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Bank Sarasin Assesses Biofuels Sustainability

4 August 2006

Basel-based Bank Sarasin has issued a report—Biofuels: transporting us to a fossil-free future?—that briefly assesses the sustainability of biofuels from environmental and investment perspectives.

The Bank concludes that until new technology enables second-generation biofuels derived from waste biomass rather than edible crops, the limit for environmentally and socially responsible use of current biofuels is roughly 5% of current gasoline and diesel consumption in the US and the EU.

The assessment factors in the environmental and social risks of current-generation biofuels such as the negative environmental impact of monocultures, threat of accelerated clearing of the rainforest and competition between energy and food crops as well as the opportunities.

As a result, despite the current heat in the market, the Bank is less than enthusiastic from an investment point of view about the prospects for current ethanol and biodiesel fuels, despite the legal targets for biofuel use being set.

For some time now we have been seeing the share prices of companies active in the biofuel industry rising sharply in response to investors’ high expectations. We are less excited about the future of this industry, because its expansion will quickly come up against certain natural constraints.

—Matthias Fawer-Wasser, sustainability analyst, Bank Sarasin

We advise a more cautious approach, as growth could quickly come up against natural barriers in the short term at least. This is mainly due to the limited availability of raw materials (arable land, competition for use by the food & beveragae industry), but also due to the limited saleability of by-products. In all the regions mentioned above, it is actuallyt unclear how much land is available for growing energy crops without having a negative impact on the needs of the food industry, animal feed industry, fallow land, soil quality and biodiversity.

—“Biofuels – transporting us to a fossil-free future?”

The Bank is much more enthusiastic about the prospects for cellulosic ethanol and second-generation biofuels.

The report outlines the Bank’s criteria for sustainable investments in biofuels:

  • Fuel type. The Bank prefers ethanol to biodiesel, because it can be made from a broader range of raw materials. Cellulosic ethanol is a preferred fuel because of the ability to use a variety of waste feedstocks.

    The Bank is also interested in Biomass-to-Liquids production and in biogas (methane) production from waste.

    The development of this next generation of biofuels is still in its infancy, but in the long term they promise much greater potential than conventional plant oils and bioethanol.

  • Feedstocks. The Bank gives preference to companies procuring their feedstocks locally with short transportation distances. Long-term contacts are better than spot purchases.

    Companies that procure feedstock or fuels form developing countries should have a catalog of environmental and social criteria that apply to the cultivation of the energy crop.

    The most suitable raw materials are optimized energy crops with additional environmental benefits—sorghum for ethanol or jatropha for biodiesel, for example.

The report rates the sustainability of 16 biofuels companies and finds only 10 of them as qualifying for Sarasin’s sustainable investment universe.

Sarasin’s Sustainability Rating for 16 Biofuels Companies
Sustainable Not Sustainable
  • Abengoa
  • Biofuels Corp
  • D1 Oils
  • EOP Biodiesel
  • Pacific Ethanol
  • Renova Energy
  • Xethanol
  • Neste Oil
  • Novozymes
  • SunOpta
  • Archer Daniels Midland
  • Cosan
  • Agrana
  • Bunge
  • Südzucker

The report is available from Bank Sarasin for €50.

August 4, 2006 in Biodiesel, Biomass-to-Liquids (BTL), Biomethane, Cellulosic ethanol, Ethanol, Sustainability | Permalink | Comments (7) | TrackBack (0)

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Comments

I believe in synthetic methane from biomass. I think we can use it for buildings, homes and transportaion as a CO2 neutral energy source in the future.

The ease of making ethanol vs. biodiesel depends on the process.  Fermentation makes ethanol more easily (unless you ferment to methanol and make dimethyl ether for diesel fuel instead), but any non-biological process which starts with gasification could build up almost any desired product (alcohols or medium-chain alkanes) about as easily as any other.

I don't share the enthusiasm for bio-methane.  It's not as clean or flexible as electricity for fixed uses, and it's not as easily stored and used as liquids for mobile uses.  I think charcoal for direct-carbon fuel cells is a better scheme for biomass than methane.

The list of sustainable and non-sustainable companies is good, but how are consumers to know which ones are supplying which supermarkets, or petrol companies like BP, Shell, Exon etc?

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