Combined Renewable Energy Powerplant

Biofuels May Raise GHG Emissions, says Nobel Laureate Paul Crutzen

Biofuels could boost global warming, finds study
September 21, 2007 -- By Zoe Corbyn, Chemistry World

Growing and burning many biofuels may actually raise rather than lower greenhouse gas emissions, a new study led by Nobel prize-winning chemist Paul Crutzen has shown. The findings come in the wake of a recent OECD report, which warned nations not to rush headlong into growing energy crops because they cause food shortages and damage biodiversity.

Crutzen and colleagues have calculated that growing some of the most commonly used biofuel crops releases around twice the amount of the potent greenhouse gas nitrous oxide (N2O) than previously thought - wiping out any benefits from not using fossil fuels and, worse, probably contributing to global warming. The work appears in Atmospheric Chemistry and Physics and is currently subject to open review.

'The significance of it is that the supposed benefits of biofuel are even more disputable than had been thought hitherto,' Keith Smith, a co-author on the paper from the University of Edinburgh, told Chemistry World. 'What we are saying is that [growing many biofuels] is probably of no benefit and in fact is actually making the climate issue worse.'

Crutzen, famous for his work on nitrogen oxides and the ozone layer, declined to comment before the paper is officially published. But the paper suggests that microbes convert much more of the nitrogen in fertiliser to N2O than previously thought - 3 to 5 per cent or twice the widely accepted figure of 2 per cent used by the International Panel on Climate Change (IPCC).

For rapeseed biodiesel, which accounts for about 80 per cent of the biofuel production in Europe, the relative warming due to N2O emissions is estimated at 1 to 1.7 times larger than the quasi-cooling effect due to saved fossil CO2 emissions. For corn bioethanol, dominant in the US, the figure is 0.9 to 1.5. Only cane sugar bioethanol - with a relative warming of 0.5 to 0.9 - looks like a viable alternative to conventional fuels.

Some previous estimates had suggested that biofuels could cut greenhouse gas emissions by up to 40 per cent.

Global picture

The IPCC's N2O conversion factor is derived using data from plant experiments. But Crutzen takes a different approach, using atmospheric measurements and ice core data to calculate the total amount of N2O in the atmosphere. He then subtracts the level of N2O in pre-industrial times - before fertilizers were available - to take account of N2O from natural processes such as leguminous plants growing in forests, lightning, and burn offs.

Assuming the rest of the N2O is attributable to newly-fixed nitrogen from fertilizer use, and knowing the amount of fertilizer applied globally, he can calculate thecontribution of fertilizers to N2O levels.

The results may well trigger a rethink by the IPCC, says Smith. 'Should we go along the road of adding up the experimental evidence for each of the processes or are we better off using the global numbers?'

Critical reception

But other experts are critical of Crutzen's approach. Simon Donner, a nitrogen researcher based at Princeton University, US, says the method is elegant but there is little evidence to show the N2O yield from fertilized plants is really as high as 3-5 per cent. Crutzen's basic assumption, that pre-industrial N2O emissions are the same as natural N2O emissions, is 'probably wrong', says Donner.

One reason he gives is that farmers plant crops in places that have nitrogen rich soils anyway. 'It is possible we are indirectly increasing the "natural" source of N2O by drawing down the soil nitrogen in the world's agricultural regions,' he explains.

Others dispute the values chosen by Crutzen to calculate his budget. Stefan Rauh, an agricultural scientist at the Instituteof Agricultural Economics and Farm Management in Munich, Germany, says some of the rates for converting crops into biofuel should be higher. 'If you use the other factors you get a little net climate cooling,' he said.

Meanwhile, a report prepared by the OECD for a recent Round Table on Sustainable Development questions the benefits of first generation biofuels and concludes that governments should scrap mandatory targets.

Richard Doornbosch, the report's author, says both the report and Crutzen's work highlights the importance of establishing correct full life-cycle assessments for biofuels. 'Without them, government policies can't distinguish between one biofuel and another - risking making problems worse,' said Doornbosch.

Carbon Tax, CAFE Standards and Cap-and-Trade: An Economist's View

One Answer to Global Warming: A New Tax
September 16, 2007 -- By N. Gregory Mankiw, The New York Times

In the debate over global climate change, there is a yawning gap that needs to be bridged. The gap is not between environmentalists and industrialists, or between Democrats and Republicans. It is between policy wonks and political consultants.

Among policy wonks like me, there is a broad consensus. The scientists tell us that world temperatures are rising because humans are emitting carbon into the atmosphere. Basic economics tells us that when you tax something, you normally get less of it. So if we want to reduce global emissions of carbon, we need a global carbon tax. Q.E.D.

The idea of using taxes to fix problems, rather than merely raise government revenue, has a long history. The British economist Arthur Pigou advocated such corrective taxes to deal with pollution in the early 20th century. In his honor, economics textbooks now call them “Pigovian taxes.”

Using a Pigovian tax to address global warming is also an old idea. It was proposed as far back as 1992 by Martin S. Feldstein on the editorial page of The Wall Street Journal. Once chief economist to Ronald Reagan, Mr. Feldstein has devoted much of his career to studying how high tax rates distort incentives and impede economic growth. But like most other policy wonks, he appreciates that some taxes align private incentives with social costs and move us toward better outcomes.

Those vying for elected office, however, are reluctant to sign on to this agenda. Their political consultants are no fans of taxes, Pigovian or otherwise. Republican consultants advise using the word “tax” only if followed immediately by the word “cut.” Democratic consultants recommend the word “tax” be followed by “on the rich.”

Yet this natural aversion to carbon taxes can be overcome if the revenue from the tax is used to reduce other taxes. By itself, a carbon tax would raise the tax burden on anyone who drives a car or uses electricity produced with fossil fuels, which means just about everybody. Some might fear this would be particularly hard on the poor and middle class.

But Gilbert Metcalf, a professor of economics at Tufts, has shown how revenue from a carbon tax could be used to reduce payroll taxes in a way that would leave the distribution of total tax burden approximately unchanged. He proposes a tax of $15 per metric ton of carbon dioxide, together with a rebate of the federal payroll tax on the first $3,660 of earnings for each worker.

The case for a carbon tax looks even stronger after an examination of the other options on the table. Lawmakers in both political parties want to require carmakers to increase the fuel efficiency of the cars they sell. Passing the buck to auto companies has a lot of popular appeal.

Increased fuel efficiency, however, is not free. Like a tax, the cost of complying with more stringent regulation will be passed on to consumers in the form of higher car prices. But the government will not raise any revenue that it can use to cut other taxes to compensate for these higher prices. (And don’t expect savings on gas to compensate consumers in a meaningful way: Any truly cost-effective increase in fuel efficiency would already have been made.)

More important, enhancing fuel efficiency by itself is not the best way to reduce energy consumption. Fuel use depends not only on the efficiency of the car fleet but also on the daily decisions that people make — how far from work they choose to live and how often they carpool or use public transportation.

A carbon tax would provide incentives for people to use less fuel in a multitude of ways. By contrast, merely having more efficient cars encourages more driving. Increased driving not only produces more carbon, but also exacerbates other problems, like accidents and road congestion.

Another popular proposal to limit carbon emissions is a cap-and-trade system, under which carbon emissions are limited and allowances are bought and sold in the marketplace. The effect of such a system depends on how the carbon allowances are allocated. If the government auctions them off, then the price of a carbon allowance is effectively a carbon tax.

But the history of cap-and-trade systems suggests that the allowances would probably be handed out to power companies and other carbon emitters, which would then be free to use them or sell them at market prices. In this case, the prices of energy products would rise as they would under a carbon tax, but the government would collect no revenue to reduce other taxes and compensate consumers.

The international dimension of the problem also suggests the superiority of a carbon tax over cap-and-trade. Any long-term approach to global climate change will have to deal with the emerging economies of China and India. By some reports, China is now the world’s leading emitter of carbon, in large part simply because it has so many people. The failure of the Kyoto treaty to include these emerging economies is one reason that, in 1997, the United States Senate passed a resolution rejecting the Kyoto approach by a vote of 95 to zero.

Agreement on a truly global cap-and-trade system, however, is hard to imagine. China is unlikely to be persuaded to accept fewer carbon allowances per person than the United States. Using a historical baseline to allocate allowances, as is often proposed, would reward the United States for having been a leading cause of the problem.

But allocating carbon allowances based on population alone would create a system in which the United States, with its higher standard of living, would buy allowances from China. American voters are not going to embrace a system of higher energy prices, coupled with a large transfer of national income to the Chinese. It would amount to a massive foreign aid program to one of the world’s most rapidly growing economies.

A global carbon tax would be easier to negotiate. All governments require revenue for public purposes. The world’s nations could agree to use a carbon tax as one instrument to raise some of that revenue. No money needs to change hands across national borders. Each government could keep the revenue from its tax and use it to finance spending or whatever form of tax relief it considered best.

Convincing China of the virtues of a carbon tax, however, may prove to be the easy part. The first and more difficult step is to convince American voters, and therefore political consultants, that “tax” is not a four-letter word.

The Road To Clean Energy Starts Here, by Jeffrey D. Sachs

The Road to Clean Energy Starts Here
May 2007 Issue -- By Jeffrey D. Sachs, Scientific American

Realizing crucial energy technologies will take more than just research and development

The key to solving the climate change crisis is technology. To accommodate the economic aspirations of the more than five billion people in the developing countries, the size of the world economy should increase by a factor of four to six by 2050; at the same time, global emissions of greenhouse gases will have to remain steady or decline to prevent dangerous changes to the climate. After 2050, emissions will have to drop further, nearly to zero, for greenhouse gas concentrations to stabilize.

The overarching challenge is to make that transition at minimum cost and without economic disruption. Energy-saving technologies will play a pivotal role. Buildings can save energy at low capital cost, and often net overall savings, through improved insulation, efficient illumination and the use of heat pumps rather than home furnaces. Automobiles could, over time, reach 100 miles per gallon by a shift to plug-in hybrids, better batteries, lighter frames and other strategies. Of course, technologies such as heat pumps and plug-in hybrids partly reduce direct emissions by shifting from on-site combustion to electricity, so that low-emission power plants become paramount.

Low-emission electricity generation will be achieved in part through niche sources such as wind and biofuels. Larger-scale solutions will come from nuclear and solar power. Yet clean coal will be essential. New combustion techniques, combined with carbon capture and sequestration (CCS), offer the prospect of low- or zero-emission coal-fired thermal plants. The incremental costs of ccs may well be as low as one to three cents per kilowatt-hour.

All these technologies are achievable. Some will impose real added costs; others will pay for themselves as lower energy bills offset higher capital outlays. Some estimates suggest that, as of 2050, the world will have to negate around 30 billion tons of carbon dioxide emissions a year at a cost of roughly $25 per ton, or $750 billion annually. But with a world economy by then of perhaps $200 trillion, the cost would be well under 1 percent of world income and perhaps under 0.5 percent, a true bargain compared with the costs of inaction.

Achieving these technological solutions on a large scale, however, will require an aggressive global technology policy. First, there will have to be market incentives to avoid emissions, in the form of either tradable permits or levies. A reasonable levy might be $25 per ton of emitted carbon dioxide, introduced gradually over the next 10 to 20 years. Second, there will have to be ample government support for rapid technological change. Patents can help spur private market research and development (R&D), but public funding is required for basic science as well as for the public demonstration and the global diffusion of new technologies. In sum, we need a strategy sometimes described as RDD&D.

In the past two years, the Earth Institute at Columbia University has hosted a Global Roundtable on Climate Change, involving leading corporations from around the world. These companies, including many of the largest power producers, are ready to reduce carbon emissions. They know that CCS must be a high priority. A new Global Roundtable Task Force on CCS seeks to promote the required RDD&D. Fortunately, the European Union has already pledged to build at least a dozen CCS demonstration projects in Europe by 2015. But we will also need such centers in the U.S., China, India, Australia, Indonesia and other highly significant coal-power producers. In the low-income countries, this will require a few billion dollars; that is where the RDD&D investments of the high-income countries will be essential. The CCS Task Force aims to break ground on one or more demonstration plants by 2010 in every major coal region. By 2015 this crucial technology can be proved and added to the bid to avert climate disaster. This model of RDD&D won't stop there. Harnessing technology to achieve sustainable energy will involve much of the global economy for decades.

Alberta's Oil Sands Face Water Shortages

Excerpt from:
Choke point for oil sands may be water shortage
May 11, 2007 -- By Martin Mittelstaedt, The Globe and Mail via Peak Energy

The amount of water available in Northern Alberta isn't sufficient to accommodate both the needs of burgeoning oil sands development and preserve the Athabasca River, contends a study issued jointly yesterday by the University of Toronto and the University of Alberta.

The study, written in part by Dr. David Schindler, a University of Alberta biologist considered Canada's top water expert, suggests that the choke point for the province's oil sands expansion may not be the huge carbon dioxide emissions arising from mining and processing the sticky, bitumen containing tar sands, as is widely assumed, but a lack of water.

Oil sands plants typically use two to four barrels of water to extract a barrel of oil from the tar sands, a resource that has given the Northern Alberta region the world's largest petroleum reserves but made it a global centre of environmental controversy.

The problem of water availability is expected to become acute in the decades ahead because climate change is likely to cause much more arid conditions, reducing stream flows on the Athabasca River, the source of the industry's water, to critically low levels during parts of each year.

Designing Cities For People

Designing Cities For People
May 1, 2007 -- By Lester R. Brown, Earth Policy Institute

As I was being driven through Tel Aviv from my hotel to a conference center a few years ago, I could not help but note the overwhelming presence of cars and parking lots. Tel Aviv, expanding from a small settlement a half-century ago to a city of some 3 million today, evolved during the automobile era. It occurred to me that the ratio of parks to parking lots may be the best single indicator of the livability of a city--whether a city is designed for people or for cars.

The world's cities are in trouble. In Mexico City, Tehran, Bangkok, Shanghai, and hundreds of other cities, the quality of daily life is deteriorating. Breathing the air in some cities is equivalent to smoking two packs of cigarettes per day. In the United States, the number of hours commuters spend sitting in traffic going nowhere climbs higher each year.

In response to these conditions, we are seeing the emergence of a new urbanism. One of the most remarkable modern urban transformations has occurred in Bogotá, Colombia, where Enrique Peñalosa served as Mayor for three years, beginning in 1998. When he took office he did not ask how life could be improved for the 30 percent who owned cars; he wanted to know what could be done for the 70 percent--the majority--who did not own cars.

Peñalosa realized that a city that is a pleasant environment for children and the elderly would work for everyone. In just a few years, he transformed the quality of urban life with his vision of a city designed for people. Under his leadership, the city banned the parking of cars on sidewalks, created or renovated 1,200 parks, introduced a highly successful bus-based rapid transit system, built hundreds of kilometers of bicycle paths and pedestrian streets, reduced rush hour traffic by 40 percent, planted 100,000 trees, and involved local citizens directly in the improvement of their neighborhoods. In doing this, he created a sense of civic pride among the city's 8 million residents, making the streets of Bogotá in strife-torn Colombia safer than those in Washington, D.C.

Enrique Peñalosa observes that "high quality public pedestrian space in general and parks in particular are evidence of a true democracy at work." He further observes: "Parks and public space are also important to a democratic society because they are the only places where people meet as equals. In a city, parks are as essential to the physical and emotional health of a city as the water supply." He notes this is not obvious from most city budgets, where parks are deemed a luxury. By contrast, roads, the public space for cars, receive infinitely more resources and less budget cuts than parks, the public space for children. Why, he asks, are the public spaces for cars deemed more important than the public spaces for children?

Now government planners everywhere are experimenting, seeking ways to design cities for people not cars. Cars promise mobility, and they provide it in a largely rural setting. But in an urbanizing world there is an inherent conflict between the automobile and the city. After a point, as their numbers multiply, automobiles provide not mobility but immobility. Congestion also takes a direct economic toll in rising costs in time and gasoline. And urban air pollution, often from automobiles, claims millions of lives.

Another cost of cities that are devoted to cars is a psychological one, a deprivation of contact with the natural world--an "asphalt complex." There is a growing body of evidence that there is an innate human need for contact with nature. Both ecologists and psychologists have been aware of this for some time. Ecologists, led by Harvard University biologist E.O. Wilson, have formulated the "biophilia hypothesis," which argues that those who are deprived of contact with nature suffer psychologically and that this deprivation leads to a measurable decline in well-being.

Throughout the modern era, budget allocations for transportation in most countries--and in the United States, in particular--have been heavily biased toward the construction and maintenance of highways and streets. Creating more livable cities and the mobility that people desire depends on reallocating budgets to emphasize the development of rail- or bus-based public transport and bicycle support facilities.

The exciting news is that there are signs of change, daily indications of an interest in redesigning cities for people, not for cars. One encouraging trend comes from the United States. Public transit ridership nationwide rising by 2.1 percent a year since 1996 indicates that people are gradually abandoning their cars for buses, subways, and light rail. Rising gasoline prices are encouraging still more commuters to abandon their cars and take the bus or subway or get on a bicycle.

When Beijing decided to promote an automobile-centered transportation system, a group of eminent scientists in China protested. They pointed out that the country does not have enough land to accommodate the automobile and to feed its people. What is true for China is also true for India and dozens of other densely populated developing countries.
Some cities are far better at planning their growth than others. They plan transport systems that provide mobility, clean air, and exercise--a sharp contrast to cities that offer congestion, unhealthy air, and little opportunity for exercise. When 95 percent of a city's workers depend on the automobile for commuting, as in Atlanta, Georgia, the city is in trouble.

By contrast, in Amsterdam only 40 percent of workers commute by car; 35 percent bike or walk, while 25 percent use public transit. Copenhagen's commuting patterns are almost identical to Amsterdam's. In Paris, just under half of commuters rely on cars. Even though these European cities are older, with narrow streets, they have far less congestion than Atlanta.

Not surprisingly, car-dependent cities have more congestion and less mobility than those that offer a wider range of commuting options. The very vehicle whose great promise was personal mobility is in fact virtually immobilizing entire urban populations, making it difficult for rich and poor alike to move about.

Existing long-term transportation strategies in many developing countries assume that everyone will one day be able to own a car. Unfortunately, given the constraints of land available for cars, not to mention those imposed by oil reserves, this is simply not realistic. These countries will provide more mobility if they support public transportation and the bicycle.

Big Oil on Peak Oil

Big Oil on Peak Oil
April 19, 2007 -- The Wall Street Journal Energy Roundup Blog

Energy Roundup and several other energy bloggers participated in a conference call yesterday with Red Cavaney, president and CEO of the American Petroleum Institute. Topics included peak oil, ethanol, the Canadian tar sands, refinery capacity and greenhouse-gas emissions caps.

Some highlights:

Cavaney is sanguine about the prospect of peak oil. He believes that, even after the world’s oil production hits its peak — whenever that happens — the downward slope of production will likely be gradual, rather than sharp. He also thinks much of the world is “under-explored,” suggesting the peak can be put off a little while longer with more exploration overseas. He also thinks hydrocarbons will always be with us, in one capacity or another. “Man left the Stone Age not because he ran out of stone. We’ll leave the age of oil, but it won’t be because we ran out of oil. It will be because other technologies have come in that will be more reliable and cost-effective.”

He claimed his industry is agnostic about the controversies surrounding global warming. “We’re not scientists or experts in that area,” he said. “But we have concluded there are sufficient signals that it’s important we get on with trying to mitigate the outcomes that may flow from path we’re on.”

He also expressed no preference for any of several potential congressional actions to limit greenhouse-gas emissions. But he also said he doubted a carbon tax would be imposed any time soon. “Most economists…say a carbon tax would be the most efficient way to maximize reductions,” he said. “But…if you talk to political advisors, that’s the last vote they’ll take.”

He was a little more heated in defending his industry against charges that it is standing in the way of a broader rollout of ethanol in the U.S. The Wall Street Journal reported earlier this month that oil-company policies make it harder for many service stations to stock a fuel called E85, a blend of 85% ethanol and 15% gasoline. And earlier this year, representatives of auto makers and the Clean Fuel Development Coalition told the Journal that oil companies weren’t doing their part to make ethanol more widely available.

Cavaney said such critics “have their own agenda.” The auto industry, he implied, has not taken ethanol use seriously, using flex-fuel vehicles and E85 primarily as marketing tools. He said his industry is doing everything it can to encourage ethanol use, but that corn-based ethanol will never be a widespread substitute for gasoline and cellulosic ethanol is still years away from commercial viability.

He also warned against relying on any one substitute for fossil fuels. “There is no one silver bullet,” he said. “Anybody that focuses that way will miss a lot of opportunities.”

Cold Turkey, by Kurt Vonnegut (1922-2007)

Excerpt from:
Cold Turkey
May 10, 2004 -- By Kurt Vonnegut

I am of course notoriously hooked on cigarettes. I keep hoping the things will kill me. A fire at one end and a fool at the other.

But I’ll tell you one thing: I once had a high that not even crack cocaine could match. That was when I got my first driver’s license! Look out, world, here comes Kurt Vonnegut.

And my car back then, a Studebaker, as I recall, was powered, as are almost all means of transportation and other machinery today, and electric power plants and furnaces, by the most abused and addictive and destructive drugs of all: fossil fuels.

When you got here, even when I got here, the industrialized world was already hopelessly hooked on fossil fuels, and very soon now there won’t be any more of those. Cold turkey.

Can I tell you the truth? I mean this isn’t like TV news, is it?

Here’s what I think the truth is: We are all addicts of fossil fuels in a state of denial, about to face cold turkey.

And like so many addicts about to face cold turkey, our leaders are now committing violent crimes to get what little is left of what we’re hooked on.

US biofuels: A field in ferment

US biofuels: A field in ferment (Subscription)
December 7, 2006 -- By Katharine Sanderson, Nature

To move US biofuels beyond subsidized corn will be a challenge, reports Katharine Sanderson.

Critics of the US ethanol industry have long derided it as an environmentally questionable subsidy to Mid-western farmers that simply serves a transparently political purpose. Voters in Iowa, the buckle in the US corn belt, get first say in the process of choosing presidential candidates. All such candidates are in favour of turning corn (maize), which the state produces in abundance, into ethanol. This pre-presidential support is good for the Iowan economy, but not necessarily that great for the environment.

Studies that compare the energy that goes into making ethanol — expended during the harvesting, fertilizing and transporting of the corn to refineries, and then refining it — with the energy that is released when it is burned routinely show that the net gain is at best small. The American Coalition for Ethanol says that ethanol contains twice the amount of energy that is used to make it; critics see no net gain whatsoever.

This criticism has had little effect, and since 1980, US ethanol production has risen from an average of 6,500 barrels (1 million litres) a day to 260,000 barrels a day. Federal mandates call for a further doubling by 2012. But it is increasingly clear to many in the industry that the criticisms of corn-based ethanol have merit, and in 2006, the need for an alternative was given the highest profile it could get when President George W. Bush brought it up in his state of the union address. In order to improve US energy security, he said, his government intended to make cellulosic ethanol (ethanol made from the rougher and woodier parts of plants) a competitive biofuel within six years.

Corn stores
The advantage of an ear of corn as a source of ethanol (or for that matter as a bit of food) is that it is mainly starch, which is made up of sugars linked in a regular way with bonds that can be broken easily. Breaking the bonds between sugars and using yeast in the fermentation to produce ethanol is a straightforward task for the biorefineries. The disadvantage is that corn is a crop that needs a lot of inputs — fertilizers, water and pesticides — and that doesn't put as much of the sugar it creates through photosynthesis into its ears as one might wish. A lot of the sugar is instead turned into stalks and 'stover' — structural material rich in cellulose and considerably more difficult to break down.

Plants that store up a significant amount of energy in easily usable forms such as starch or sugar are exceptions, encouraged in their oddities by millennia of selective breeding — and of them all, only sugar cane grown in the tropics puts enough energy into its easily purified products to make bioethanol obviously attractive. Most plants put the bulk of the energy they store up from the sun into cellulose and a related polymer, hemicellulose, and woody plants add another substance, lignin, to the mix. Cellulose makes up the plant's cell walls and, like starch, it is a polymer of sugars containing six carbon atoms linked one to the next. Hemicellulose, on the other hand, is based on a five-carbon sugar, xylose, although it contains many other sugars as well; its various components are thrown together in messy looking chains with many branches. Lignins are huge crosslinked jumbles of organic molecules which reinforce cellulose and hemicellulose to turn them into wood.

The energy that the plants put in to making the bonds in these various substances could, in principle, be extracted by fuel makers. And these molecules — particularly cellulose, which is both the most abundant and the easiest to dismantle — are much more plentiful than starches and sugars. But they are also much harder for microbes to break down; if they weren't, there'd be no trees, just pools of green goo. As yet, there are no cellulosic ethanol refineries operating at full commercial capacity, and assessments of the technology's readiness for market vary a great deal, as do opinions on how to get there from here. Government incentives and tax breaks might be one solution, but big energy companies also have a role to play, as do the smaller companies that have already worked on developing the technology, but have not yet found the best ways of spreading and licensing it.

The most expensive part of making ethanol from cellulose is pretreating the biomass to make it accessible to the enzymes that will then cut the sugars from the polymers so that they can be fermented. Typical pretreatments reduce the feedstock's volume chemically using acids, peroxides and ammonia, often along with some form of mechanical pressing or shredding. Unfortunately, this is not a step that can be skipped to cut costs, says Charles Wyman of the University of California, Riverside, because high sugar yields are essential, and untreated biomass gives very low yields. "The only step more expensive than pretreatment is no pretreatment," he says. Instead, the hunt is on for pre-treatment technologies that involve fewer chemicals, require less energy and don't degrade the sugars that are set free in the process.

After the pre-treatment stage comes the snipping out of the sugars, which is the point at which biotechnologists think they can greatly improve on the current process. Abengoa Bioenergy of St Louis, Missouri, a subsidiary of the Spanish engineering group Abengoa, recently invested $10 million in Dyadic International, a biotechnology company that is concentrating on enzymes for degrading cellulose.

Based in Jupiter, Florida, Dyadic didn't start out as an energy company — in the 1970s it was a leading supplier of pumice for stonewashing jeans. But the enzymatic expertise it developed for distressing denim was then turned to a number of other ends. One of those was breaking down wood, a job that in nature largely falls to fungi. The company's research has centred on a filamentous mess of a fungus discovered by accident in a Russian forest that now, after ten years of processing and genetic engineering, makes up Dyadic's patented C1 fungal cell system. The fungus has been fully sequenced and encouraged to overexpress the genes that then make cellulases and xylanases — the proteins that break up cellulose and hemicellulose to produce fermentable sugars. "We have the world's most prolific filamentous fungus," boasts Dyadic's chief executive Mark Emalfarb.

Cellulose solutions
Emalfarb believes that the cellulosic ethanol market could eventually be worth $20 billion a year in the United States, and suggests that there is enough raw material available in the United States to produce 2.4 billion barrels of cellulosic ethanol a year. This is a bit more than half of what some estimates claim is needed to completely replace petrol as a fuel — the United States gets through some 3.3 billion barrels a year, but the energy content of ethanol is lower than that of petroleum.

The current leader in the cellulosic ethanol market, Iogen, also uses fungal enzymes. The company makes small commercial quantities of ethanol from straw at its pioneering cellulosic ethanol facility in Ottawa, Canada. As the first of its kind, this is an undoubted achievement. But even when it reaches its full capacity, which it is taking quite some time to do, it will be capable of producing only 2.5 million litres (16,000 barrels) a year, which is not a great deal.

Iogen chief executive Brian Foody is not worried. The critical steps for getting the right enzymes, the right pretreatment systems and the right yeast systems, have all been done, he says. "We just need to go through the nuts and bolts of the process." This means making sure that the demonstration plant works well enough to be replicated elsewhere — the company is looking to build new facilities in Idaho, Saskatchewan and Germany.

Iogen recently secured a $30-million investment from the bankers Goldman Sachs, bringing the total invested in it since the 1970s up to $130 million. But not all potential investors are convinced. "I don't really understand what Iogen is doing," says Matt Drinkwater, market analyst at New Energy Finance in London, UK. And his concerns are not unique to Iogen — many of the companies in the sector, he says, hold details of their processes so close to their chests that they are hard to evaluate, whether they be relatively small outfits such as Iogen or giants such as DuPont, which is also developing cellulosic ethanol technologies. Robert Wilder, who manages the Wilderhill clean energy index — the first such index to be accepted on Wall Street — agrees, but acknowledges the constraints that the chief executives of small cellulosic ethanol companies work under in terms of not tipping their hands to larger competitors.

Smells like green spirit
Perhaps because of these uncertainties over the technology's readiness, most of the money that has been invested recently in ethanol production both within the United States and beyond has been in the more traditional technologies. The sizable investments being made by agribusiness giant Archer Daniels Midland — the biggest ethanol producer in the United States and, perhaps tellingly, a company run by a chief executive who was recruited from the oil industry — seem mostly to be in traditional corn ethanol. The same applies to high-flying UK entrepreneur Richard Branson's recent investments in Ethanol Grain Processors of Tennessee and a new grain-based Californian ethanol venture, Cilion.

But there is some evidence that enthusiasm for investing in corn ethanol may be waning. Various ethanol companies that were riding high earlier in the year saw their stock slump after the summer when oil prices came down from their $78 a barrel peak.

This might mean the market is aware that, although subsidies may be able to keep it profitable for the time being, there is no way that corn ethanol can make a marked difference to long-term energy use in the United States. To make enough ethanol to start seriously displacing oil imports requires a process that can use cellulosic materials such as switchgrass, a tall prairie grass, or miscanthus, a grass imported from Asia, which provide far more tonnes of biomass per hectare than corn kernels ever can, and can be grown on land not suitable for conventional agriculture. Other sources could be farm waste or trees or newly engineered plants of some sort.. This leads to something of an investing impasse: the companies in the business at the moment make money; the ones that might take it to the next stage do not, in large part because no one has made the heavy capital investments needed for plants that make use of the technologies that have already been piloted.

One way round this is to invest across the board. This is the strategy pursued by Vinod Khosla, the Silicon Valley venture capitalist who is one of the founders of Cilion. Khosla is also involved in cellulosic technologies through two companies based in Cambridge, Massachusetts: Celunol, which has just started to operate its own pilot plant, and Mascoma, which concentrates on process engineering and which last month raised $30 million in second-round venture funding. Farther afield in the biofuels world, Khosla is also a major investor in Kergy, a company that turns biomass into fuel in a completely different 'thermochemical' way, using just heat and catalysts. For some observers, such as Dan Schrag, a geochemist at Harvard University, these approaches are more attractive than fermentation, not least because they need no witches' brews made from fiddly feedstock-specific enzyme. "When the dust clears, cellulosic ethanol is unlikely to be where we end up," he predicts.

To Drinkwater, investors such as Khosla, with their broad-based approach to the problem, are exactly what the industry needs to drive the market forwards and get it over the final bump it needs to clear before commercial success. Unfortunately, there are few such people. In their absence, many in the industry, not without self-interest, see the responsibility resting with governments to provide attractive tax incentives. "All forms of energy should face market prices that reflect the cost to society that they impose," says Foody. And to set those market prices, the right tax incentives and government mandates need to be in place.

But government incentives won't make the scientists any smarter, and observers outside the pioneering companies believe there is still basic work to be done before those companies, or their eventual competitors, make the process economically viable. Thus they welcome increasing levels of basic research from the government, such as the US Department of Energy's pledge of $250 million to set up two bioenergy research centres that are largely focused on cellulosic ethanol. The European Union has set aside E100 million (US$132 million) for cellulosic ethanol in its seventh Framework Programme on research.

Ethanol alternative
Companies large enough to afford it are also following the basic research route rather than placing early bets on particular technologies. BP has announced it will invest $500 million over ten years to fund an Energy Biosciences Institute, which will be a dedicated facility based at a university. The University of Cambridge, Imperial College London, Massachusetts Institute of Technology, Stanford, the University of California, Berkeley, and Lawrence Berkeley National Laboratory have all been mentioned as possible hosts — the final decision is expected in December.

One intriguing possibility for such research to pursue is replacing ethanol with another form of alcohol. The fact that ethanol is easy to ferment can blind people to the fact that it has almost as many inherent problems as a fuel as corn has as a feedstock. Its tendency to pick up water wherever it goes makes it hard to transport, particularly in pipelines. It's corrosive. It's more volatile than one might wish. And its energy density is low compared with regular petrol.

For these reasons, BP and DuPont are working with British Sugar to adapt their ethanol fermentation facility in East Anglia to produce butanol — an alcohol with four carbons in it, as opposed to ethanol's two. This requires training microbes in new tricks, but it is not as hard a problem as breaking down woody plant material. The East Anglia plant will use locally grown sugar beet as the feedstock, but in the long term the aim would be to use a cellulosic feedstock. "We accept that taking stuff out of the food chain is not the right way to go," says Robert Wine, a BP spokesman.

Drinkwater thinks that an industry demand for butanol as an end product could actually increase interest in cellulosic approaches. "Most refiners would be much happier to use butanol than ethanol," he says. If oil companies become confident in biofuel technologies, investors would in turn be more confident of the biofuels industry as a whole, giving the industry that elusive final shove that it seems to need.

Green shoots of growth

Green shoots of growth (Subscription)
December 7, 2006 -- Editorial, Nature

Energy from biomass is an idea whose time has returned.

Until the twentieth century, biomass was humanity's principal source of energy, heating our stoves and feeding our draught animals. Even today, roughly 10% of all our energy comes from biomass — far more than from any other renewable energy source or, for that matter, from nuclear fission.

But this use of biomass for energy supply is accompanied by many challenges. For one thing, it is often not all that renewable — the biomass sources that provide firewood to the world's poor, for example, are not being replanted. For another, it is very inefficient: gathering firewood takes a long time. The history of the past couple of centuries has been in large part one of people moving away from biomass as soon as they can afford to do so.

Three recent developments have spurred renewed interest in biomass, however. One is the need to reduce greenhouse-gas emissions. The requirement for other external energy inputs during biomass processing means that it often involves some net carbon emissions — but the amount of carbon dioxide given off by burning biomass is the same as that taken from the atmosphere by photosynthesis in the first place. If biomass projects could sequester carbon, either by enriching the soil beneath plantations or by storing any carbon dioxide produced in combustion, they could even be carbon negative — a unique selling point for this energy source.

The other two developments are the upward movement in the prices of oil and natural gas, and the related revival of concerns about the security of their supply. Most nations are seeking home-based energy sources that do not rely on political stability in the Middle East or Russia.

It seems unlikely that these factors will provide sufficient impetus to propel biomass energy to the very front rank of possible alternatives to fossil fuels. But biomass clearly has a potential role as part of a portfolio of energy sources for the twenty-first century.

If that role is to be fulfilled, two things need to happen. Nations have to build regulatory mechanisms that recognize the carbon benefits of technologies such as biomass — through emissions pricing, a carbon tax or a combination of the two. And intensive research needs to be conducted into both the efficient production of biomass and its conversion into useable energy.

One focal point for such research should be finding ways to grow biomass quickly and in an easily processed form while minimizing external inputs, such as fertilizer and pesticides. Another is the systems engineering of farms and ecosystems, finding ways to fit biomass projects into and around present land use and possible changes in farming practice.

A major attraction of biomass is that it is likely to benefit poorer countries, which tend to be in tropical regions where plants grow quickly. There is plenty of scope for more collaboration between developing countries on biomass research and development, both to meet local needs and for export.

But this requires consideration of the local and global ecological impact of biomass expansion. Vast tropical monocultures eating away at primary forests — as exemplified by the production of palm oil in Indonesia — will benefit no one, except those who profit from selling the fuel. In effect, such approaches take green subsidies from richer countries, and use them to despoil the tropics.

Similar problems afflict existing biomass programmes in the United States, where ethanol refineries often burn fossil fuel and are reliant on subsidized corn monoculture. More innovative approaches would include firing the refineries with agricultural waste, and feeding them with plants of many different species. Biomass energy should be developed energetically, but within the context of appropriate environmental policies, and using approaches that are both sustainable and cost-effective.

Do We Tax Energy Enough?

Here is the link with audio and video of this great discussion as well as related papers by Hassett and Parry. I would recommend signing up for a free subscription to Resources by Resources for the Future as well as reading Greg Mankiw's blog. Below is an introduction to the discussion.

Do We Tax Energy Enough?
March 29, 2007 -- American Enterprise Institute For Public Policy Research

What are the advantages and disadvantages of carbon and gasoline taxes? Ian W. H. Parry of Resources for the Future and AEI’s Kenneth P. Green, Kevin A. Hassett, and N. Gregory Mankiw will examine the pros and cons of carbon and gasoline taxes, discuss possible levels at which they could be set, and compare taxation to regulation as an alternative way to address environmental concerns.

Corn Can't Solve Our Problem

Corn Can't Solve Our Problem
March 25, 2007 -- By David Tilman and Jason Hill, The Washington Post

The world has come full circle. A century ago our first transportation biofuels -- the hay and oats fed to our horses -- were replaced by gasoline. Today, ethanol from corn and biodiesel from soybeans have begun edging out gasoline and diesel.

This has been hailed as an overwhelmingly positive development that will help us reduce the threat of climate change and ease our dependence on foreign oil. In political circles, ethanol is the flavor of the day, and presidential candidates have been cycling through Iowa extolling its benefits. Lost in the ethanol-induced euphoria, however, is the fact that three of our most fundamental needs -- food, energy, and a livable and sustainable environment -- are now in direct conflict. Moreover, our recent analyses of the full costs and benefits of various biofuels, performed at the University of Minnesota, present a markedly different and more nuanced picture than has been heard on the campaign trail.

Some biofuels, if properly produced, do have the potential to provide climate-friendly energy, but where and how can we grow them? Our most fertile lands are already dedicated to food production. As demand for both food and energy increases, competition for fertile lands could raise food prices enough to drive the poorer third of the globe into malnourishment. The destruction of rainforests and other ecosystems to make new farmland would threaten the continued existence of countless animal and plant species and would increase the amount of climate-changing carbon dioxide in the atmosphere.

Finding and implementing solutions to the food, fuel and environment conflict is one of the greatest challenges facing humanity. But solutions will be neither adopted nor sought until we understand the interlinked problems we face.

Fossil fuel use has pushed atmospheric carbon dioxide higher than at any time during the past half-million years. The global population has increased threefold in the past century and will increase by half again, to 9 billion people, by 2050. Global food and fossil energy consumption are on trajectories to double by 2050.

Biofuels, such as ethanol made from corn, have the potential to provide us with cleaner energy. But because of how corn ethanol currently is made, only about 20 percent of each gallon is "new" energy. That is because it takes a lot of "old" fossil energy to make it: diesel to run tractors, natural gas to make fertilizer and, of course, fuel to run the refineries that convert corn to ethanol.

If every one of the 70 million acres on which corn was grown in 2006 was used for ethanol, the amount produced would displace only 12 percent of the U.S. gasoline market. Moreover, the "new" (non-fossil) energy gained would be very small -- just 2.4 percent of the market. Car tune-ups and proper tire air pressure would save more energy.

There is another problem with relying on a food-based biofuel, such as corn ethanol, as the poor of Mexico can attest. In recent months, soaring corn prices, sparked by demand from ethanol plants, have doubled the price of tortillas, a staple food. Tens of thousands of Mexico City's poor recently protested this "ethanol tax" in the streets.

In the United States, the protests have also begun -- in Congress. Representatives of the dairy, poultry and livestock industries, which rely on corn as a principal animal feed, are seeking an end to subsidies for corn ethanol in the hope of stabilizing corn prices. (It takes about three pounds of corn to produce a pound of chicken, and seven or eight pounds to grow a pound of beef.) Profit margins are being squeezed, and meat prices are rising.

U.S. soybeans, which are used to make biodiesel, may be about to follow corn's trajectory, escalating the food vs. fuel conflict. The National Biodiesel Board recently reported that 77 biodiesel production plants are under construction and that eight established plants are expanding capacity.

In terms of environmental impact, all biofuels are not created equal. Ethanol is the same chemical product no matter what its source. But ethanol made from prairie grasses, from corn grown in Illinois and from sugar cane grown on newly cleared land in Brazil have radically different impacts on greenhouse gases.

Corn, like all plants, is a natural part of the global carbon cycle. The growing crop absorbs carbon dioxide from the atmosphere, so burning corn ethanol does not directly create any additional carbon. But that is only part of the story. All of the fossil fuels used to grow corn and change it into ethanol release new carbon dioxide and other greenhouse gases. The net effect is that ethanol from corn grown in the Corn Belt does increase atmospheric greenhouse gases, and this increase is only about 15 percent less than the increase caused by an equivalent amount of gasoline. Soybean biodiesel does better, causing a greenhouse gas increase that is about 40 percent less than that from petroleum diesel.

In Brazil, ethanol made from sugar cane produces about twice as much ethanol per acre as corn. Brazilian ethanol refineries get much of their power from burning cane residue, in effect recycling carbon from the atmosphere. The environmental benefit is large. Sugar-cane ethanol grown on established soils releases 80 percent less greenhouse gases than gasoline.

But that isn't the case for sugar-cane ethanol or soybean biodiesel from Brazil's newly cleared lands, including tropical forests and savannas. Clearing land releases immense amounts of greenhouse gases into the air, because much of the material in the plants and soil is broken down into carbon dioxide.

Plants and soil contain three times more carbon than the atmosphere. The trees and soil of an acre of rainforest -- which, once cleared, is suitable for growing soybeans -- contain about 120 tons of organic carbon. An acre of tropical woodland or savanna, suitable for sugar cane, contains about half this amount. About a fourth of the carbon in an ecosystem is released to the atmosphere as carbon dioxide when trees are clear-cut, brush and branches are burned or rot, and roots decay. Even more is lost during the first 20 to 50 years of farming, as soil carbon decomposes into carbon dioxide and as wood products are burned or decay.

This means that when tropical woodland is cleared to produce sugar cane for ethanol, the greenhouse gas released is about 50 percent greater than what occurs from the production and use of the same amount of gasoline. And that statistic holds for at least two decades.

Simply being "renewable" does not automatically make a fuel better for the atmosphere than the fossil fuel it replaces, nor guarantee that society gains any new energy by its production. The European Union was recently shocked to learn that some of its imported biodiesel, derived from palm trees planted on rain-forest lands, was more than twice as bad for climate warming as petroleum diesel. So much for the "benefits" of that form of biodiesel.

Although current Brazilian ethanol is environmentally friendly, the long-term environmental implications of buying more ethanol and biodiesel from Brazil, a possibility raised recently during President Bush's trip to that country, are cloudy. It could be harmful to both the climate and the preservation of tropical plant and animal species if it involved, directly or indirectly, additional clearing of native ecosystems.

Concerns about the environmental effects of ethanol production are starting to be felt in the United States as well. It appears that American farmers may add 10 million acres of corn this year to meet booming demand for ethanol. Some of this land could come from millions of acres now set aside nationwide for conservation under a government-subsidized program. Those uncultivated acres absorb atmospheric carbon, so farming them and converting the corn into ethanol could release more carbon dioxide into the air than would burning gasoline.

There are biofuel crops that can be grown with much less energy and chemicals than the food crops we currently use for biofuels. And they can be grown on our less fertile land, especially land that has been degraded by farming. This would decrease competition between food and biofuel. The United States has about 60 million acres of such land -- in the Conservation Reserve Program, road edge rights-of-way and abandoned farmlands.

In a 10-year experiment reported in Science magazine in December, we explored how much bioenergy could be produced by 18 different native prairie plant species grown on highly degraded and infertile soil. We planted 172 plots in central Minnesota with various combinations of these species, randomly chosen. We found, on this highly degraded land, that the plots planted with mixtures of many native prairie perennial species yielded 238 percent more bioenergy than those planted with single species. High plant diversity led to high productivity, and little fertilizer or chemical weed or pest killers was required.

The prairie "hay" harvested from these plots can be used to create high-value energy sources. For instance, it can be mixed with coal and burned for electricity generation. It can be "gasified," then chemically combined to make ethanol or synthetic gasoline. Or it can be burned in a turbine engine to make electricity. A technique that is undergoing rapid development involves bioengineering enzymes that digest parts of plants (the cellulose) into sugars that are then fermented into ethanol.

Whether converted into electricity, ethanol or synthetic gasoline, the high-diversity hay from infertile land produced as much or more new usable energy per acre as corn for ethanol on fertile land. And it could be harvested year after year.

Even more surprising were the greenhouse gas benefits. When high-diversity mixtures of native plants are grown on degraded soils, they remove carbon dioxide from the air. Much of this carbon ends up stored in the soil. In essence, mixtures of native plants gradually restore the carbon levels that degraded soils had before being cleared and farmed. This benefit lasts for about a century.

Across the full process of growing high-diversity prairie hay, converting it into an energy source and using that energy, we found a net removal and storage of about a ton and a half of atmospheric carbon dioxide per acre. The net effect is that ethanol or synthetic gasoline produced from this grass on degraded land can provide energy that actually reduces atmospheric levels of carbon dioxide.

When one of these carbon-negative biofuels is mixed with gasoline, the resulting blend releases less carbon dioxide than traditional gasoline.

Biofuels, if used properly, can help us balance our need for food, energy and a habitable and sustainable environment. To help this happen, though, we need a national biofuels policy that favors our best options. We must determine the carbon impacts of each method of making these fuels, then mandate fuel blending that achieves a prescribed greenhouse gas reduction. We have the knowledge and technology to start solving these problems.

Food to Fuel Increases World Food Prices

Massive Diversion of U.S. Grain To Fuel Cars Is Raising World Food Prices
March 21, 2007 -- By Lester R. Brown, Earth Policy Institute

ECO-ECONOMY UPDATE:
Massive Diversion of U.S. Grain To Fuel Cars Is Raising World Food Prices

If you think you are spending more each week at the supermarket, you may be right. The escalating share of the U.S. grain harvest going to ethanol distilleries is driving up food prices worldwide.

Corn prices have doubled over the last year, wheat futures are trading at their highest level in 10 years, and rice prices are rising too. In addition, soybean futures have risen by half. A Bloomberg analysis notes that the soaring use of corn as the feedstock for fuel ethanol “is creating unintended consequences throughout the global food chain.”

The countries initially hit by rising food prices are those where corn is the staple food. In Mexico, one of more than 20 countries with a corn-based diet, the price of tortillas is up by 60 percent. Angry Mexicans in crowds of up to 75,000 have taken to the streets in protest, forcing the government to institute price controls on tortillas.

Food prices are also rising in China, India, and the United States, countries that contain 40 percent of the world’s people. While relatively little corn is eaten directly in these countries, vast quantities are consumed indirectly in meat, milk, and eggs in both China and the United States.

Rising grain and soybean prices are driving up meat and egg prices in China. January pork prices were up 20 percent above a year earlier, eggs were up 16 percent, while beef, which is less dependent on grain, was up 6 percent.

In India, the overall food price index in January 2007 was 10 percent higher than a year earlier. The price of wheat, the staple food in northern India, has jumped 11 percent, moving above the world market price.

In the United States, the U.S. Department of Agriculture projects that the wholesale price of chicken in 2007 will be 10 percent higher on average than in 2006, the price of a dozen eggs will be up a whopping 21 percent, and milk will be 14 percent higher. And this is only the beginning.

In the past, food price rises have usually been weather related and always temporary. This situation is different. As more and more fuel ethanol distilleries are built, world grain prices are starting to move up toward their oil-equivalent value in what appears to be the beginning of a long-term rise.

The food and energy economies, historically separate, are now merging. In this new economy, if the fuel value of grain exceeds its food value, the market will move it into the energy economy. As the price of oil climbs so will the price of food.

Some 16 percent of the 2006 U.S. grain harvest was used to produce ethanol. With 80 or so ethanol distilleries now under construction, enough to more than double existing ethanol production capacity, nearly a third of the 2008 grain harvest will be going to ethanol.

Since the United States is the leading exporter of grain, shipping more than Canada, Australia, and Argentina combined, what happens to the U.S. grain crop affects the entire world. With the massive diversion of grain to produce fuel for cars, exports will drop. The world’s breadbasket is fast becoming the U.S. fuel tank.

The number of hungry people in the world has been declining for several decades, but in the late 1990s the trend reversed and the number began to rise. The United Nations currently lists 34 countries as needing emergency food assistance. Many of these are considered failed and failing states, including Chad, Iraq, Liberia, Haiti, and Zimbabwe. Since food aid programs typically have fixed budgets, if the price of grain doubles, food aid will be reduced by half.

Urban food protests in response to rising food prices in low and middle income countries, such as Mexico, could lead to political instability that would add to the growing list of failed and failing states. At some point, spreading political instability could disrupt global economic progress.

Against this backdrop, Washington is consumed with “ethanol euphoria.” President Bush in his State of the Union address set a production goal for 2017 of 35 billion gallons of alternative fuels, including grain-based and cellulosic ethanol, and liquefied coal. Given the current difficulties in producing cellulosic ethanol at a competitive cost and given the mounting public opposition to liquefied coal, which is far more carbon-intensive than gasoline, most of the fuel to meet this goal might well have to come from grain. This could take most of the U.S. grain harvest, leaving little grain to meet U.S. needs, much less those of the hundred or so countries that import grain.

The stage is now set for direct competition for grain between the 800 million people who own automobiles, and the world’s 2 billion poorest people. The risk is that millions of those on the lower rungs of the global economic ladder will start falling off as higher food prices drop their consumption below the survival level.

In February 2007 the World Food Programme Director James T. Morris reported that 18,000 children are now dying every day from hunger and malnutrition. This daily loss of life is six times the number of U.S. combat fatalities in Iraq over the last four years.

There are alternatives to this grim scenario. A rise in auto fuel efficiency standards of 20 percent, phased in over the next decade would save as much oil as converting the entire U.S. grain harvest into ethanol.

One option that is gaining momentum is a shift to plug-in hybrids. Adding a second storage battery to a gas-electric hybrid car along with a plug-in capacity so that the batteries can be recharged at night allows most short-distance driving—daily commuting and grocery shopping, for example—to be done with electricity. If this shift were accompanied by investment in thousands of wind farms that could feed cheap electricity into the grid, then cars could run largely on electricity for the equivalent cost of $1 per gallon gasoline.

Encouragingly, three auto manufacturers—Toyota, Nissan, and GM—have announced plans to bring plug-in hybrid cars to market. Plug-In Partners, which is spearheading a national campaign to shift to plug-in hybrid cars, already has 508 partners, including electrical utilities, corporations, state and city governments, and farm and environmental groups. Among its fast-growing list of partners are the American Public Power Association, Electric Power Research Institute, American Wind Energy Association, American Corn Growers Association, and the cities of Los Angeles, Dallas, Chicago, and Boston. Already a number of Partners have collectively pledged to purchase for their own fleets more than 8,000 plug-in hybrids as soon as they reach the market.

Ethanol euphoria is not an acceptable substitute for a carefully thought through policy. For Washington, it is time to decide whether to continue with the current policy of subsidizing more and more grain-based fuel distilleries or to encourage a shift to more fuel-efficient cars and a new automotive fuel economy centered on plug-in hybrid cars and wind energy. The choice is between a future of rising world food prices, spreading hunger, and growing political instability, or one of stable food prices, sharply reduced dependence on oil, and much lower carbon emissions.

Distillery Demand For Grain To Fuel Cars Vastly Understated

Distillery Demand For Grain To Fuel Cars Vastly Understated: World May Be Facing Highest Grain Prices in History
January 4, 2007 -- By Lester R. Brown, Earth Policy Institute

ECO-ECONOMY UPDATE:
World May Be Facing Highest Grain Prices in History

Investment in fuel ethanol distilleries has soared since the late-2005 oil price hikes, but data collection in this fast-changing sector has fallen behind. Because of inadequate data collection on the number of new plants under construction, the quantity of grain that will be needed for fuel ethanol distilleries has been vastly understated. Farmers, feeders, food processors, ethanol investors, and grain-importing countries are basing decisions on incomplete data.

The U.S. Department of Agriculture (USDA) projects that distilleries will require only 60 million tons of corn from the 2008 harvest. But here at the Earth Policy Institute (EPI), we estimate that distilleries will need 139 million tons—more than twice as much. If the EPI estimate is at all close to the mark, the emerging competition between cars and people for grain will likely drive world grain prices to levels never seen before. The key questions are: How high will grain prices rise? When will the crunch come? And what will be the worldwide effect of rising food prices?

One reason for the low USDA projection is that it was released in February 2006, well before the effect of surging oil prices on investment in fuel ethanol distilleries was fully apparent. Beyond this, USDA relies heavily on the Renewable Fuels Association (RFA), a trade group, for data on ethanol distilleries under construction, but the RFA data have lagged behind movement in the industry.

We drew on four firms that collect and publish data on U.S. ethanol distilleries under construction. RFA is the one most frequently cited. The other three firms are Europe-based F.O. Licht, the publisher of World Ethanol and Biofuels Report; BBI International, which publishes Ethanol Producer Magazine; and the American Coalition for Ethanol (ACE), publisher of Ethanol Today.

Unfortunately, the lists of plants under construction maintained by RFA, BBI, and ACE are not complete. Each contains some plants that are not on the other lists. Drawing on these three lists and on biweekly reports from F.O. Licht, EPI has compiled a more complete master list. For example, while we show 79 plants under construction, RFA lists 62 plants. (We welcome any information that will improve this list, which can be viewed at www.earthpolicy.org/Updates/2007/Update63_data.htm).

According to the EPI compilation, the 116 plants in production on December 31, 2006, were using 53 million tons of grain per year, while the 79 plants under construction—mostly larger facilities—will use 51 million tons of grain when they come online. Expansions of 11 existing plants will use another 8 million tons of grain (1 ton of corn = 39.4 bushels = 110 gallons of ethanol).

In addition, easily 200 ethanol plants were in the planning stage at the end of 2006. If these translate into construction starts between January 1 and June 30, 2007, at the same rate that plants did during the final six months of 2006, then an additional 3 billion gallons of capacity requiring 27 million more tons of grain will likely come online by September 1, 2008, the start of the 2008 harvest year. This raises the corn needed for distilleries to 139 million tons, half the 2008 harvest projected by USDA. This would yield nearly 15 billion gallons of ethanol, satisfying 6 percent of U.S. auto fuel needs. (And this estimate does not include any plants started after June 30, 2007, that would be finished in time to draw on the 2008 harvest).

This unprecedented diversion of the world’s leading grain crop to the production of fuel will affect food prices everywhere. As the world corn price rises, so too do those of wheat and rice, both because of consumer substitution among grains and because the crops compete for land. Both corn and wheat futures were already trading at 10-year highs in late 2006.

The U.S. corn crop, accounting for 40 percent of the global harvest and supplying 70 percent of the world’s corn exports, looms large in the world food economy. Annual U.S. corn exports of some 55 million tons account for nearly one fourth of world grain exports. The corn harvest of Iowa alone, which edges out Illinois as the leading producer, exceeds the entire grain harvest of Canada. Substantially reducing this export flow would send shock waves throughout the world economy.

Robert Wisner, Iowa State University economist, reports that Iowa’s demand for corn from processing plants that were on line, expanding, under construction, or being planned as of late 2006 totaled 2.7 billion bushels. Yet even in a good year the state harvests only 2.2 billion bushels. As distilleries compete with feeders for grain, Iowa could become a corn importer.

With corn supplies tightening fast, rising prices will affect not only products made directly from corn, such as breakfast cereals, but also those produced using corn, including milk, eggs, cheese, butter, poultry, pork, beef, yogurt, and ice cream. The risk is that soaring food prices could generate a consumer backlash against the fuel ethanol industry.

Fuel ethanol proponents point out, and rightly so, that the use of corn to produce ethanol is not a total loss to the food economy because 30 percent of the corn is recovered in distillers dried grains that can be fed to beef and dairy cattle, pigs, and chickens, though only in limited amounts. They also argue that the U.S. distillery demand for corn can be met by expanding land in corn, mostly at the expense of soybeans, and by raising yields. While it is true that the corn crop can be expanded, there is no precedent for growth on the scale needed. And this soaring demand for corn comes when world grain production has fallen below consumption in six of the last seven years, dropping grain stocks to their lowest level in 34 years.

From an agricultural vantage point, the automotive demand for fuel is insatiable. The grain it takes to fill a 25-gallon tank with ethanol just once will feed one person for a whole year. Converting the entire U.S. grain harvest to ethanol would satisfy only 16 percent of U.S. auto fuel needs.

The competition for grain between the world’s 800 million motorists who want to maintain their mobility and its 2 billion poorest people who are simply trying to survive is emerging as an epic issue. Soaring food prices could lead to urban food riots in scores of lower-income countries that rely on grain imports, such as Indonesia, Egypt, Algeria, Nigeria, and Mexico. The resulting political instability could in turn disrupt global economic progress, directly affecting all countries. It is not only food prices that are at stake, but trends in the Nikkei Index and the Dow Jones Industrials as well.

There are alternatives to creating a crop-based automotive fuel economy. The equivalent of the 2 percent of U.S. automotive fuel supplies now coming from ethanol could be achieved several times over, and at a fraction of the cost, by raising auto fuel efficiency standards by 20 percent.

If we shift to gas-electric hybrid plug-in cars over the next decade, we could be doing short-distance driving, such as the daily commute or grocery shopping, with electricity. If we then invested in thousands of wind farms to feed cheap electricity into the grid, U.S. cars could run primarily on wind energy—and at the gasoline equivalent of less than $1 a gallon. The stage is set for a crash program to help Detroit switch to gas-electric hybrid plug-in cars.

It is time for a moratorium on the licensing of new distilleries, a time-out, while we catch our breath and decide how much corn can be used for ethanol without dramatically raising food prices. The policy goal should be to use just enough fuel ethanol to support corn prices and farm incomes but not so much that it disrupts the world food economy. Meanwhile, a much greater effort is needed to produce ethanol from cellulosic sources such as switchgrass, a feedstock that is not used for food.

The world desperately needs a strategy to deal with the emerging food-fuel battle. As the leading grain producer, grain exporter, and ethanol producer, the United States is in the driver’s seat. We need to make sure that in trying to solve one problem—our dependence on imported oil—we do not create a far more serious one: chaos in the world food economy.

Is It Time for a New Tax on Energy?

Is It Time for a New Tax on Energy?
February 9, 2007 -- By Phil Izzo, Wall Street Journal

Economists Say Government Should Foster Alternatives – But Not How Bush Proposes

The government should encourage development of alternatives to fossil fuels, economists said in a WSJ.com survey. But most say the best way to do that isn't in President Bush's energy proposals: a new tax on fossil fuels.

Forty of 47 economists who answered the question said the government should help champion alternative fuels. Economists generally are in favor of free-market solutions, but there are times when you need to intervene," said David Wyss at Standard & Poor's Corp. "We're already in the danger zone" because of the outlook for oil supplies and concerns about climate change, he said.

A majority of the economists said a tax on fossil fuels would be the most economically sound way to encourage alternatives. A tax would raise the price of fossil fuels and make alternatives, which today often are more costly to produce, more competitive in the consumer market. "A tax puts pressure on the market, rather than forcing an artificial solution on it," said Mr. Wyss.

President Bush has made a strong push on energy initiatives over the past month but he has steered clear of proposals that would raise taxes. In his State of the Union address, Mr. Bush set targets that call for a 20% reduction in gasoline use over the next 10 years. He proposed regulations to tighten gas-mileage standards and force fuel suppliers to use more alternative fuels. In addition, his budget proposal presented to Congress this week provides substantial funding for biofuel, clean coal and renewable energy programs.

In the survey, which was conducted Feb. 2-7, just two economists recommended regulations that require energy companies use more alternatives, one of the keys of the Bush plan, while six advised subsidies for producers of alternative fuels. "With subsidies, the government chooses the market solution," said Diane Swonk at Mesirow Financial. "I'd favor taxes in this area."

Other economists in the survey, though, said the smartest course for the government is to let market forces determine the future of alternative energies. "The more we mess with things the more problems we create," said Brian S. Wesbury of First Trust Advisors. "Government interference in the marketplace can do damage to long-term development of alternate energies."

Biggest Economic Risks

Although crude-oil prices have eased from levels hit last year, the economists said dependence on fossil fuels remains a threat. When asked to pick the greater geopolitical threat to the economy, by almost an 3-to-1 margin the economists chose a disruption in crude oil supplies caused by tensions in the Mideast over the impact on spending and confidence that could follow a major terrorist attack. "The economy has already proven it can survive terror attacks. It had a harder time with almost $80 per barrel oil," said Ms. Swonk.

The economists generally expect oil to remain below $60 a barrel for the remainder of this year. The average forecast puts crude oil futures at $57.98 a barrel in June and $58.72 in December. That roughly matches the price at which crude futures have traded in New York this week, but is well below the nominal highs set last year at around $77 a barrel.

"Demand for energy is going to grow, and energy likely to come from existing sources isn't going to grow fast enough," said Daniel Laufenberg at Amerprise Financial. "It's not a crisis today, but higher prices are telling us now is the time the start preparing."

Sarbanes-Oxley Fallout

The survey also gauged economists' sentiment on concerns expressed by business leaders that Sarbanes-Oxley rules, other regulatory enforcement and litigation are hurting the competitiveness of U.S. financial markets. Twelve of 51 economists who responded to the question said they feel these forces are hurting market competitiveness "a lot and are a serious threat to the economy." Thirty-six of the economists said markets are being hurt some but not enough to be a major economic worry.

Regarding Sarbanes Oxley specifically, a majority – 26 of 50 economists – said they believe the rules have had a "more negative than positive" impact on the economy. Four others said the impact has been entirely negative. In contrast, 19 economists deemed the impact "more positive than negative" and one said it has been an entirely positive influence on the economy.

Among other findings in the survey:

• Economists, on average, increased their forecast for first-quarter gross domestic product growth by three-tenths of a percentage point to 2.5% following the release of the government's first estimate of fourth-quarter growth last week. That report put growth for the period at a 3.5% rate. GDP is the broadest measure of economic output. Expectations of modest improvement in growth for the rest of the year were changed little. For the fourth quarter of 2007, the economists forecast growth at a 3% rate.

• The economists are skeptical that the federal budget will be balanced by 2012, a goal that is shared by President Bush and Democratic leaders. The economists put the probability of attaining that goal at 32%.

• There is a split on where the Federal Reserve's federal-funds rate is headed this year. Some 69% of respondents expect the next move to be a decrease, while 31% see a rate increase on the horizon. However, most don't see any move until some time in the summer.

• Sentiment improved a bit on the outlook for home prices. On average, economists expect a closely watched index calculated by the Office of Federal Housing Enterprise Oversight will show that prices rose 3.52% last year, up from an earlier forecast of 2.76%. Ofheo's report on 2006 prices is expected to be released early next month. For 2007, the economists see a price decline of 0.18% compared to an earlier forecast of a 0.49% decline. However, when one outlier, who forecast a 20% drop, is removed, the economists expect a modest gain in home prices this year.

Corn-based ethanol's a flawed concept

Corn-based ethanol's a flawed concept
February 16, 2007 -- By Myra P. Saefong, MarketWatch

Ethanol as an alternative energy source is a flawed concept -- at least when corn is used to produce it.

And the consequences of using corn to create ethanol are far-ranging - they even impact consumers and the price they pay for meat.

So is it worth it? It depends who you ask.

"There have been numerous studies completed regarding the energy efficiency of ethanol vs. its production," said John Eichberger, vice president of government relations for the National Association of Convenience Stores.

"These range from a positive net energy return in excess of 30% to a negative net energy return of more than 30%," he said. "Researchers on both sides of the issue argue that the other research is significantly flawed."

Even so, policymakers insist that ethanol is a "positive replacement product for crude-oil based fuels and have proceeded down a path to subsidize and mandate its use," said Eichberger, whose trade organization represents the convenience and petroleum-retailing industry.

There's no doubt that renewable fuels are a good idea, said Darin Newsom, a senior analyst at Omaha, Nebraska-based DTN. "That means putting more research into more efficient ways" of making them.

That said, "corn is a short-term end to the means."

Invest energy to get energy

"Some of the warts associated with ethanol production are [real] -- it does use a lot of water, electricity and natural gas," said Newsom.

So "the problem with corn-based ethanol is that, at best, you don't get more energy out of it than it costs to grow and make it," said Sean Brodrick, a contributing editor at MoneyandMarkets.com.

"At worst, you lose energy."

A math and science lesson is in order.

An easy-to-read measure of whether ethanol's economically viable can be derived from taking a look at its "energy return on energy invested," or EROI, according to Brodrick.

"It is at the crux of why corn-based ethanol is a boondoggle," he said.

EROI can be expressed as "net energy," he explains. The EROI for corn-based ethanol is 1.2:1, so the net energy is 0.2, he said.

That means you put in 1 British thermal unit to get 1.2 BTUs from it, he said.

"At EROI of 1.2 to 1, the 3.9 billion gallons that the U.S. produced in 2005 required 3.29 billion gallons of BTU energy input, resulting in a 'net energy' of 610 million gallons," he said.

And that's being generous, he said. "There are some computations that show corn-based ethanol has a net energy of zero. Others show it as a net energy loser."

So it all depends on how you look at it.

A "break even" with the cost of production would be largely based on the cost of crude oil and the cost of corn, said Rick Kment, an analyst at DTN.

For example, if crude-oil prices are at $70 to $100 per barrel, very high corn prices can be paid and ethanol can still economically work in the system, he said.

But with $30 crude and $4 corn, "it becomes unprofitable," he said.

At current price levels, DTN estimates a net profit -- after depreciation and all other factors -- to be near 5 cents per gallon of ethanol produced, he said.

That's down from a 50-cent per gallon net profit at the first of the year, and down from $2.50 a gallon in June 2006, Kment said.

March crude-oil futures closed Thursday at $57.99 a barrel on the New York Mercantile Exchange, while March corn futures were trading around a 10-year high above $4 a bushel on the Chicago Board of Trade. And March ethanol stood at $2.08 a gallon on the CBOT.

'Dead argument'

Still, there are many more experts who say there's really no question as to whether corn-based ethanol puts out more than it uses up.

"The argument over the energy balance of ethanol is really a dead argument," said Matt Hartwig, a spokesman for the Renewable Fuels Association, the national trade group for the ethanol industry. "Study after study has proven them [the critics] to be flat out wrong," he said.

Hartwig called attention to the Web site for the biomass conversion research laboratory at Michigan State University.

A Feb. 5 note on the site prepared by Bruce Dale, professor of chemical engineering at the university, said the net energy analysis is "simple and has great intuitive appeal," with net energy defined as ethanol's heating value minus the fossil energy inputs required to produce the ethanol.

But "it is also dead wrong and dangerously misleading."

Tadeusz Patzek, professor of civil & environmental engineering at the University of California at Berkeley, said in a report last year that the "energy cost of producing and refining carbon fuels in real time, e.g., corn and ethanol, is high relative to that of fossil fuels deposited and concentrated over geological time."

"We do not value energy per se, but rather the services or 'qualities' that the energy provides," argued Dale.

"We need to carefully choose our metric of comparison," he said.

One gallon of ethanol contains 84,000 BTUs, which is about 2/3 that of gasoline, according to Neil Koehler, chief executive of Pacific Ethanol Inc.

"Since ethanol burns more completely (and cleanly) than gasoline, this lower energy density can be completely offset by increased efficiency," he said.

It's eating at corn

But ethanol's impact on the corn market has been "dramatic," said DTN's Newsom.

"If ethanol demand increases to projected levels, corn supplies will be incredibly low at the end of the 2006-2007 marketing year in August 2007," he said.

The U.S. produced an estimated 4.9 billion gallons of ethanol last year and used more than 5.5 billion, according to the Renewable Fuel Association's Hartwig. Ethanol is blended in more than 46% of the nation's gasoline, he said.

"It would seem that the corn market is poised for a long-term rally in price," said Newsom. He predicts that the high of $5.54 a bushel from 1996 seems like a "reasonable price target."

Meanwhile, limitation in the corn market itself should be considered.

"Corn-based ethanol will be of limited supply," said Charles Perry, chairman of energy-consulting firm Perry Management. The U.S has a limited amount of productive land so we "can spare only a limited amount of our corn crop for ethanol."

At the same time, this corn use for ethanol has been "hampering feeding, with some talk in the livestock industry of herd reduction due to higher feed costs," said Newsom.

"Our food prices will go through the roof -- $4-$5 corn makes for very expensive beef, pork and chicken," said Bernie Feshbach, president of investment firm Feshbach & Sons.

Also, "the use of corn makes ethanol a regional (Midwest) issue as the U.S. lacks the infrastructure to move the product around to meet demand," said Newsom.

But the logistics involved with ethanol production could be irrelevant.

"More attention needs to be paid to the personal economics of ethanol since many consumers are more concerned with cost, than with how a fuel is derived," said Geoff Sundstrom, a spokesman for motorist group AAA.

The industry will get a chance to discuss all of these things soon. The Renewable Fuels Association's 12th annual National Ethanol Conference is next week from Feb. 19-21 in Tucson, Ariz.

The group's Web site says registration for the conference is closed because it's reached its capacity. Interested parties are being placed on a waiting list.

The Sum of All Ears: Corn Ethanol to Replace Gasoline, A Bad Idea

Excerpts from:
The Sum of All Ears
January 29, 2007 -- By Paul Krugman, The New York Times via Economist's View

Corn Cop-Out, Commentary, NY Times: For those hoping for real action on global warming and energy policy, the State of the Union address was a downer. There had been hints and hopes that the speech would be a Nixon-goes-to-China moment, with President Bush turning conservationist. But it ended up being more of a Nixon-bombs-Cambodia moment.

Too bad... The only real substance was Mr. Bush’s call for ... ethanol to replace gasoline. Unfortunately, that’s a really bad idea. There is a place for ethanol in the world’s energy future — but that place is in the tropics. Brazil has managed to replace a lot of its gasoline consumption with ethanol. But Brazil’s ethanol comes from sugar cane.

In the United States, ethanol comes overwhelmingly from corn, a much less suitable raw material. In fact, ... researchers ... estimate that converting the entire U.S. corn crop — the sum of all our ears — into ethanol would replace only 12 percent of our gasoline consumption.

Still, doesn’t every little bit help? Well, this little bit would come at a very high price compared with ... conservation. The Congressional Budget Office estimates that reducing gasoline consumption 10 percent through ... fuel economy standards would cost ... about $3.6 billion a year. Achieving the same result by expanding ethanol production would cost taxpayers at least $10 billion a year...

What’s more, ethanol production has hidden costs. ...[T]he Department of Energy ... says that the net energy savings from replacing a gallon of gasoline with ethanol are only ... about a quarter of a gallon, because of the energy used to grow corn, transport it, run ethanol plants, and so on. And these energy inputs come almost entirely from fossil fuels, so it’s not clear ... ethanol does anything to reduce carbon dioxide emissions.

So why is ethanol, not conservation, the centerpiece of the administration’s energy policy? Actually, it’s not entirely Mr. Bush’s fault.

To be sure, ... Mr. Bush’s people seem less concerned with devising good policy than with finding something, anything, for the president to talk about that doesn’t end with the letter “q.” And the malign influence of Dick “Sign of Personal Virtue” Cheney, who no doubt still sneers at conservation, continues to hang over everything.

But even after the Bushies are gone, bad energy policy ideas will have powerful constituencies... Subsidizing ethanol benefits two well-organized groups: corn growers and ethanol producers (especially the corporate giant Archer Daniels Midland). As a result, it’s bad policy with bipartisan support. For example, earlier this month legislation calling for a huge increase in ethanol use was introduced by five senators, of whom four, including ... Barack Obama and Joseph Biden, were Democrats. In a recent town meeting in Iowa, Hillary Clinton managed to mention ethanol twice...

Meanwhile, conservation doesn’t have anything like the same natural political mojo. Where’s the organized, powerful constituency for tougher fuel economy standards, a higher gasoline tax, or a cap-and-trade system on carbon dioxide emissions?

Can anything be done to promote good energy policy? Public education is a necessary first step, which is why Al Gore deserves all the praise he’s getting. It would also help to have a president who gets scientific advice from scientists, not oil company executives and novelists.

But there’s still a huge gap between what obviously should be done and what seems politically possible. And I don’t know how to close that gap.