Peter Hazell

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Bioenergy Opportunities and Challenges

• Peter Hazell
• Visiting Professor
• Centre for Environmental Policy
• Wye Campus

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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

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Bio-energy today
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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.

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Top producers of biofuels in 2005(million liters)
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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

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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??

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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?

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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

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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

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Net energy calculation for ethanol from maize in
US (USDA, 2002)
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Energy balance for one gallon of ethanol produced
from maize in the US (David Pimental at Cornell
University)
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Energy balances for other fuel typesSource
Worldwatch Institute, 2006
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• 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

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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

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• 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

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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

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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

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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 RD.
• 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?

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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?

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Issues for developing countries

• The 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 USs
  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?

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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 landsan
  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.

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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.