Biofuels

The Great Biofuel scam

Why biofuels won’t help climate change

Why biofuels won’t help climate change

By Nick Louth                                                Feb 2007

For all the excitement over the issue, biofuels are not going to be much help in reducing carbon emissions, or in slowing the consumption of oil reserves. In fact, the entire biofuel industry is already in deep trouble because of that old adversary: economics.

The excitement of biofuels is in theory understandable. A bus in Brazil, running on ethanol derived from locally-grown sugar cane, produces 90% less carbon dioxide than a petrol powered bus. The reason for that is the carbon absorbed from the atmosphere by the growing cane offsets almost all the carbon returned to the atmosphere by burning the ethanol to power the bus.

Brazilian buses, the perfect scenario

Better still, the bus would produce much less particle and sulphur dioxide pollution, even if running on a mix of petrol and ethanol. By using local crops a whole series of important developmental boxes can be ticked:  rural incomes boosted, technology transferred to less developed countries, a useful new export for poor agrarian countries and so on. Landlocked African countries, using the Brazilian experience, could cut their reliance on pricey foreign fuel by growing sugar cane for ethanol.

Holy grail scenario

This is the holy grail of biofuel. Growing fuels to substitute for increasingly scarce oil supplies, and cutting reliance on energy from unstable regions like the Middle East. We know it works, because until fuel prices crashed in the 1990s and made it uneconomic, Brazil was a huge producer of ethanol for domestic use.

So much for theory. The carbon gain isn’t automatic. It hinges on growing crops to make the fuel that would not otherwise be grown. If the crops are merely diverted from other uses then there is no new crop growth, and no offset to the carbon produced by the fuel burning.

Don’t use the rain forest

However, if new acreage of crops is grown this is most likely to be provided by the destruction of existing forest. “If even five per cent of biofuels are sourced from wiping out existing ancient forests, you’ve lost all your carbon gain,” said Doug Parr, chief UK scientist at Greenpeace.

It is far from certain that there is fallow, non-forested but productive land available on the scale required to make the carbon equation of biofuels stand up.

Yet there is no doubting the official enthusiasm for biofuel. The European Union this week set a target that by 2020 10% of all petrol and diesel used in vehicles should come from biofuels. From farmers to financiers, $2bn a year has been raised to plough into biofuel production.

Biofuels: one clean drop in an oily bucketful

The International Energy Agency says that demand for crops for biofuels will soar from 41.5m tones of oil equivalent in 2010 to 92.4m by 2030. With government subsidies it may climb faster to 146.7m tonnes by 2030, the IEA says.

Yet that is still a drop in a bucket compared to the 3,809m tonnes of oil consumed annually worldwide. Oil consumption is set to grow every year by 3.2-3.6% according to the IEA. A single year’s growth would thus eat up the entire 2030 cumulative biofuel target. Plainly, we are hardly going to see much difference in fuel demand or in reliance on the Middle East because of these alternative fuels.

Besides, the OECD reckons it would take 70% of Europe’s farmland devoted to biofuel crops to provide just 10% of road transport fuel.

“Biofuels are not any kind of answer to global warming,” said Parr.

Biofuel cultivation make most sense in the tropics where intense sunshine promotes rapid crop growth and carbon uptake, where labour is cheapest and where expensive (and oil-derived) fertilizers are not required. In temperate latitudes, though, the energy balance is reversed in crops like maize (corn), wheat and rapeseed.

Corn to ethanol: Just a waste of energy?

Temperate ethanol production actually wastes energy. David Pimentel, Professor of Ecology and Agriculture at Cornell University in New York showed that it took 6,597 kilocalories of non-renewable energy to produce a litre of ethanol from U.S.-grown corn. This ethanol contains only 5,130 kilocalories of energy per litre, essentially getting 22% less out than you put in.

Yet it is in just those traditional farming areas of Europe and North America where the enthusiasm, the spending and the government subsidy has been greatest. It is also there where protectionism has been greatest. The U.S. currently levies a 54 cents a gallon tariff on imports of Brazilian ethanol, the one biofuel which actually is efficient.

Not about saving the world, more about farm subsidies

It is hard not to come to the conclusion that the greatest beneficiary of biofuel will not be the world’s energy users, but the rich world’s grain farmers. 

With $600bn annually spent subsidising global agriculture, it is no surprise that farmers are standing in line to receive yet more handouts to support the markets for what they grow. In 2006, U.S. farmers received over $5bn in subsidies to grow biofuel.

In Europe the crops grown for electricity generation biofuels, such as elephant grass and short-rotation willow coppice, are on fresh land. This is a carbon gain, but at some subsidy cost. The land most often used is set-aside, the land European farmers are paid once not to farm under EU rules, and then paid a second time to farm, so long as they grow only non-food crops. It’s a classic EU subsidy tangle that we taxpayers are funding.

Now economics weighs in  

However, the soaring costs of the crops needed to produce biofuels is already threatening to make them uneconomic and ensure that they could not survive without subsidies. Prices of maize, wheat, palm oil, rapeseed (known as canola in the U.S.) and soy oil futures are all soaring, making the price of biofuels much more expensive than the fuels they are intended to displace in our fuel tanks.

Maize prices (corn in the U.S.) have reached a ten-year high of $4.31 a bushel in recent days, double the level of a year ago, while crude oil prices, having reached $76 a barrel in August are now back at levels of year ago, $60.

The rising cost of grain has been driven by an awful harvest of wheat this year in Australia, normally one of the world’s largest producers, plus increasing demand for biofuels. India, the world’s second largest wheat producer, has banned exports and released 365,000 tonnes from its strategic reserve to curb price rises.

Now beer drinkers need to worry

It isn’t just bread eaters who need to be concerned. Beer drinkers too are likely to face price increases. The price of barley, an important constituent in beer production, has soared 86% in the last year because farmers are switching away from the crop to grow biofuel crops like rapeseed instead. Lager-maker Heineken has already warned that this is causing problems. Once again, note what is happening: the acreage devoted to biofuels is coming from switching crops, not growing anything new. There is no carbon gain.  

Technology and mix problems

Biofuels face major technical and market problems too. Spanish engineering group Abengoa has threatened to suspend output at its largest bioethanol plant, which uses wheat to make a biofuel for petrol. But in Spain most drivers use diesel and ethanol can only be blended with petrol. The 200,000 tonne-per-year Dunkirk biofuel refinery planned by Neste of Finland and Total of France is jeopardised by technical problems because of the higher than expected temperatures required to turn vegetable oils into hydrocarbons.  

Taxation: Nein!

In Germany, demand for biodiesel has fallen 30% this year after the Federal government put a nine euro cent tax on each litre, with plans to escalate this to the 45 cent level on existing diesel by 2012.

Achim Steiner, head of the UN Environment Programme said in a recent article: “The market acceptance of biofuels will accelerate if the costs of climate change and pollution are captured in the price of energy, an omission that unfairly makes conventional fuels look more financially attractive than they really are.”

He’s right that conventional fuels don’t capture their climate change and pollution cost, but wrong to believe that biofuels always do. Biofuels do not provide a pure carbon offset unless the crops would not otherwise be grown, their production is often highly energy intensive, and without a big rise in the price of oil they will continue to cost more to produce than the fuel they are supposed to replace.

A role to play, but lost in politics

Biofuels could have a role to play if they were grown only in the tropics, but the western world’s farmers do not want to lose out on the subsidies. And to keep biofuels competitive will cost a lot more in taxpayer subsidies. Are we really prepared to do this when they aren’t going to help us win the war on climate change?

In the end, if we are to tackle climate change we need to take a more fundamental look at the amount we drive and fly, how we heat our homes and the food and consumers goods we buy. It’s never going to be fixed by merely changing the fuel we put in the tank.

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