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Study for OECD Highly Critical of Prospects for Current Biofuels and Government Policies

11 September 2007

Oecd2
Full lifecycle environmental impact of fuels based on UBP (UmweltBelastungsPunkte) indicator from The Swiss Institute. The UBP represents environmental impact on human health, ecosystems and the depletion of natural resources. Click to enlarge.

A study, prepared for discussion by the OECD (Organization for Economic Co-operation and Development) Roundtable on Sustainable Development, concludes that the potential of current biofuel technologies—ethanol and biodiesel—to deliver a major contribution to the energy demands of the transport sector without compromising food prices and the environment is very limited.

The report—Biofuels: Is the Cure Worse Than the Disease—suggests that although second-generation technologies are promising, they may never be viable; that the economic outlook for biofuels is “fragile”; and that government policies are “inefficient”, "not cost-effective” and are setting ambitious market shares without an in-depth understanding of a sustainable production level and from where these biofuels could be supplied.

The report, which was leaked prior to public release, is to be discussed today and tomorrow by ministers and representatives meeting in Paris.

The report notes that global production of biofuels amounted to 0.8 EJ in 2005, or roughly 1% of total road transport fuel consumption. Technically, up to 20 EJ from conventional ethanol and biodiesel, or 11% of total demand for liquid fuels in the transport sector, has been judged possible by 2050, with another 12% potentially coming from second-generation biofuel technologies.

Biofuels could thus theoretically achieve a market share of nearly a quarter of the liquid fuels market in 2050 (11% from conventional and 12% from advanced technologies). However, it seems unlikely this potential will be realised, as concerns over food prices and environmental degradation caused by first generation technologies suggest that the potential of conventional technologies might be closer to current production levels. Furthermore, commercialisation of second-generation technologies is still a (distant) possibility with only several pilot and demonstration plants currently being built.

But this is only part of the reason. The unfavourable economics of biofuels also suggests that the market share of nearly a quarter is unlikely to be realised. More realistic is the roughly 13% market share in 2050 calculated by the IEA (2006a)—an estimate that takes relative fossil fuel prices into account. If that target were to be met, the avoided CO2 reduction from increased biofuels would be almost 1.8 Gt, or 3% of energy-related CO2 emissions in a business-as-usual scenario. Given the projected growth in demand for transportation fuels, this will not reduce overall petroleum fuel consumption below current levels but only moderate the growth in demand.

Oecd1
Subsidies (in red) at different points of the biofuel supply chain. Click to enlarge.

Furthermore, the study concludes, this 3% reduction would come a large cost in the form of required government subsidies.

The cost of obtaining a unit of CO2-equivalent reduction through subsidies to biofuels is extremely high, well over $500 per tonne of CO2-equivalent avoided for corn-based ethanol in the United States, for example, with other researched countries not performing much better. The score is also not very favourable in terms of displacing fossil fuels. In most cases the use of biofuels roughly doubles the cost of transportation energy for consumers and taxpayers together.

The report suggests the following policy directions for discussion:

  • The strategic importance of and objectives for first generation biofuels need to be refocused and refined. International organizations such as the IEA, OECD, FAO and World Bank need to continue to adopt a soundly-based, common understanding of the limits of both traditional and second-generation biofuels in their analysis of energy futures.

  • Priority should be given to research into second-generation biofuels— not only technologies, but also the assumptions regarding the cost and long-term availability of their feedstocks. Domestic policy efforts should be redirected from (subsidy) instruments aimed at the deployment of biofuels in general back to the R&D and demonstration phase of advanced biofuel technologies.

  • Further research is needed to verify the environmental benefits for each biofuel production pathway, feedstock and location.

  • National governments should cease to create new mandates for biofuels and investigate ways to phase them out, preferably by replacing them with technology-neutral policies such as a carbon tax. Such policies will more effectively stimulate regulatory and market incentives for efficient technologies.

  • Policy efforts to develop certification of biofuels must be unified. Only a global and coherent approach stands a chance of making a positive difference.

  • Certification of biofuels—and the design criteria to use them in combination with GHG emissions reduction regulations and preferential tax treatments—should be urgently placed on the WTO agenda. A special committee on trade and environment has been created to channel these discussions and could possibly be used to this end.

  • The WTO should also be used to step up efforts to lower trade barriers to biofuels imports, allowing developing countries that have ecological and climate systems more suited to biomass production to use their comparative advantage.

  • More work needs to be done to assess the relative importance of biofuels in developing countries as an export commodity and as a means to provide excess to modern, more efficient and less polluting energy sources. It may be that in many developing country circumstances it would be more productive to channel efforts to developing other forms of bioenergy than liquid fuels. More help should be provided to developing countries in identifying opportunities to use biofuels to enhance economic progress.

Resources:

September 11, 2007 in Biodiesel, Ethanol, Sustainability | Permalink | Comments (51) | TrackBack (0)

Comments

Excellent report even if many of us (ICE lovers) would rather continue burning liquid fuel (from all sources) till the last drop.

The solution has been around for almost 150 years.

Progressive but massive and widespread electrification of most (if not all) ground transportation vehicles, industrial processus, commercial operations, agricultural operations, domestic HVAC etc is the best way to reduce GHG while retaining productive land for food crops to feed the 10+ billions of us in the near future.

Sometime between 2020 and 2050, current + improved ICE machines and burning liquid fuel could be curtailed or simply taxed out on existance.

Posted by: Harvey D | September 11, 2007 at 05:52 PM

Jack, when did I say I know it all? If I knew it all I would spending my time ruling the universe.

Posted by: Ben | September 11, 2007 at 06:18 PM

Harvey, you're forgetting a few basics: electricity is pretty dirty (coal), complete electrification would melt the planet and cause the destruction of all nature and life, and it's not very feasible, unless you use... carbon-negative bioenergy, the only renewable form of energy that can be stored, traded and that reduces carbon emissions (all other forms of energy, including wind, solar and nuclear, are all carbon-positive).

In short, if we want to fight climate change, there's no escape from biomass. People don't seem to understand this.

Posted by: Jonas | September 11, 2007 at 06:28 PM

Harvey:

Unless the engineering shortcomings of battery technology are corrected, I doubt we'll see complete electrification. ICEs may be comparatively inefficient, but pure EVs can't match the portability and energy density of liquid fuels without fast-charging batteries and longer ranges (A123, Altairnano?). Perhaps as pure commuter vehicles, but not in farming or long-distance applications.

I'd love to think otherwise, because electricity is fairly easy to produce. But I haven't seen any signs that we're on the verge of a sea change in personal transport. Maybe in a 2020-2050 timeframe you could be right (even without piling on carbon taxes), but I'm not willing to predict anything that far ahead.

Jonas:

There's some very exciting developments in geothermal energy going on that could displace a lot of natural gas and coal. All part of a diverse energy portfolio.

Posted by: Cervus | September 11, 2007 at 06:35 PM

http://www.greencarcongress.com/2007/08/volvo-demonstra.html is where a comparison, using Volvo trucks, and that includes hydrogen, can be found. It looks as if hydrogen does well from an environmental perspective, yet fares poorly in terms of energy value and infrastructure.

Posted by: jcwinnie | September 11, 2007 at 06:39 PM

Jonas,

In the states it is mostly coal, but in France it is Nuclear and in Iceland it is geothermal. By the way what is "carbon negative" by your definition?

Posted by: Ben | September 11, 2007 at 07:20 PM

One of the other fond memories of being a 24 year old is feeling clever by saying things like "I didn't say that" even when my actions, words, and attitudes already speak indicated my attitude quite clearly.

It's really exciting using one's brain for the first time. It's scary thinking about the day the training wheels come off.

Ah, the memories.

Posted by: jack | September 11, 2007 at 08:01 PM

Jonas,
Clearly PHEV will be the stepping stone, to get that range. Cover 40 miles/d with grid derived power and you have the vast majority of driving covered. More if you need it on occasion as a decent hybrid. Coal may not be pristine, but the inefficiency of ICE's creates results in 3 to 5x more carbon than EV's running on electricity from even a 100% coal generated source (which we are far from). Meanwhile other sources, including renewables, increase their share. And clever approaches to decrease the carbon emission of coal plants are coming on board. Alliant is working with cofiring biomass (switchgrass) with coal, which not only lowers the emission per unit energy produced, but, thanks to an extensive root system, the grass actually captures more carbon than it emits! Another approach is being taken by NRG working with GreenFuel - testing capturing the carbon emission in algae bioreactors and converting the algae into biofuel (although there is no reason that they couldn't also use it to create omega three fatty acids for human or aquaculture consumption). Biomass for electricity production is plain and simple a much more efficient way to get energy from the resource. And need not compete with food. Pass a carbon tax or cap and trade and they'll roll it out in a bigger way faster.

The infrastructure for electricity is here. The capacity is here. The source is mainly domestic (some imported NG from Canada). The savings in dollars per mile travelled and in carbon emitted dramatic. The batteries are here. The cars are being released over the next two to three years.

Posted by: Don | September 11, 2007 at 10:32 PM

It really bothers me when people look at the economics of first generation ethanol and canola oil and say that in general "biofuels can't work". In a time just before transistors, they might as well have looked at a valve and said electronic computers will never work.

Posted by: clett | September 12, 2007 at 06:12 AM

Don,

I would rather use nuclear and renewables for electicity. As oil get more expensive so do oil products, only biomass can replace those (well coal can too but coal can't solve GW as well).

Posted by: Ben | September 12, 2007 at 07:24 AM


For those interested, the OECD is a remnant of the Cold War, emanating from the Marshall Plan. Now that there's no USSR, it's purposeless, outdated and redundant. It's Secretary General, Angel Gurria, recently got into scandal over his elaborate public-funded expenses. So it's a little humorous to hear this outfit damning biofuels as a waste of capital.

Be that as it may, oil is still expensive and the biofuels train has really left the station at this point, and there's nothing OECD can do aside from denouncing it, assuming anyone's listening to them. They are also being glib by not specifying their own preferred alternatives. One could read this as a general argument for the free market, but the driving force is against this specific oil alternative altogether. To kill all subsidies to folks delivering biofuels now in favor of "research" on second generation techology in the distant future looks to me like a recipe for ridding the oil industry from a pesky competitor.

Posted by: Jim G. | September 12, 2007 at 07:44 AM

Jack,

I don't see a problem with my age: I honestly don’t believe I know everything (or even much) precisely because I’m young, I’m certainly not so assure of my knowledge base to attack others with rude and insulting language.

Posted by: Ben | September 12, 2007 at 08:05 AM

@Ben:

"Carbon-negative" means that you take historic CO2 emissions out of the atmosphere.

Wind, solar, nuclear and other energy concepts are all slightly carbon-positive, carbon-neutral at best, over their entire life-cycle. That is, they add small amounts of CO2.

Socalled 'Bio-energy with Carbon Storage' (BECS) systems on the contrary take CO2 out of the atmosphere and store it away. You grow energy crops, utilize them as fuels in power plants, and sequester the CO2. Alternatively, you grow biogas crops, clean out the CO2 and store it (this can be done independently of power plants), and ship out the ultra-clean, carbon-negative biomethane. This biomethane can then be used in CNG cars and power plants.

The concept was developed by the Abrupt Climate Change Strategy group. If implemented on a global scale, BECS can take us back to pre-industrial CO2 levels by mid-century.

No other energy system is carbon-negative.

So the question becomes: is it ethical to invest in solar, wind or nuclear - all carbon-positive -, when that very money could be invested in BECS systems?

The feasibility of the concept is backed up by some good science (and by the many developments in CCS).

Posted by: Jonas | September 12, 2007 at 08:22 AM

Jonas,

Solar/wind/water/Nuclear are barely carbon positive, they produce carbon due to how they are constructed, which can be changed to be carbon neutral. Biomass and biofuels can supply some of our energy needs but definitely not all of it, I believe in biofuels but believe they are best suited to replacing industrial oil uses that no other renewable energy source can replace. Carbon capture can use either biology or artificial means to remove CO2 from the atmosphere, as long as a carbon sink larger then a carbon producers is made there will be a total carbon sink, this means the carbon made from setting up solar/wind/water/etc can be negated by carbon capture. We simply cannot remove all carbon positive sources but we can reduce them and make larger carbon negative systems to negate them.

Posted by: Ben | September 12, 2007 at 09:16 AM

I don't see a problem with my age

Naturally.

I honestly don’t believe I know everything (or even much)

You may think you believe that, but your words here indicate otherwise.

I’m certainly not so assure of my knowledge base to attack others with rude and insulting language.

Right, you just troll and pretend like things that have been discussed and settled haven't, make things up completely about what you or others have claimed, and enter into discussions like finance, which you clearly know nothing about, yet unrelentingly hold to your ignorant position -- all while claiming you believe you don't have a "know-it-all" attitude that stems from your narrow-minded "magic bullet" approach that is unfortunately fairly prevalent here.

This behavior, done persistently enough, is what leads me now to treat you as a troll, which you are. If you don't like being treated as a troll, stop acting like one. You needn't get in the last word, since it won't make you "win," you can defer to other people's expertise (people here have a wide variety of it), and you can make attempts to realize that nothing is black-and-white and there are no magic bullets. You can also start being honest about what you've claimed, what others have claimed, and whether something has been covered already and needn't be brought up again.

You can pull that off then you'll be treated as an equal. Otherwise, you'll get treated exactly as you should be.

Back to ignoring you.

Posted by: jack | September 12, 2007 at 09:52 AM

What my words indicate about my personallity is subjective. I have stating things in gray, stating the pros and cons of a technology and that there is no single solution (mixed economy), I have also stated the "last word" does not mean victory, I'm not trying to win arguments here (apparently you are), most of us here are trying to have respectful discussion so we can learn and develop collectively.

The rule with trolls is: don't feed them. Any time you "feed" a troll with any comment at all, the troll wins. So you can't ignore a troll sporadically, you have to ignore them completely. You said you believe I was a troll awhile back and that you would ignore me but you haven't kept to that policy. I hope you do now.

Posted by: Ben | September 12, 2007 at 10:34 AM

Ben: It's ok to be young, Your personality is just fine with me.

Posted by: John | September 12, 2007 at 11:28 AM

It's ok to be young

It sure is. What's not OK is to forget that you are and therefore don't know much.

Posted by: jack | September 12, 2007 at 12:00 PM

"I know nothing except the fact of my ignorance."

Posted by: Ben | September 12, 2007 at 01:08 PM

Ben, the IEA Bioenergy Executive Committee just published a new report on the global potential for bioenergy and biofuels.

Here:
Potential Contribution of Bioenergy to the Worlds Future Energy Demand
http://www.ieabioenergy.com/MediaItem.aspx?id=5586

Pretty impressive numbers:
-under an optimal scenario, bioenergy can deliver 1100 Exajoules by 2050 (world currently consumes 380EJ of fossil energy)
-more reasonable scenario: between 200-400EJ
-of this: 130-260 EJ liquid biofuels for transport
-over the longer term (2100): land availability increases (as efficiency in agriculture increases and global population declines), bioenergy can meet up to 1100 EJ, under the high demand scenario

You see, people underestimate the sustainable biofuel potential. They start from current technologies and agronomic principles, whereas they forget that science and technology deliver ever better bioconversion and production techniques.

Moreover, there is vast untapped potential in developing countries.


Anyways, I know no media will report on that analysis, because it happens to offer an optimistic picture.

I hope GreenCarCongress will report on it, though.

Posted by: Jonas | September 12, 2007 at 01:35 PM

"I know nothing except the fact of my ignorance."

Says someone who proudly can't understand the word "affordable," but will go on and on about affordability and confounding it with profitability.

Posted by: jack | September 12, 2007 at 01:35 PM

Jonas,

Now that looks like an interesting report, you'll have to give me awhile to digest it.

Posted by: Ben | September 12, 2007 at 01:41 PM

Looks like someone has turned to spoofing my ID now.

Posted by: jack | September 13, 2007 at 06:37 AM

Perhaps if you didn't post so many snide and dismissive comments, you wouldn't be so easily parodied.

Posted by: Engineer-Poet | September 14, 2007 at 07:52 AM

I'd also like to add that anyone denying a confirmable fact gets one free pass along with a hotlink to the information which proves them wrong. After that, they're fair game for any epithet you like.

I reserve the right to make an abundance of snide and dismissive comments if someone is clearly wading into deep waters without a life vest and tries to pull me down with them.

Posted by: Engineer-Poet | September 14, 2007 at 08:44 AM

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