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The Wall Street Journal: Bet on Biofuels?

By MARTIN LIVERMORE
January 3, 2007

Biofuels are touted by some people to play a key role in the decarbonization of the world’s economy. Others say they will cause environmental damage and even put our food security at risk. The truth, of course, lies somewhere in between, and time alone will tell who’s right.

What is undeniable is that there is a business opportunity here. So, not surprisingly, major energy companies such as Shell and BP are actively interested in biofuels. Volkswagen co-sponsors a project to make ethanol from agricultural waste in \*CityEurope\*, and Saab already markets cars that can run on 85% alcohol. DuPont and British Sugar are collaborating to produce a novel biofuel — butanol — by pooling their expertise in biotechnology and process engineering.

Biofuels are not new. Henry Ford originally intended for the Model-T to run on ethanol. But a number of factors have come together to revive interest in recent years. Not least of these is the present received wisdom on climate change. According to this view, man-made emissions of carbon dioxide from burning fossil fuels are driving an unprecedented rise in global temperatures. Substituting biofuels for petrol and diesel should reduce emissions, and governments are therefore encouraging their production.

At the same time, concerns about energy security have created a real incentive to reduce oil imports from politically unstable production areas. This is about economics as well: High oil prices over the last few years have brought closer the prospect of biofuel production being viable without subsidies. Last but not least is the desire to support the farming sector.

The result is burgeoning production of both ethanol and diesel from farm produce: starch and vegetable oil, respectively. Until recently the world’s largest producer of bioethanol, \*City\*CityBrazil\*\* is unique in that it does not need to pay subsidies because of the low cost of growing sugar cane there. In 2004, \*City\*CityBrazil\*\* produced 16 billion liters of bioethanol. Of this, 2.8 billion liters were exported. The \*City\*CityU.S.\*\* has made rapid progress in bioethanol, primarily driven by its need to support a large but uneconomic farming sector. In 2005, its total production of bioethanol overtook that of \*City\*CityBrazil\*\* for the first time.

The situation in \*CityEurope\* is different. Here, both ethanol and diesel are produced, but the driver is primarily climate change policy. At the same time, \*CityEurope\*’s farmers receive even greater subsidies than their trans-Atlantic cousins, thanks to the infamous Common Agricultural Policy. The European Union has a target of making 5.75% of transport fuel from renewable resources by 2010. Like most of \*City\*CityBrussels\*\*’ targets, this is almost certain to be missed in the majority of member states. But the direction is clear.

Biofuels essentially face two problems. Their contribution to carbon reduction is currently more modest than it first appears, and increasing their production will inevitably lead to competition for land with food crops.

Conversion of starch to ethanol has high energy requirements: Ethanol only contains about one-third more energy than is needed to produce it. So it is only partially renewable, and requires significant fossil fuel input to produce it. However, considerable energy can be recovered — and carbon emissions avoided — by burning biomass waste to power the process. In this way, it is possible for ethanol to produce 75% less greenhouse gas emissions than petrol.

However, the second limitation on biofuels is more serious. At present, many countries have sufficient agricultural surpluses to cope with growth in demand over the next few years. The \*City\*CityU.K.\*\*, for example, exports about three million tons of wheat each year. This is sufficient to make about 1.25 billion liters of ethanol, and current national demand is a small fraction of that amount. But not all countries enjoy such surpluses, and global food demand is growing as the world’s population climbs from today’s 6.5 billion to 9 billion or more by mid-century. By then, today’s overproduction will be needed to feed the extra mouths as well as the increasing numbers of animals required to supply the meat demanded by a more prosperous developing world.

Could this spell the end for biofuels? Almost certainly not, but it does mean that we’ll have to produce them differently. Rather than take precious grain that could otherwise be eaten, future processes will be based on straw and other waste products, which make up about half of all agricultural production in the case of major crops. The problem is that the cellulose which forms the backbone of this biomass is difficult to break down into the constituent sugars which can then be fermented. Difficult, but not impossible: Iogen has already built a demonstration plant in \*City\*CityCanada\*\* to produce ethanol from corn and soya residue. Abengoa has a similar facility in \*City\*CitySpain\*\*, using wheat straw.

The opportunities for biodiesel seem more limited. Diesel is an important transport fuel in \*CityEurope\*, but the major feedstock needed is vegetable oil, the production of which requires more land than does an equivalent amount of starch, and for which no farm waste can readily be substituted.

The answer in this case lies in yet another fuel, which has the potential to replace both the current bioethanol and biodiesel: biobutanol. Ethanol, despite its increasing use, suffers from a number of drawbacks. In particular, it can be difficult to mix with petrol and cannot be transported via pipelines because it picks up moisture and causes corrosion.

Butanol, on the other hand, has neither of these disadvantages and has another big plus: It gives more miles to the gallon. It may also be possible to mix butanol with diesel, making it potentially the best new biofuel on the horizon. BP, DuPont and British Sugar are planning to make butanol in the \*City\*CityU.K.\*\* in coming years. At present it is made from starch, but biotechnology should again hold the key to a viable production process from straw or even wood chips.

Is all of this too good to be true? Time alone will tell. In the meantime, governments will provide incentives to produce biofuels, and businesses will be happy to oblige.

Mr. Livermore is director of the Scientific \*City\*CityAlliance\*\*.

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