Environmental Issues with Feedstocks for Biofuels and Biochemicals

1. Environmental Issues with Feedstocks for Biofuels and Biochemicals Don O’Connor (S&T)2 Consultants Inc. SCA Sarnia, June 12, 2012

2. Agenda • Sustainability • Food vs. Fuel • Indirect Land Use Change • The Models • The Evidence. • What needs to be done to close the gap? • Other Fuel’s Indirect Impacts?

3. Introduction • Any new market participant represents a threat to the established industry players. • New technologies from new participants always face criticism as they represent a threat to the status quo. • So it has been with biofuels, and while biochemicals have so far flown under the radar, they too could face criticism. • The environmental benefits of biofuels has been questioned by many.

6. Bioenergy Sustainability • Europe has made this a requirement for biofuels and biofuel feedstocks that are sold in the EU. • Mandatory requirements • Minimum GHG emission reductions • No new land, land must have been in production before 2008. • Voluntary schemes • Also looking at social issues and other environmental impacts • The devil is in the detail and in the interpretation of the requirements.

7. Bioenergy Sustainability • It appears that Canadian producers can meet the requirements, as they are currently interpreted, with minimum efforts. • ISO 13065 • International effort to develop a standard for bioenergy sustainability. • ISO standards have to go through a WTO screen so a successful standard should stop “criteria creep” • Not clear after 2 years if consensus on a standard can be reached. • Comparability is a stumbling block.

8. Food vs. Fuel • This remains an emotional issue. • In North America the food supply is arguable more secure now than it was a decade ago. • Next years crop is no longer dependent on support from the government for this years crop. • In North America increased demand from population increases is met by increased yields. • People don’t comprehend that most agricultural land is used for feed production and not food production.

9. US Corn Demand

10. US Corn Demand

11. The ILUC Hypothesis

12. The ILUC Hypothesis • The new land comes from pasture and forest. • Both result in carbon emissions from working the soil. • Forests release the above ground carbon to the atmosphere. • The net impact is a large increase in GHG emissions and the headlines that biofuels are more GHG intensive than gasoline or diesel.

13. The Models • Econometric models are used for the estimation of land use changes. • GTAP • Mirage • FAPRI • FASOM • The models do a reasonable job of estimating the substitution effects. • That is what they were designed to do. • But most are static models and they don’t account for changes in technology or demographics.

14. Some Results IFPRI adjusted to 30 year time period for comparison

15. Some Results

16. Some Results

17. The Evidence • Biofuel production has increased dramatically in the past decade. • What has happened to land use? • What has happened to land use change emissions?

18. United States • Ethanol Production increased from 8 to 50 billion litres between 2002 and 2011. • Agricultural land decreased. • Forest land increased. • Agricultural exports increased. • The various models all predict the opposite would happen.

19. Europe • Large increase in biodiesel production in the past decade. • Agricultural land decreased. • Forest land increased. • Also opposite to what the model are predicting.

20. Carbon Pools and Fluxes

21. Global Carbon Budget

22. Global Carbon Budget

23. Global Carbon Budget

24. Global Carbon Budget

25. What Needs to be Done to Improve the Models? • Many of the models guess what the yield on new land will be, and guess low, about 50% of the yield on existing land. • The evidence suggests that the yield on new land is about the same as on old land. • The models don’t factor in the capital costs of land conversion, even though they are economic models! • As a result, for new land they choose between pasture and forest based on the proportions of each available. • The evidence suggests that 20 to 30 times as much pasture will be converted compared to forest. Most models are about 2 to 1. • Uncertainty about carbon stocks on converted lands.

26. Land Databases • The models don’t have a good database of what land is available. • Idle cropland is not a category in most models. • Some models include this land in cropland in some countries, include it as pasture land in other countries. There is no consistency even in the same models. • When idle land is included in the cropland category, the models can’t access it. They will choose pasture and forest land instead.

27. Idle Cropland • The quantity of idle cropland could be as large as 400 million ha. About one third of the utilized cropland. • The change in harvested area between 2005 and 2011 represents 10% of the idle land. • EU land requirements for biofuel were 1.8 million ha in the IFPRI modelling of ILUC. • No good estimates of double cropping potential, nor can most models estimate this factor.

28. Dynamic Economies • The models are static models. They introduce a shock and look for the economy to change to a new equilibrium without the passage of time. • That is not how the real world works. • What changes are we seeing over time? • There are big changes in the developed world in our eating habits. • The US eats 10% more meat per capita than it did 30 years ago but uses 20% less feed to produce the meat.

29. Meat Consumption and Feed Demand

30. Land Requirements for US Meat

31. Land Requirements for US Meat 20 million ha freed 80 billion litres ethanol

32. Land Requirements for Canadian Meat

33. Indirect Effects Petroleum • Crude oil is refined to produce transportation fuels and light oils for heating. • The refining process produces a large number of co-products, some with high value and some with low value. • The low value products (residual oils, bunker fuels, petroleum coke, etc.) are generally burned to produce heat and power in large conversion devices.

34. Residual Prices

35. Indirect Effects Petroleum

36. Estimate of the Magnitude • If there were no production of residual oil, what would be used instead? • LCA work done in Europe has used natural gas to replace the lost production of residual oil. • The emission credit for natural gas compared to residual oil is about 35 kg CO2eq/GJ. • At 15% of the barrel, the indirect effects of petroleum fuels amount to 5.2 kg CO2eq /GJ. • Each crude oil and refinery would have different indirect effects.

37. Outlook • Food vs. Fuel and ILUC arguments will continue to evolve. • Issues are different in the developed world compared to the developing world. • Not sure that the indirect effects of fossil fuels will be incorporated into the models. • Even though it could be beneficial to the oil sands emissions picture. • There is a group of activists questioning the CO2 cycling benefit of biomass. • This could be the next big issue, it has started already in some regions for woody biomass.

38. Outlook • In the past several years there have been a lot of biofuel and biochemical processes developed that utilize “low cost sugars” • What happens to the public support for the bioeconomy if the “low cost sugars” are produced from corn? • If the bioeconomy is based on lignocellulosic feedstocks where does that leave agriculture when crop yields are doubled by 2030?

39. Thank You