDA invested resources to try and address
  consumers concerns and lack of understanding

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Food versus Fuel

• Competition for land
• Traditional use for crop production and
  transportation fuels production
• NEW USES Biomass required for heat and power and
  land being used to create carbon offsets
• Second and third generation fuels expected to
  have low food price impact
• Policies need to accelerate biofuels for aviation
  industry
• Technology government can help by funding
  research and development
• Market Prices are volatile policy can be used
  to stabilize prices or reduce fluctuations
• Government policy supporting or impacting
  industry uncertainty needs to be minimized

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Conclusions

• Outreach and Education
• Consumers need to understand the complexities of
  food (commodities), biofuels production, land use
  and economy interactions
• Air Force might consider
• Funding a second generation facility to supply
  jet biofuel
• Vertical integration approach feedstock
  production to end use by air force and commercial
  aviation industry
• New models in approach partnerships with private
  sector, local municipalities/farmers/companies

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THANK YOU!
Contact Information Harry S. Baumes hbaumes_at_oce.u
sda.gov 202-401-0497