INSIGHT: Managing away from ‘splash and dash’

13 November 2007 17:05  [Source: ICIS news]

By Nigel Davis

Capturing biofuels potentialLONDON (ICIS news)--Turning over good agricultural soil to the production of raw materials for biofuels makes little sense but it is a stepping off point in the drive towards greater fuel sustainability.

The Food and Agriculture Organisation (FAO) has distanced itself from remarks made by UN special rapporteur Jean Ziegler last month.

He called it "a crime against humanity" to convert agricultural productive soil into soil which produces foodstuff that will be turned into biofuels.

But he had a point. The dash to convert food into fuel is not ill conceived, as he suggested, but runs the risk of distorting global agricultural markets.

Those markets can absorb the impact of increased biofuels production but only to a certain - as yet undefined - extent.

The push must be to use non-food plants, agricultural wastes and crop residues, rather than food crops to make bioethanol and biodiesel.

Corn and wheat prices have been pushed higher this year more by drought and other adverse weather conditions than by increased biofuels production.

Of increasing concern globally also has to be the changing tastes of large numbers of consumers who are eating more grain-fed meat.

Biofuels resources have to be developed sustainably. Indeed, one of the greatest current global challenges is the effective management of the shift towards biofuels while ensuring food security, adequate protection of the environment and biodiversity.

As the FAO said this week, capturing the full potential of biofuels means overcoming environmental and social constrains and removing trade barriers.

Potential conflicts between bioenergy production and the protection of the environment, sustainable development, food security of the rural poor and the economic development of countries supplying feedstock should be urgently addressed, it said in a report issued at the 20th World Energy Congress.

Some agricultural crops have great biofuels potential, sugar being one of them.

Bioethanol produced from maize has the capacity to reduce carbon dioxide emissions by some 13% but does not appear to be sustainable, says chairman of the FAO’s global bioenergy partnership, Corrado Clini, when the environmental impact of production and conversion is considered and the fact that it is only competitive with oil prices above $80/bbl.

Looking beyond the use of agricultural commodities as biofuels feedstocks, the development of second-generation biofuels - those made from cellulosic biomass, algae or seaweed - needs to be carefully managed.

Bioenergy is forecast by the FAO to satisfy 20% of global energy demand by 2030 and 30-40% by 2060.

The International Energy Agency (IEA) suggests that biodiesel and bioethanol could account for 7% of global demand for liquid fuels by 2030. Consumption could rise fourfold to 36m tones/year from the current level of about 8m tonnes/year.

That development will be facilitated only if trade barriers are brought down and the use of the whole gamut of sources of raw materials exploited.

Recent trade talks between the US and the EU started by focusing on biofuels.

A tax loophole, for instance, has allowed the dumping of US biofuels on the European market. The incentive has helped push US exports of methyl ester biodiesel to the EU up to 700,000 tonnes so far this year from just 90,000 tonnes in 2006, according to the European Biodiesel Board.

The EU is arguing that US taxpayers are helping finance US exports of biodiesel to Europe. The US' National Biodiesel Board sees the tax break as an important incentive.

It does, however, want to see the so called “splash and dash” loophole, whereby biodiesel is imported to the US then mixed with petroleum and re-exported to the EU to qualify for a tax credit, closed.

The growing biofuels business wants to embrace free trade just as the chemicals sector does, given the fact that some 8% of its raw materials are derived from biomass.

A start can be made by defining technical standards. The US wants to see the European market for the potentially important biofuels feedstock jatropha opened up rather than further subsidy of rapeseed oil production.

“Navigating a smooth transition to a world supported by sustainable resources is the defining challenge of our time,” engineering and biology professor at Dartmouth College in the US, Lee Lynd, said at an event sponsored by DuPont on Monday. His remark is telling.

A panel at the DuPont event considered next-stage biofuels development and the move beyond grain and sugar cane ethanol.

“Increasingly, cellulosic biofuels are expected to play a key role as a source of renewable transportation fuels, and investment at entirely unprecedented levels is being made in the field,” Lynd said.

“It is reasonable to expect rapid progress and the emergence of an industry with potentially transformative impacts,” he added.

By: Nigel Davis
+44 20 8652 3214

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