Biofuels

Minister Ryan has mandated that 4% of transport fuels be renewable from July 2010 onwards. The Irish Times covers the story three times (1, 2, 3).

There are a number of things that strike me. The Department’s press release states that “[t]he obligation will be on the companies in question and at no cost to the taxpayer”. True. The cost will be to the traveller.

The opposition and the farmers quickly noted that biofuels would be mostly imported and called for support for domestic production. That could well violate EU and WTO rules. It would pose a cost to the taxpayer, and make biofuels even more expensive.

The Irish biofuels target of 4% by 2010 anticipates the EU biofuels target of 10% by 2020. It is not clear whether Ireland is engaged in prudent preparation for the EU target, or whether it is marching ahead of the music.

The biofuels target is justified on two grounds. The first is climate change. This is doubtful. A carbon tax would appropriately incentivise biofuels. The biofuels target is double regulation from a climate perspective. It is also not guaranteed that biofuels reduce greenhouse gas emissions. The rules state that biofuel emissions should be at least 35% below the emissions of the petrol or diesel replaced. This 35% per litre of fuel. As biofuels have a lower energy density, the saving per kilometre driven is less than the nominal 35%. More importantly, the nominal emissions from biofuels explicity exclude the nitrous oxide emissions from soils. N2O may turn the climate balance in favour of fossil fuels.

Biofuels may not be produced from crops grown on land that was converted from virgin forests. That rule is pointless. If history is any guide, the Brazilians will put corn on soya-land, put soya on pasture land, and chop down the trees to make way for the cows. (This is because of relative transport costs, not because of EU rules.) The “Sustainability Criteria” ignore such second- and third-order implications.

Security of supply is the second justification for the biofuels standard.  Diversification does not necessarily bring security. Four percent is small, and most of the biofuels will blended into petrol and diesel. A shortage of oil would increase the costs of agricultural production, and would have everyone scrambling for biofuels. The correlation between the price of oil and the price of biofuels is so high that diversification brings few benefits.

There is great hope for biofuels, however. We have spent the last 10,000 years perfecting plants for food. We have ignored plants for energy. We can therefore expect rapid progress. The promises of second- and third-generation biofuels are astounding — but not ready for the market yet. The current regulation protects an infant industry at the risk of locking it into outdated technologies.

50 replies on “Biofuels”

I know very little on this subject, but am I right to think that biofuels are/will be grown from genetically modified crops? I think Irish Greens are against GM. Will Mr Ryan force the Irish to buy the more expensive organic biofuel variety?

@Ahura
There is no explicit mention of GM in the current regulation. The normal rules on agricultural produce apply, though, and these favour non-GM biofuels.

That said, there is not much GM in either first- or second-generation biofuels. First-generation is like burning wood (biomass) or pressing oil from seeds (biofuels). Second-generation is about smarter processing of plant material.

GM will be a big issue for third-generation biofuels, 10-20 years from now.

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@Richard Tol

“The opposition and the farmers quickly noted that biofuels would be mostly imported”

According to the Minister, 30% of biofuels are produced in Ireland and that figure is constantly rising. If true, that is certainly better than the situation regarding fossil fuels, virtually none of which are produced in Ireland.

I have 2 questions:

(1) What price would oil have to be before biofuels produced in Ireland (repeat: in Ireland, not in Iowa) were a cheaper alternative to imported fossil fuels? Are we at that stage now, or would oil have to go higher?

(2) What proportion of Ireland’s land area would have to be devoted to biofuels to completely replace imported fossil fuels (assuming it was technically possible and assuming it was economic)?

Looked at globally, the move to biofuels can only bring benefit to Ireland, at least in relative terms as compared with the high-population density countries of western Europe. The more the developed world relies on land to produce wealth, the better for Ireland, at least in relative terms. Ditto with wind and wave energy. I’m highly sceptical of global warming and I have no idea if biofuels, wind and wave energy are technically sensible. All I say is that, if the world as a whole does move to producing a large proportion of its energy from biofuels, wind and wave, then Ireland will do very well out of it, given our abundance of land, wind and sea.

@JohntheOptimist

The 30% domestic production is for today’s consumption, which is tiny.

In the US, biofuels start breaking into the market at $85 per barrel.

I don’t think one should look at national areas. If all suitable land is used to grow biofuels (biomass), global production would be some 850 EJ (2100 EJ). Global energy use was 400 EJ/year in 2000.

Ireland does not have a competitive advantage in land-based energy crops. These are low value-added crops, that need large areas and heavy mechanisation.

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@ Johntheoptimist

1) As far as I know when oil went over $100 last year there was a lot more mixing of ethanol into gasoline in the US. The ethanol was also handy because it has a high octane rating. In any case though, high oil prices seem to cause high biofuels prices (as Richard noted above). So the savings aren’t really all that great, ethanol and biodiesel mix well enough into gasoline and diesel so that the substitution effect links the prices a lot. So even when biofuels become competitive the market tends to bring their prices up.

2) Very difficult question, doubt you’ll get any precise answer. In any case though it’s not a useful question. The idea of self-sufficiency is a bit 1950’s tbh. Even then, if we grew more biofuels we’d have to import more food, so from a self-sufficiency point-of-view it’s not great anyway.

Biofuels are mostly an attempt to hide subsidies to the agri sector. The US imposes tariffs on Brazilians cane ethanol to protect Iowa corn growers. What has WTO done about that?

As for biofuel production in Ireland, there is an interesting piece here where a waste stream (farm manure) is turned into a biogas fuel source for an ethanol plant the residue of which becomes… animal feed.

That said, consumers lose on the double as ethanol mandates don’t produce price differentiation to make up for the fact that cars don’t get the same mileage on ethanol-petrol mixes as they do on undiluted petrol.

@Richard

I think that the hopeful concluding note is overly optimisitic: “We have spent the last 10,000 years perfecting plants for food. We have ignored plants for energy. We can therefore expect rapid progress.” The primary function of food is energy provision. All foods are bio-fuels that simply rely on a different combustion mechanism. So we have been perfecting energy production for 10,000 years. Therefore, rapid progress can hardly be expected.

Thanks Richard,

That’s a bit disappointing. First generation sounds like old school caveman techniques. Second generation is fair enough, though third generation is where we might strike oil (couldn’t resist). Like nanotechnology, biofuel science seems to be less advanced than I’d like to think. I’ll blame tv programmes for this 🙂
Would GM be required for biofuels to rival fossil fuel? In theory, is it possible to modify crops enough to produce an alternative? Or do you see it as forming part of the solution (i.e. regardless of developments, we don’t have the land). Aside from Cold Fusion and George Bush II’s explosive hydrogen car idea, are there any other candidates to service our energy needs?

@Alan
The human body uses energy in a different way than an engine or turbine.

@Ahura
They can now vary the lignin to cellulose ratio at will. It’s harder to make a viable organism that is mostly lignin (good for burning) or mostly cellulose (good for chemical conversion).

There’s more progress with algae. Easier to manipulate as they don’t have to be able to stand up by themselves. Algae would be grown at sea and would hardly compete with food production.

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@MarcusOC

Thanks for that. I wasn’t suggesting that we try to become self-sufficient in fuels. I was just trying to get an idea of how much land it would take to produce that amount of fuel. Before Richard’s answer, I had no idea whether the total land area of Ireland could produce 1% or 1,000% of our fuel needs.

@Richard,
My point is that if radically improved concentrations of carbohydrates were possible for biofuels in future years then why over the course of 10,000 years have we not discovered ‘super-foods’ with radically greater carbohydrate concentrations amenable to human/animal consumption? Your claim that “we have ignored plants for energy” attempts to seperate two issues that are intrinsically connected at a molecular level.

The key problem with biofuels is the threat posed to food production levels. Other issues such as security of supply and climate targets, although important, are nowhere near as important as the world’s food supply.

Q. Why do we want (need) biofuels at all? For personal transport? Lunacy! For agricultural use? Yep! For commercial transport? Maybe.

Its not the COST of the energy, its the ENERGY COST of the energy that’s critical. Very hard to get this through some frontal bones.

B Peter

@Alan
You may want to get a thermometre and apply first to yourself and then to your car (with the engine running) to obtain first-hand experiemental evidence that your body does not get its energy by combustion. You could also try to sustain yourself on a diet of petrol, but I would caution against that.

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@ Richard Tol

Really interesting analysis. The conclusion “we have spent the last 10,000 years perfecting plants for food. We have ignored plants for energy. We can therefore expect rapid progress” is certaily food for thought. But, would this enterprise not be easier to achieve through co-ordinated support by the state. I do not mean ‘protection’ as such but facilitating innovation and productive-export based networks. Ecological support almost?

Just a query, will this mean older cars will not be able to run on this new mix of petrol?

Will we have to change our older cars to buy newer models? I would imagine older engines will work o.k., however I am suspicious.

What if the 4% blend was increased to 8% or 15% over the next 3 years? Would we then be forced to buy newer cars?

@Aidan
I agree. Research on biofuels should be supported. This is actually an area where Ireland may have an advantage, given the experience with food processing, agri- and biotechnology.

A mandated fuel share does not advance R&D. There is a guaranteed market, regardless of the price and quality of the product. The guaranteed market will grow rapidly (4% in 2010, 10% in 2020) so that companies will have to focus on scaling up the supply. There is a market for any fool with sustainability certificate.

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@Richard
I’ll must correct your point that “your body does not get its energy by combustion”. It does exactly that. See
1) “The combustion of food materials” on Brittanica:
http://www.britannica.com/EBchecked/topic/377325/metabolism/52081/The-combustion-of-food-materials
2) “The Combustion of Carbohydrates in Man after Ingestion of Common Foods” http://jn.nutrition.org/cgi/content/abstract/19/5/423
3) “Oxygen Required for Metabolism” http://hyperphysics.phy-astr.gsu.edu/Hbase/biology/metab.html

The thermometer comment was proof of this. Mass biofuel production should cease until it can be shown it does not provide a serious threat to world food supplies because they are an infinitely more important natural resource.

The Economist had an interesting debate recently on biofuels vs. electric cars and one of the points made was that it was much cheaper to move electrons than to move oil, LNG etc. Thus, fundamentally, it made sense to convert energy to electricity at as primary a point as the economies of scale would justify.

Given this, and given the fact that we already have reliable and diverse technologies in place for generating electricity (with wood, wind, nuclear, oil – whatever you fancy), shouldn’t the thrust of R & D policy support be in overcoming the obvious market failures which currently tie us to (fundamentally inefficient) combustion engine technology, in favour of electric? I.e. build networks of car power stations, invest in better electric motors etc.

After all, electric cars require a radical infrastructure change, and dividing policy support between these competing technologies will weaken our overall impact, no?

@Graham
There are all sorts of issues with electric cars, but it surely is much easier to turn biomass into electricity than it is to turn biomass into biofuels. The energy balance is much better too, as liquidifaction takes a lot of energy.

Richard,

A question: are we trapped by a flawed EU policy?

The EU targets on biofuels were devised some years before the food-biofuels problem came into focus, attracting much international publicity and analysis and soul searching among environmental NGOs about a strategy they had previously supported so passionately. Apart from a few wish-list additions about ensuring that imported biofuels are derived from ‘sustainable’ sources – which can mean anything you want it to mean, as pointed out in your analysis – the EU strategy remains unchanged. Worth noting too that originally, our own government target for biofuels penetration was meant to be 5.75% by 2010; now pared back to 4%. As the IT tells us, some 80- 90% of this fuel will be imported, most likely from Brazil.

Our national biofuels strategy appears to be something of a glorious failure. The target in 2006 was to achieve 2% biofuels penetration by 2008. To that end, Budget 2006 introduced a five year scheme of targeted excise relief. The renewables research budget was increased, overall, from €7m to €13.2m, as part of the €65m budget package to encourage biofuels production, CHPs and biomass development. Granted, most of the research funding increase was for wave –energy projects, but some was specifically directed at biofuels research also. Mary Coughlan, then Minister for Agriculture, claimed that she was actively lobbying at EU level to have the seriously inadequate €45 per hectare grant to farmers for biofuels crop cultivation increased substantially.

They’re stuck with the €45 per hectare subsidy, but the government now supports willow and miscanthus planting up to 50% of the cost per hectare or €1,450, according to last autumn’s public consultation document on the biofuels obligation. VAT rates for seeds and bulbs for biofuels crops were cut from 21% to 13.5% in Budget 2007. A synopsis of the supports etc. and analysis of the problems is contained in the consultation document at
http://www.dcenr.gov.ie/NR/rdonlyres/EC1AD24F-304F-4894-85C1-865715A6DE70/0/BiofuelsObligationScheme.pdf
if other readers may care to look. Pretty depressing reading it makes too!

And after all this subsidising and cross-subsidising, so far as I know, actual biofuels penetration reached 0.5% by 2007, about a quarter of the target for 2008. I also read somewhere that if Ireland was to grow enough biofuel crops to meet the 2020 10% target, it would mean turning over 20% of existing tillage land to their production.

So how realistic is the 4% target for 2010? And, is it not the case that we will likely be importing most, if not all, of the biofuels required to meet committed targets even by 2020?

I guess it makes sense that we have to be in at the beginning, even if current technologies are crude, if we’re going to take advantage of newer technologies for biofuels production when these become available in the middle of the next decade or so. But it seems to me that the case has not been set out very convincingly so far.

@Veronica
It’s hard to change national policy, harder to change EU policy. The pro-biofuels lobby is smelling money and has its act together. There is no anti-biofuels lobby, as the cost of this policy is so diffuse.

@Richard,

“Smelling money” indeed! The question is, whose money? All you need to do these days is mention ‘climate change’, ‘green technology’ and the ‘future of our children’s children’ in the same breath and the coffers magically open. Always knew I was in the wrong business….

@ Graham

Yes! You are 100% right.

The EU realised this when negotiating the cc and energy package and please note:

the EU/Ireland’s 2020 target refers to “renewables in transport” not biofuels as richard erroneously claims above.

The EU’s target is technologically agnostic, though a significant proportion will very likely come from biofuels it is true…

@jc
If we believe the government, we’ll have 10% all-electric vehicles and 40% renewable electricity in 2020. This makes 4% renewable electricity in transport. That would leave 6% for biofuels.

Chances are that we’ll make neither the 40% renewable power nor the 10% electric cars.

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@Richard
Leaving fatuous and disrespectful remarks aside; can you seriously condone the promotion of biofuels research in light of the damage it may cause to food supplies in the thirld world? Improved energy yields will undoubtedly exacerbate this problem.

Last year there were food riots in Morocco, Mexico, Mauritania, Senegal and Uzbekistan and Yemen among other countries. Jean Ziegler, Special UN Rapporteur for the Right to Food, called for a 5 year moratorium on biofuel production and I’m inclined to agree. A moratorium on research in the field would also serve to protect the interests of the worlds most vulnerable citizens.

“4% of transport fuels”

What is the fixation on transport? I would think modern educated people would look at a country, say Ireland, and think how many Joules, BTUs, Watts or whatever unit you like are being consumed in total. Then if you buy into the bio fuels argument you can figure out ways to increase the proportion of energy consumed in the form of bio fuels.

Perhaps transport is the least appropriate use of bio fuel, as opposed to home heating or electricity production. Maybe the best use of plant matter is as insulation for years, as opposed to burning it once. Or perhaps the best use of food is eating it? I’ve tried that myself on many occasions, it’s quite good prepared properly.

@Alan
First-generation biofuel is made from edible material. It directly competes with food. Second-generation biofuel is made from non-edible material. It competes with food on input markets (land, labour, fertilizers) and indirectly on other markets (the source material is now used as fertilizer or as an input to a range of industrial processes). Third-generation biofuel hardly competes with food production as it uses new plants and new areas.

This is one of the reason why I argue that it would be better to go slow on biofuel use (and work hard on biofuel R&D).

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@Richard,

In July last Exxon Mobil announced a $600m research programme partnership with Synthetic Genomics to develop next generation biofuels from photosynthetic algae. That’s $120m per annum for the next five years with the world’s leading scientists in this area on board. I assume that what you mean by biofuel R&D here is some complementary offshoots to what the big players are engaged in, since we have only a tiny fraction of the resources available to them to devote to research projects?

@Veronica

Sure. ExxonMobil knows that they will run out of conventional oil one day, and they have every intention of continuing to be the largest private company in the world. That’s why they put up 100s of millions per year for R&D — the cooperation with SG is just one of their programmes.

Irish researchers will be involved if and only if they are world class on the Exxon Mobil scale of world class (rather than on the SFI scale of world class). It’s a good test of the true standing of our biotechnologists and assorted scientists.

@ Richard

Agreed (although I would be more optamistic about targets being met).

Our biofuels target is likely between 6-7% for 2020 which is not a big deal.

Some of that may come from second-gen.

Considering that in transport we are 98ish % dependent on imported fossil the last time I looked, I think this is reasonable.

http://www.ukerc.ac.uk/support/Global%20Oil%20Depletion

That’s not quite true. In practice, if everything goes badly wrong (for example, some chain of geopolitical events disrupts the global supply of oil and gas at the same time and for a protracted period) then it is likely that the flow of energy will become a political, rather than an economic matter. At that stage, it won’t matter what the ‘official’ or ‘market’ price of the energy is, what will matter is whether you have access to the rationed supplies. If you have the energy supply within your own territory, that means that you can guarantee access to it. Otherwise you are dependent on the kindness of strangers.

I am not saying this is a bad thing or a good thing, just pointing out that energy security is not so much an economic concept as a political one.

@Richard

“A carbon tax would appropriately incentivise biofuels.”
This is only the case if
a) the tax is high enough to achieve the target GHG atmospheric concentration
b) the tax applies globally (or tariffs are applied)
c) the tax applies to all net GHG emissions including land use emissions

This biofuels promotion measure is an addition to a proposed C tax which will not meet any of the above conditions. In fact it will incentivise displacement of C emissions from fossil sources to land use sources. Therefore it will risk increasing GHG concentrations.

http://www.sciencemag.org/cgi/content/abstract/324/5931/1183

@Laks

No.No.No.

a) A carbon tax would appropriately incentivise biofuels. The tax may be inappropriate, but that is a different story.

b) A carbon tax applies to legally defined emissions. If biofuels from sugarcane in Brazil is sold in Ireland but burned in the UK, then the physical uptake of carbon in Brazil is legally placed in Ireland as is the emission in the UK.

c) A carbon tax applies to legally defined emissions. The carbon tax appropriately incentivises biofuels within the legal framework. The legal accounting for emissions is inappropriate (rather than the tax or its impact on biofuels).

In practice, in a serious fuel crisis, we would be dependent on the kindness of strangers, more than on our own resources, you are correct. Still, the higher our energy security as a country, the more energy secure the EU as a whole will be.

It would be interesting as an exercise to figure out what we would do if we had to immediately cut consumption by 40 percent or more, with the prospect of this being a long term issue. What would we prioritize? Really an academic exercise rather than a practical one, but thinking about it highlights how dependent we are on energy and hydrocarbons in particular. (I would say that we would not be prioritizing emergency vehicles, despite the obvious appeal of this idea. We would be prioritizing the continuity of the food production and food distribution network.)

@Richard

I assumed that when an economist referred to appropriately incentivising something, you meant incentivising the appropriate level of use. If you meant something else you might explain? You will appreciate that ‘appropriately incentivising an inappropriate level of biofuel use’ is a concept the meaning of which is likely to prove elusive for some readers.

I’m sure you appreciate that legal definitions of emissions (which are after all the product of political negotiations) are not our best understanding of what effects climate. Scientific definitions represent our best understanding of what matters. I assumed because of your correct concern for deforestation from displaced production that you were concerned about impact on the planet. I’m now confused as to what you think. Your tendency towards declarations of what seems to you to be objective reality rather than explanations of what you’re trying to say doesn’t really help discussion.

“If biofuels from sugarcane in Brazil is sold in Ireland but burned in the UK, then the physical uptake of carbon in Brazil is legally placed in Ireland as is the emission in the UK.”

I’m lost as to what you’re trying to say here. Under Kyoto accounting rules Brazil doesn’t have to meet any emission or sequestration targets. Under Kyoto rules biofuel combustion emissions are carbon-neutral no matter where they occur. Any reduction in fossil fuel use in an Annex 1 country is counted. Any displacement to a non-Annex 1 country is disregarded.

@laks
Sorry for being unclear.

In your initial intervention, you seem to want to use biofuels to repair errors in targets and accounting standards. That is silly. Biofuels should be used within the agreed framework of targets and accounting. Other instruments should be used to fix targets and accounting.

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@richard
“you seem to want to use biofuels to repair errors in targets and accounting standards.”

But of course I didn’t write that. Maybe you’re desperate for “silly” biofuels enthusiasts to disagree with you so you can argue with them, with the result that you’re misreading comments.

@Laks
No offense meant.

You wrote
“A carbon tax would [only] appropriately incentivise biofuel if […] the tax is high enough to achieve the target GHG atmospheric concentration”

To me, this means that you would want to put additional incentives on biofuels to make up for the shortfall in emission reduction elsewhere.

I would think that cost-effectiveness is a necessary condition for efficiency, so I’d first equalise prices at the margin and then put that price at the Pigou level. The reverse order is very costly.

On your second and third point, I clearly argued from the perspective of an Irish decision maker, who will have to work within their own jurisdiction given the international accounting rules.

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@Richard
“On your second and third point, I clearly argued from the perspective of an Irish decision maker, who will have to work within their own jurisdiction given the international accounting rules.”

Ah but the Irish decision maker in question is Eamon Ryan who has never claimed that his goal is to maximise Ireland’s economic benefit within the international accounting rules without taking account of the actual impact on the climate. Quite the reverse in fact.

And by the way, the sixth paragraph of your original post contradicts your claimed perspective.

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