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

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:

Comments

Cervus

Do they consider a peak oil scenario in any of their economics calculations for 2nd gen fuels? We're going to be out of oil by 2050.

Ben

Here the problem with the report right here: "caused by first generation technologies" They consider second generation technologies as to "distant" and also don't consider radical increases in oil prices.

tthoms

This, assuming their analysis is accurate, supports my opinion that biofuels are not viable unless they can be produced from an otherwise non-useful yet plentiful source. Corn, beets, and even used vegetable oil doesn't meet this criteria.
That's why I was rooting for the thermodepolymerization folks; making fuel out of waste would be a God-send. Too bad we haven't heard from them in a few years.

BlackSun

Cervus, exactly. Looking at the prospects for available liquids, it's not biofuels vs. petroleum, it's biofuels vs. nothing. Now that's not to say that there aren't other ways to do things such as electrification. But these people act as if there's an endless supply of petroleum to fulfill non-substitutable liquid fuel demand, which there's clearly not.

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.

This is priceless in its absolutely perfect cynical faux ignorance. Phase out biofuels??? One more attempt to delay the inevitable transition--follow the money trail for this research--from people who are determined to squeeze the last drop of profits from fossil energy.

adopt a soundly-based, common understanding of the limits of both traditional and second-generation biofuels in their analysis of energy futures.

How do they know the limits of "second-generation biofuels??" Do they have a crystal ball?? What a lot of these studies also do is to measure the very worst-case of the early failures of developing technology against highly mature technologies.

They're also not considering the overwhelming subsidies and policy support that already exists for business as usual.

Of course there are good and bad ways to do biofuels, and it's important to make the distinction. But how many more of these sham reports will we have to endure on our way to a sustainable zero-carbon future?

jack

Someone please explain again why biofuels are good and hydrogen is bad.

Lucas

At present, no one can say for certain but there are many indications that peak oil has passed. Saudi Arabia produced 1.7% less oil last year. The North sea is slowing down, etc.

If not some sort of bio-fuel ... What?

jack

Saudi Arabia produced 1.7% less oil last year.

And made a tidy profit doing it. They just agreed to boost production come November.

gavin walsh

"Someone please explain again why biofuels are good and hydrogen is bad."

http://www.planetark.com/dailynewsstory.cfm/newsid/37166/story.htm

bulky storage tanks required, energy carrier not source, low EROEI, currently derived from fossil fuels, etc. I'm sure you've heard all the arguments already. If the guys at Purdue U can make that gallium alloy work then the hydrogen storage problem is solved, but that is still in the early stages.

also note this from today's news:

http://www.physorg.com/news108723229.html

"Research finds diesel exhaust kills throat cells
Researchers at Deakin University have found that diesel exhaust is far more damaging to our health than exhaust from biodiesel, the plant-based fuel."

This report does seem overly negative of ALL biofuels, when in reality some biofuels are significantly more promising than others.


jack

bulky storage tanks required, energy carrier not source, low EROEI, currently derived from fossil fuels, etc. I'm sure you've heard all the arguments already.

I've heard all of those arguments and they have varying levels of credibility.

Storage tanks - so what, everything needs storage space
"Energy carrier" is a canard - everything's an energy carrier
Low EROEI - debatable and things like ethanol aren't too great, either
Derived from fossil fuels - not a necessity

So those are some of the potential cons of hydrogren. You haven't mentioned the pros of hydrogen, nor the pros and cons of biofuels. Does hydrogen inflate food prices and cause food security conflicts in developing countries? And if one is using electrolysis to make hydrogen, is there a scarcity of water on planet Earth?

Just wondering some things.

Ben

Peak oil does not mean the end of oil it means the end of cheap oil, making alternatives look much more attractive. Based on the most recent reports Peak oil is alreayed begining, and is expect to be in full swing by 2020 (As in prices and shortages will at ridicules high rates by 2020).
http://www.greencarcongress.com/2007/07/iea-sees-oil-su.html#more
http://www.greencarcongress.com/2007/06/four_takes_on_g.html#more
http://www.greencarcongress.com/oil/index.html

Jack,

Hydrogen requires energy (energy negative), many biofuels are energy positive. Also you can't make plastics and replace industrial oil uses with hydrogen and electricity. That is not to say BEV and even hyEV won’t have a place in the future, but biofuels and biomass will have their place as well.

Ben

Jack,

2nd gen biofuels don't take up croplands, and in many cases actually consume waste. Actually there is a growing scarcity of clean fresh water in the world so hydrogen to be more environmental it needs to be made for desalinated water (more energy,increase price)

jack

To clarify, I would like responses only from adults who know what they're talking about.

Cervus

Lucas:

There's evidence that we've plateaued, it not peaked. The real question in my mind over OPEC has been "won't increase production, or can't?" I guess this is the moment of truth. We do have some fairly large production platorms scheduled to start up in the GOM next year (Thunder Horse, for intance) in 2008 that could make the downslope less steep.

JN2

Cervus, BlackSun: no oil by 2050? Even the pessimistic ASPO thinks we'll be producing 40 Mbpd (all liquids) in 2050. Hardly zero.

Cervus

JN2:

By then it'll be far too expensive as a transportation fuel. Another possibility is that we're entering a "Peak Lite" scenario where although production continues to increase, demand increases far faster than the oil industry can keep up. I'm not sure which scenario is playing out here. But unless some economic downturn either slows oil demand growth or reduces demand, we're in for either scenario sooner rather than later.

Sim

I hope this isnt another one of those bogus groups Dick Cheney put together to refute global warming or alternative fuels. Probably isn't but they do that kind of thing. If a tiny fraction of the money used for oil went into pond biodiesel r&d we could replace oil using a small amount of land.

Neil

jack:
I didn't notice anyone saying "bio-fuels good, hydrogen bad" on this thread before your post.

Please explain why you consider the term "energy carrier" to be a canard.

To state what you must already know, there are lots of energy carriers around, but some of them (like petroleum and NG) are both energy carriers and primary energy sources/reservoirs. Electricity and Hydrogen are commonly referred to as "energy carriers" because there are no reservoirs of either that can be readily exploited, but they can be produced from any number of primary energy sources.

gavin walsh

"And if one is using electrolysis to make hydrogen, is there a scarcity of water on planet Earth?"

you're absolutely right that there is no scarcity of salty water on Earth. in that scenario you are simply shifting the emissions from the tailpipe to the powerplant. hydrogen fuel electrolysed using coal-fired electricity is not really an improvement in any department. of course if the hydrogen were generated by a clean tech such as solar or geothermal that would be great, but also begs the question would it not be more efficient to simply run the vehicles off electricity rather than waste energy converting the electricity to hydrogen and then burn it or run it through a fuel cell.

jack

I didn't notice anyone saying "bio-fuels good, hydrogen bad" on this thread before your post.

That's a joke, right? The second the word "hydrogen" is mentioned in a blog post, it's bashing time. Just wanted to know why that's so bad but biofuels are so good.

Please explain why you consider the term "energy carrier" to be a canard.

It's a meaning-free term. Fossil fuels are energy carriers for solar energy, etc. It means nothing.

To state what you must already know, there are lots of energy carriers around, but some of them (like petroleum and NG) are both energy carriers and primary energy sources/reservoirs.

That's a semantic distinction with really no merit. Fossil fuels come primarily from decomposed biomass. How does biomass transform CO2 and turn it into plant material? Right, it needs sunlight. The only difference between fossil fuels and hydrogen (created from electrolysis) is the conversion period from sunlight into another form of energy.

Electricity and Hydrogen are commonly referred to as "energy carriers" because there are no reservoirs of either that can be readily exploited, but they can be produced from any number of primary energy sources.

Well, to me that would be a good thing, since all these "reservoirs" are limited whereas sun (and wind, wave, and geothermal) are functionally inexhaustible.

People use the term "carrier" as if that's some strike against hydrogen or actually means anything from a physical standpoint, which it isn't and it doesn't.

jack

hydrogen fuel electrolysed using coal-fired electricity is not really an improvement in any department.

I don't recall anyone proposing that hydrogen should be made from coal-fired electricity.

of course if the hydrogen were generated by a clean tech such as solar or geothermal that would be great, but also begs the question would it not be more efficient to simply run the vehicles off electricity rather than waste energy converting the electricity to hydrogen and then burn it or run it through a fuel cell.

The sun doesn't always shine and the wind doesn't always blow. Hydrogen allows energy to be stored for later use. It can also be combusted, unlike electricity.

Despite the focus of this site, there are other uses of energy out there than vehicles and we shouldn't forget that. We also shouldn't be so sure that the personal automobile is some permanent, dominant fixture.

tthoms

Blacksun:

The report does not suggest phasing out "biofuels". It suggests phasing out biofuel mandates and replacing them with technology neutral "carbon taxes" and what-not.

Ben

tthorns,

Carbon taxes might increase efficiency but there not going to develop new technologies to replace fossil fuels. That requires R&D and subsidies.

Jack,

It does not matter what you like, you can ignore me all you want but I never said I was going to ignore you. Biomass is also made from the sun and is also "inexhaustible". Fossil fuels are a naturally stored reserve of energy hence a "energy source" while hydrogen needs energy now to be made hence a "energy carrier" I'm sure others here are aware of other needs of energy in fact despite this news blogs name they have many articles about other transport systems and even power providing systems.

jack

I remember when I was 24 and thought I knew it all. Pretty funny.

Jonas

Hi, this study backs the case for a 'Biopact'.

More comprehensive coverage here:

And:
"At the same time, according to Jacques Diouf, Director-General of FAO, bioenergy provides a chance to enhance growth in many of the world’s poorest countries by bringing about an agricultural renaissance and supplying modern energy to a third of the world’s population. This means not only improving export opportunities for developing countries to the industrialised world but, perhaps more importantly, helping them to use biomass to produce their own electricity."

The vision of the guys at Biopact (I'm part of them) are now backed by Joseph Stiglitz, the FAO, the WorldWatch Institute, the gov't of Sweden, the Brazilian socialists, and the IEA.

All these organisations have clearly said that it makes no sense to produce biofuels from crops like corn; you have to tap the huge potential in the developing world instead. Such a 'biopact' is a win-win situation.

Jonas

[apparently something went wrong with the html].

Hi, this study backs the case for a 'Biopact'.

More comprehensive coverage here:
OECD warns against subsidies for inefficient biofuels in the North, calls for liberalisation of market - major boost to idea of 'Biopact'
http://biopact.com/2007/09/oecd-warns-against-subsidies-for.html>


It's a bit disappointing that the study doesn't rely on studies about the potential for biofuels in the developing world, and that it doesn't highlight carbon-negative biofuels. But that aside, it's a good analysis.

It means: the EU/US must stop subsidizing inefficient biofuels and must start importing highly efficient, sustainable biofuels made in the Global South.

It says:
"Liberalising trade in biofuels is difficult but essential for global objectives. Ethanol from sugarcane grown in Brazil is by far the cheapest biofuel today. South America and Africa have a large potential to increase biofuel production."

And:
"At the same time, according to Jacques Diouf, Director-General of FAO, bioenergy provides a chance to enhance growth in many of the world’s poorest countries by bringing about an agricultural renaissance and supplying modern energy to a third of the world’s population. This means not only improving export opportunities for developing countries to the industrialised world but, perhaps more importantly, helping them to use biomass to produce their own electricity."

The vision of the guys at Biopact (I'm part of them) are now backed by Joseph Stiglitz, the FAO, the WorldWatch Institute, the gov't of Sweden, the Brazilian socialists, and the IEA.

All these organisations have clearly said that it makes no sense to produce biofuels from crops like corn; you have to tap the huge potential in the developing world instead. Such a 'biopact' is a win-win situation.

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