Biofuels bandwagon running on empty?

London - While politicians and green lobby groups have long championed biofuels as an energy source that can increase security of supply, reduce vehicle emissions and provide a new income stream for farmers, others believe that they will increase energy-price volatility, food prices and even life-cycle emissions of greenhouse gases.

It now seems that the latter argument is starting to hold sway with even Friends of the Earth calling on the EU to scrap its 10% target for using plant-based bio-fuels for transport. This call came in part in response to an Organisation for Economic Co-operation and Development highlighting serious concerns about social and environmental effects of the biofuels sector.

FoE biofuels campaigner, Ed Matthew said: "Rushing down the biofuels route will be a huge mistake. The OECD is the latest respected organisation to warn about the social and environmental risks associated with this technology. The EU must abandon its 10% biofuels target or risk further destruction and poverty in developing countries.”

European Heads of State agreed in March this year to a target that 10% of transport fuels should be met by plant-based biofuels by 2020. The target however is conditional on biofuels being produced “sustainably” and on the commercialisation of next generation, biomass-to-liquid fuels.

In its report, the OECD estimates that global production of biofuels at 0.8 EJ in 2005, or roughly 1% of total road transport fuel consumption. Technically, it said, up to 20 EJ from conventional ethanol and biodiesel, or 11% of total demand for liquid fuels in the transport sector, has been judged possible by 2050.

An expansion on this scale could not be achieved, however, without significant impacts on the wider global economy, said OECD, adding that it now seems more likely that land-use constraints will limit the amount of new land that can be brought into production leading to a “food-versus-fuel” debate.

Any diversion of land from food or feed production to production of energy biomass will influence food prices from the start. The rapid growth of the biofuels industry is likely to keep these prices high and rising throughout at least the next decade. The growth of the biofuels industry is also likely to place pressure on the environment and biodiversity.

“Biomass feedstocks can be most efficiently produced in tropical regions, where suitable and available land is mostly concentrated, and annual yields are highest,” said the OECD report. “However, as long as environmental values are not adequately priced in the market there will be powerful incentives to replace natural ecosystems such as forests, wetlands and pasture land with dedicated bio-energy crops, thus harming the environment.”

According to OECD, among current biofuel technologies, only sugarcane-to-ethanol in Brazil, ethanol produced as a by-product of cellulose production, as in Sweden and Switzerland, and manufacture of biodiesel from animal fats/cooking oil, can substantially reduce greenhouse gases. The other conventional biofuel technologies, it said, typically deliver GHG reductions of less than 40% compared with their fossil-fuel alternatives.

When such impacts as soil acidification, fertilizer use, biodiversity loss and toxicity of agricultural pesticides are taken into account, the overall environmental impacts of ethanol and biodiesel can very easily exceed those of petrol and mineral diesel.

In only a very few countries do biofuels have the potential to make a significant dent in dependence on imported oils. The amount of fossil fuels that can be displaced by domestic production of biofuels will be small in the great majority of countries.

Growing the biofuels market will tend to increase the positive relation between oil prices and biofuel costs, the report continued. Higher oil prices will both raise the production cost of biofuels and exert upward pressure on agricultural commodity prices, so limiting the possibility for biofuels to reduce transport fuel prices.

“The conclusion must be that the potential of the current technologies of choice — ethanol and biodiesel — to deliver a major contribution to the energy demands of the transport sector without compromising food prices and the environment is very limited, said OECD.

Second-generation technologies hold promise but depend on technological breakthroughs, the report noting that: “The harmful consequences of many first-generation technologies have received widespread attention but these concerns have not to date resulted in any effective policy response.”

Second-generation biofuels could, in theory, make it possible to avoid competing land use claims by growing biomass feedstocks on marginal and degraded land and using residual biomass materials. They have the potential to deliver an additional 23 EJ of biofuel energy in 2050, or 12% of total transport fuel demand, while potentially avoiding many of the negative effects of conventional fuels.

However, said OECD, as these technologies are still in the demonstration phase, “it remains to be seen whether they will become economically viable over the next decade, if ever. Even with positive technological developments there are serious doubts about the feasibility of using residue material as biomass feedstock on a large scale.”

Meanwhile, the logistical challenge of transporting biomass material to large production facilities is likely to impose a floor below which production costs cannot be lowered. This, said the report, suggest that second-generation biofuels will remain niche players, produced mainly in plants where the residue material is already available in situ, such as bagasse from sugarcane pressing and wood-process residues.

Economic outlook fragile

Biofuels could theoretically achieve a market share of nearly a quarter of the liquid fuels market in 2050 (11% from conventional and 12% from advanced technologies). However, OECD believes it unlikely that this potential will be realised, as concerns over food prices and environmental degradation caused by first generation technologies suggest that the potential of conventional technologies might be closer to current production levels.

“Commercialisation of second-generation technologies is still a distant possibility with only several pilot and demonstration plants currently being built. But this is only part of the reason. The unfavourable economics of biofuels also suggests that the market share of nearly a quarter is unlikely to be realized,” said the report.

OECD believes a more realistic estimate is around 13% market share in 2050. This would equate to an avoided CO2 reduction from increased biofuels of almost 1.8 Gt, or 3% of energy-related CO2 emissions in a business-as-usual scenario.

Given the projected growth in demand for transportation fuels, this will not reduce overall petroleum fuel consumption below current levels but only moderate the growth in demand.

“While this scenario is more realistic it should still be considered a best-case scenario, as the analysis behind it is based on prices of biofuels falling below fossil-fuel alternatives and aggressive government mandates and targets, said OECD.

Although there is scope for production costs for biofuel feedstocks to decline as a result of improvements in yields, it is not clear that such improvements will be enough to compensate for rising prices due to production factors and the combined pressures on prices of rising demand for food, feed and biofuels.

“Increasing competition with biomass feedstocks — woody material as well as agricultural products — is actually pushing feedstock prices and production costs up. Higher oil prices will have the effect of increasing biofuel production costs while simultaneously making fossil fuel alternatives such as tar sands and coal-to-liquids increasingly competitive,” the report concluded.