COMMENTARY
Can
Agriculture Compete in a Market for Carbon?
Opportunities for Soil Carbon Sequestration in the Big Sky Region
John
M. Antle and Susan M. Capalbo
Montana
State
University
Many
industrialized countries are looking at ways to reduce their net
emissions of greenhouse gases such as carbon dioxide.
There is a growing interest in terrestrial carbon
sequestration, the process of transforming carbon in the air (carbon
dioxide or CO2) into soil carbon and plant material, as
one way of addressing climate change and reducing net emissions.
Studies indicate that producers in the Big Sky region, encompassing
Montana, Wyoming, North and South Dakota, Idaho and the Pacific
Northwest, can sequester significant amounts of atmospheric carbon
in soils by changes in management practices on lands currently in
forestry, range, and croplands, and enhancing reclaimed mine lands.
For example, changes from conventional management practices
in
Montana
to no-till, minimum-till or continuous cropping practices have the
potential to increase the sequestration of soil carbon in the
“terrestrial sinks”. This potential new market could be
beneficial to producers if they can store carbon at a cost that is
economically competitive with other sources.
So the important questions are:
how likely are landowners to change their production
practices, what is the opportunity cost of changing production
practices and how much carbon can be sequestered, and what are the
long term prospects for reducing or offsetting emissions?
Farmers
entering into contracts to sequester carbon in soil would agree to
adopt practices that “produce” carbon in the soil. In this
sense, carbon contracts would be similar to existing commodity
futures contracts. However, carbon contracts would be different from
conventional commodity contracts in many important respects.
First, in the case of soil
carbon, the buyer never actually takes delivery of the commodity;
rather, the commodity is embodied in an asset (the soil) that
belongs to the landowner. Moreover, unless the land is managed
appropriately, carbon that is stored in soil may be released back
into the atmosphere. In this respect, producers can be thought of as
providing a carbon sequestration service rather than a
commodity that can be physically removed from the farm.
Second, unlike other
agricultural commodities, changes in soil carbon are not directly
visible to either the producer or the buyer. The changes in soil
carbon specified in contracts will need to be verified by
appropriate field measurements.
Third, carbon is spatially and temporally variable, and
therefore the quantity a farmer can sequester in the soil is
uncertain at the time the contract is traded. The total cost of
providing soil carbon services is therefore equal to the
compensation that would be paid to the farmer for changing land-use
or management practices, plus the costs of negotiating contracts and
monitoring compliance. In some cases, such as changing land-use
practices, compliance can be monitored visually at a low cost. In
other cases, for example, changing management practices such as
fertilization rates, monitoring compliance may be more costly.
Suppose
that soil science research has established the annual average rate
of carbon accumulation for each major type of soil, accounting for
conditions such as climate and management practices. Further suppose
that farmers could enter into contracts (either with the government
or private firms) to provide carbon sequestration services for a
specified time period. The contract pays the farmer an amount each
year over the contract period to follow specified management
practices that sequester additional tons of carbon per acre or
hectare per year. The
buyer of the carbon values the contract according to how much carbon
the farmer sequesters in soil and how long the process takes. As an
example, let's assume that the buyer of the contract can take credit
for 0.25 tons of carbon sequestered per acre per year; thus, if the
value of carbon were $20 per ton, the value of the contract to the
buyer each year is equal to $20 X 0.25 tons, or $5 per acre per year.
Buyers
and sellers enter into a contract when the value to the buyer is
equal to the value to the seller. This implies that on an annual
basis, carbon contracts will provide the farmer with a payment equal
to the value of the carbon sequestered.
How many acres or hectares of land would farmers be willing
to put into this type of contract? The answer will depend on the
payments made to farmers for changing practices as compared to the
costs to the farmer of changing practices. We refer to the cost to
farmers of changing practices as the farm opportunity cost
(this is called the marginal cost in economics). Without the carbon
market, farmers follow whatever practices maximize their profit. If
farmers switch to alternative practices to enhance carbon
sequestration, they will earn a lower profit; otherwise they would
have already been following these practices. Thus farmers enter into
carbon contracts when those contracts offer more money per acre than
what is brought in by their current practices. Following our
example, if the farmer’s current practices provide a return of $50
per acre, and the carbon contract pays $5 per acre, the alternative
practice would have to provide a return greater than $45 per acre
for the farmer to be willing to enter the contract.
Carbon
sequestration can also be achieved through a government program
rather than a carbon market. In this case, the government would pay
farmers to adopt practices that sequester additional carbon. A
supply curve for soil carbon can then be derived as the
correspondence between payment offered for an additional ton of
carbon and the total quantity supplied.
A
recent study of soil carbon sequestration in
Montana
simulated the effects of farmers participating in a government
program to sequester soil carbon or in a market for carbon. The
study area consisted of the grain-producing region of
Montana
, and the analysis was based on data derived from a survey of farms
in the region and on various other soil and climate data. The analysis showed that a policy that provides payments for converting
cropland to permanent grass is a relatively inefficient means to
increase soil carbon, with farm opportunity costs per metric ton of
carbon ranging from $50 to over $500. By contrast, payments to adopt
continuous cropping were found to produce increases in soil carbon
at a farm opportunity cost ranging from $12 to $140 per metric ton
of carbon. These values varied depending on soil and climate
conditions and the profitability of the management alternatives.
These results indicate that grain producers in
Montana
could sequester as much as 20 million metric tons of carbon in soil
over a 20- to 30-year period at a cost that is competitive with
industrial emissions reductions or other sinks such as conversion of
agricultural land to forests. The results also indicate that the
cost per metric ton of soil carbon sequestered varies with soil and
climate conditions and the type of practices used to increase soil
carbon.
Spatially
varying physical and economic characteristics have two important
implications. First, a
market for carbon will be beneficial to regions that have the lowest
opportunity costs per metric ton of carbon sequestered, and as the
demand for carbon increases there will be greater opportunities for
more producers to enter the market.
Second, carbon can be sequestered in the agricultural soils
of
Montana
and other regions of the northern
Great Plains
at a cost competitive with other terrestrial sinks, such as
forestry, and with other industrial sequestration opportunities.
Studies of the cost of reducing carbon through industrial emissions
reductions and through the use of other sinks, such as afforestation,
show that the cost per metric ton of carbon could be in the range of
$20 to $200. Thus the
Montana
study shows that soil carbon sequestered by grain producers in the
northern
Great Plains
region could compete in a national or international market for
carbon.
In
this analysis for
Montana
, the entire opportunity costs associated with changing agricultural
practices were attributed to a single environmental
benefit—sequestering carbon. In many cases, changes in land-use
and management practices produce multiple environmental benefits,
such as reduced soil erosion, improved water quality and wildlife
habitat, and visual amenities. If additional environmental benefits
were incorporated into an analysis of soil carbon, the relative
economic efficiency of alternative land-use and management options
could be higher, and generally all options to sequester soil carbon
would become more competitive with non-agricultural reductions in
greenhouse gases emissions.
What
are the long term prospects for terrestrial sequestration?
As part of a multi-tiered approach to increasing
concentrations of greenhouse gases, the use of terrestrial sinks
provides an immediate, low cost, and environmentally risk-free
potential to offset some of the buildup of carbon dioxide.
While it is not the sole answer to the need to reduce
emissions, it can and should be part of a cohesive program that
focuses on greater energy efficiencies, other long-term
sequestration options, and continued use of renewables and other
low-carbon energy technologies.
More
information and accompanying publications can be found at www.casmgs.montana.edu.
Contact
Susan M. Capalbo
Director and PI, Big Sky Carbon Sequestration Regional Partnership
scapalbo@montana.edu
FEATURE
ARTICLE
Environmental Organizations
and Leaders Endorsing a Biobased Economy
The
Future 500, an environmental non-profit located jointly in
California and Japan, describing itself as a “visionary
not-for-profit, with practical business skills, respected and
trusted by corporate and NGO leaders alike,” appears to be making
headway in the tortuous debate surrounding a future carbohydrate
economy. Future 500 is
collaborating with groups like the Institute for Local Self-Reliance
(ILSR) to coordinate support for its SEED (Secure, Sustainable
Energy and Environmental Demand) Initiative Action Agenda.
Future 500 announced on April 19, 2005 that over 70
environmental groups and leaders have signed onto the action agenda
that calls for “companies to switch to better technologies,
including: bioplastics, such as polylactic acid (PLA), and biodiesel
and bio-ethanol,”-- but not just any companies, their sights are
set on the Fortune 500 companies.
Pointing out that already big hitters like
Toyota
, Cargill Dow, Biota,
ADM,
Wild Oats, Newman’s Own, Novo Nordisk, and Genencor have adopted
biobased alternatives for their products and are making quite a lot
of money doing it, Future 500 argues that,
beyond a company’s bottom line, investing in these technologies
not only reduces dependence on petroleum but that in turn reduces
greenhouse gases and military conflicts, and also generates
non-toxic wastes that can be further utilized for other products or
composted. Or, as Tachi
Kiuchi and Bill Shireman, co-founders of Future 500, recognize “all
waste is lost profit.”
The
SEED Initiative claims inspiration from such ideas as the
‘cradle-to-cradle’ mentality coined by Greenblue, as well as
drawing influences from David Morris’s “The Carbohydrate
Economy;” John Doerr and Kleiner Perkins’s “Distributed
Materials;” Zero Waste Alliance; Amory Lovins, and William
McDonough’s “intelligent design.”
While many may see the economic development and national
security reasons for embracing biobased products, fuels, and power,
growing awareness on the environmental benefits seems to be slower
moving, hence the need for initiatives such as Future 500’s. The
biobased economy can yield public health benefits, carbon dioxide
emission mitigation, and overall environmental benefits from
improved land stewardship and waste reduction.
To
support the initiative, either as an individual or a member, visit http://future500.org/take_action.php.
LEGISLATIVE
UPDATES
Senate Energy Committee
Approves Energy Bill
On Thursday, May 26, 2005, the Senate Energy
Committee reported out its Energy Bill with a vote of 21-1.
The bill is expected to be taken up by the full Senate in
June. It contains
policies and programs regarding energy efficiency, renewable energy,
clean coal, oil and gas, nuclear, electricity, fuels and vehicles,
hydrogen, R&D, and Indian Energy.
There are a few programs that support expansion of bioenergy
and biofuel deployment. It
provides funding for an ongoing renewable energy resource
assessment; creates two grant programs for the use of biomass from
Federal and Indian lands to encourage electricity and heat
production from biomass, while improving biomass utilization
technology; creates a program to encourage removal of hazardous
fuels from high risk areas on Federal and Indian lands and
development of new biomass utilization technologies; and requires
the Secretary of DOE to continue cutting-edge R&D in renewable
energy, including bioenergy from cellulosic feedstocks. Perhaps most
notably, the Committee strongly approved by a bipartisan voice vote
an 8 billion gallon (by 2012) Renewable
Fuel Standard. The
amendment was offered by Senators Jim Talent (R-MO), Tim Johnson
(D-SD), Byron Dorgan (D-ND), and Ken Salazar (D-CO).
Sen. Maria Cantwell (D-WA) successfully offered an amendment
to count each gallon of cellulosic ethanol as 2.5 gallons toward the
proposed RFS, while setting aside up to 250 million gallons of the
RFS to be met by cellulosic ethanol beginning in 2013.
Sen. Feinstein’s (D-CA) amendment to exempt
California
from any seasonal fuel additive requirement also was adopted.
There continues to be lack of parity in funding
levels for renewable energy R&D versus more traditional energy
resources. When Sen. Ron
Wyden (D-OR) suggested some parity should at least be given between
support for clean coal technologies and renewable energy, Chairman
Pete Domenici (R-NM) responded by describing the proposal as
“absurd” and continued by saying “The senator made a lot of
noise, and that's all it is. We've
got a lot of work to do. This bill will not have what you ascribe,
because it’s impossible. This
is a joke, OK? So let us proceed.”
Clearly there is still much work to be done in educating
Senate leadership on the urgent need to appropriately finance a
broad range of sustainable energy options.
Incidentally, Sen. Wyden was the one dissenting vote on the
bill.
http://energy.senate.gov/public/index.cfm?FuseAction=PressReleases.Detail&PressRelease_id=234687&Month=5&Year=2005
Bicameral Biodiesel Tax
Incentive Actions
Last week, Members from both the House and
Senate introduced legislation to extend the tax credit of $1.00 per
gallon of agri-biodiesel and $0.50 per gallon of biodiesel from
waste oils and fats (S. 1076, H.R. 2498) tax credit to 2010.
Senators Jim Talent (R-MO) and Blanche Lincoln (D-AR) were chief
sponsors of the bill as well as Representatives Kenny Hulshof (R-MO)
and Earl Pomeroy (D-ND). The
stand-alone bill is expected to be included in the Senate Finance
Committee’s energy tax package, to be written by biodiesel
advocate Chairman Chuck Grassley (R-IA).
The one year-old biodiesel tax incentive was first passed in
the American JOBS Security Act
of 2004 (H.R. 4520) and was only authorized to last one year.
The industry views the extension of this credit as pivotal
for future biodiesel production growth.
Already a number of production facilities are under
construction to ramp up production significantly from current levels
of 20 million gallons. Senate
Finance Committee has not yet scheduled committee action.
http://www.renewableenergyaccess.com/rea/news/story;jsessionid=aHjmiLZxs04h?id=31010
House Ag Appropriations: Sec.
9006 Garnering Significant Support
For the third year the Administration slashing
of funding for Sec. 9006, the Renewable Energy and Energy Efficiency
Improvements Program, but the House Appropriations Subcommittee on
Agriculture appropriated full funding, $23 million, for this very
popular and extremely successful program.
In previous years, amendments had to be offered on the floor
by Rep. Marcy Kaptur (D-OH) and Rep. Stephanie Herseth (D-SD) to
restore full funding. During
the FY06 appropriations process, Subcommittee Chair Henry Bonilla
(R-TX) included $23 million in his “Chairman’s mark.”
Final figures for other programs that had received
significant cuts in the Administration’s FY06 request* Sec. 9010 (CCC
Bioenergy Program), Sec. 9008 (Biomass R&D Act), and Sec. 6401
(Value-Added Producer Grant Program) have not been made available to
the public. The
Chairman’s mark will be filed and be available for viewing on June
3, 2005. Full Committee
action will occur the following week of June 6, 2005, with floor
action to follow shortly after.
*http://www.eesi.org/publications/Press%20Releases/2005/5.17.05%209006%20Approps.htm
For
Senator Obama, E85 Just Makes Good Cents
Fifteen percent gasoline blended with 85
percent ethanol (E85) seems to be a magic elixir for gas station
sticker shock. In April,
when Senator Obama discussed his introduced tax credit for E85
fueling stations, the biofuel was selling for 30 cents per gallon
below gasoline. According
to Justin Powell, a local Illinoisan, “Obviously I'm interested in
E-85 because of the price. But
it's also cleaner. I bought this truck last summer, and I started
using E-85 as soon as it was offered.”
(S.918), The E-85 Fuel Utilization and Infrastructure Development Incentives Act
of 2005, was co-sponsored by Senators Obama (D-IL), Durbin
(D-IL), and Talent (R-MO) and was introduced on April 27, 2005.
Senator Obama introduced this bill as an amendment to the
Transportation Bill (H.R. 3), which was approved by the Senate on
May 17, 2005 and is now awaiting conference action with the House.
The legislation provides a 50 percent tax break
for the construction of E85 fueling facilities as well as a tax
credit of 35 cents per gallon of E85 to the consumer.
Sen. Obama highlighted the need for more E85 fueling
facilities on the Senate floor: “The only problem we have now is
that we're in short supply of E-85 stations. While there are more
than 180,000 gas stations all over
America
, there are only about 400 E-85 stations.” Similar provisions have
passed the Senate three times already with Sen. Obama poised to
finally close the loop.
http://www.lincolncourier.com/news/05/04/19/e.asp
Appropriations Getting
Defensive about Biofuels
Rep. Marcy Kaptur (D-OH) introduced an
amendment that was later adopted during the House debate of the FY06
Defense Authorization Act (H.R. 1815) on May 25.
The amendment requires the Secretary of Defense to conduct a
study regarding the current use of biodiesel and ethanol fuel by the
Armed Forces and Defense Agencies as well as actions to be taken to
increase their use. These same entities will be expected to provide
an evaluation of their requirements for the use of biodiesel and
ethanol fuels for the years 2007 through 2012.
Further, the House of Representatives expects an overview of
efforts the Department has made with local and state governments to
support expansion of biofuel refueling stations that are open to the
public. As a champion on
the Hill for renewable energy and renewable fuels, Rep. Kaptur said
on the House floor, “The Department of Defense uses the largest
fleet in the
United
State
government. They should
be a leader in alternative fuels research and alternative energy.”
http://www.kaptur.house.gov/PressRelease.aspx?NewsID=1391
Cantwell
Puts Forth a Challenge for the Nation
On April 10, 2005, Sen. Maria Cantwell (D-WA)
announced her pending
legislation, “The 20/20 Biofuels Challenge Act.”
This bill would require the
United States
to produce 20 billion gallons of biofuels (including ethanol and
biodiesel) by 2020. Sen.
Cantwell highlights the need to produce biofuels from a variety of
feedstocks besides corn and soy.
Her bill provides a $1 billion accelerated pilot program for
the Department of Defense to effectively deploy biofuels; extends
and expands existing biofuel tax incentives; and triples bioenergy
research and development programs to $500 million.
Cantwell, having met with a number of farmers and ranchers in
Washington
State
, wants this challenge to focus on finding new home-grown sources of
bioenergy. In her words,
“We may sit on just three percent of the world's oil reserves, but
this country can control its own destiny in the global energy
marketplace. And we can do it at the same time we are providing
energy security to our consumers and economic security to our
agricultural communities.”
Sen. Cantwell hails from a state that is
already one of the leading users of biodiesel and consumes 33
million gallons of ethanol annually.
As she says, “The fact is,
Washington
State
is poised to lead the way because we recognize the tremendous
opportunity as well as the importance of moving forward on a smart
national biofuels strategy.”
http://cantwell.senate.gov/news/releases/2005_04_10_biofuelsb.html
Biofuels and Bioenergy
Legislation Taking Hold in Numerous States
Minnesota
Governor Tim Pawlenty signed into law a statewide mandate for 20
percent ethanol use on May 10, 2005.
The bill would increase the existing mandate of 10 percent
ethanol, by requiring all transportation fuel sold in
Minnesota
to be 20 percent ethanol (E20) by 2013.
However, this mandate will not take effect if 20 percent of
fuel sales consists of ethanol by 2010.
This could be accomplished by increasing sales of E85 (85
percent ethanol blend) to one-fifth of total fuel sales.
Currently
Minnesota
has more E85 stations than all other states combined. Combined with
an increase in sales of Flex Fuel Vehicles (FFV’s), E85 sales are
predicted to increase dramatically.
There is also work to be done guaranteeing E20 blends will
not have detrimental impacts on car engines.
Gasoline engine manufacturers and the EPA have verified only
up to E10 blends to be used in the nation’s fleet.
More testing will need to be done to ensure a smooth
transition, if necessary, from the existing E10 blends to E20.
The Minnesota Department of Agriculture plans to apply
pressure to the Federal Government to grant
Minnesota
a waiver allowing E20 to be sold statewide as well as work with car
manufacturers to extend their warranties for E20 use.
“Utilizing homegrown renewable fuels is good for our
farmers, it's good for rural economic development, it's good for
national security, and it's good for the environment,” Governor
Pawlenty said. “I would much rather have the fuel in our
cars come from the Midwest than from the
Middle East
.”
http://www.minnesotaagconnection.com/story-state.cfm?Id=405&yr=2005
http://www.swiftcountymonitor.com/Main.asp?SectionID=1&SubSectionID=1&ArticleID=16065
http://www.governor.state.mn.us/Tpaw_View_Article.asp?artid=1347
Washington
Governor Christine Gregoire signed two landmark bills on May 10,
2005. SB 5101, dubbed
the “New Germany-style Production Tax Credit”, will provide a 15¢
per kilowatt-hour incentive for small scale renewable energy
producers using either solar, wind, or anaerobic digester
technology. The
incentive would be capped at $2,000 a year, paid to the producer by
the utility. The utility
would then receive a tax credit from the State.
The credit will be augmented if some of the components are
produced within the State, raising the amount of return as high as
54¢ per kwh. Before
utilities develop comprehensive “feed-in” rules, this credit
will apply to predominantly off-grid energy production beginning
July 1, 2005 for a guaranteed ten years.
The second bill, SB 5111 will provide significant tax breaks
for renewable energy manufacturing businesses located in
Washington
or that decide to relocate to the State.
The credit is further increased for companies that choose
locations in economically depressed areas.
Finally, in related news, Governor Gregoire signed HB 1397
which, contingent on
Oregon
’s action, adopts
California
’s vehicle GHG emissions standards that incidentally do not
include biodiesel as an applicable alternative fuel.
http://www.pewclimate.org/what_s_being_done/in_the_states/news.cfm
http://www.renewableenergyaccess.com/rea/news/story?id=28478
http://www.harvestcleanenergy.org/hce.html
Montana Governor
Brian Schweitzer was proud to sign the State’s first biofuels
mandate for a ten percent ethanol blend in all gasoline sold by
2006. The mandate will
not take effect until at least 55 million gallons of ethanol is
being produced within the State.
The bill, SB 293, sponsored by Sen. Jerry
Black, R-Shelby, also provides tax incentives for ethanol produced
solely from grain grown in
Montana
. Possible feedstocks
being considered include corn, wheat, and barley.
There are at least three production facilities in the
planning stages, with one nearing construction. Nevertheless, the
mandate is not expected to go into effect for another four to five
years.
http://www.greatfallstribune.com/apps/pbcs.dll/article?AID=/20050507/NEWS01/505070308/1002
http://www.harvestcleanenergy.org/hce.html
For an excellent update of pending
legislation in
Oregon
and
Idaho
, please read the Harvesting Clean Energy Network’s eNews Bulletin
for May 2005 at http://www.harvestcleanenergy.org/hce.html
or visit the
Oregon
Biofuels Network at www.biofuels4oregon.org.
North
Dakota Governor John Hoeven signed a number of bills on Earth
Day, April 22, 2005, in support of renewable energy technologies,
including wind, hydrogen, biodiesel, and ethanol.
The incentives for ethanol production include $3.25 million
for new and existing ethanol plants in the State, $1.35 million for
the expansion of existing plants, and a 20¢ per gallon tax credit
for retail sales of E85 (HB 1478).
In terms of biodiesel, SB 2217 includes $1.2 million for
buying down interest on new biodiesel production plants, by
providing up to $650,000 per plant; an income tax credit of 10
percent per year for 5 years or 50 percent of direct costs for fuel
suppliers and retailers’ equipment; and sales tax exemptions for
biodiesel blends of 5 percent biodiesel equaling 5 cents per gallon
of fuel blended. Both
ethanol and biodiesel plants will earn a 30 percent investment tax
credit (SB 2281). ND
House Majority Leader Rick Berg said, “I’m really excited about
these initiatives. They create incentives for private investment in
renewable energy and give our ag producers additional markets for
their products. It will also reduce our dependence on foreign oil
which will create a stronger
America
.”
http://www.eere.energy.gov/femp/newsevents/detail.cfm/news_id=9015
http://governor.state.nd.us/media/news-releases/2005/04/050422.html
Indiana
Governor Mitch Daniels signed the biofuel bill, HB 1032, on April 1,
2005. The bill, as
authored by Representative Steve Heim (R-Culver) and sponsored by
Senator Vic Heinold (R-Kouts), instructs the state government to run
all state agency vehicles on bio-based fuels, such as biodiesel,
ethanol, or gasohol, when possible.
Indiana
already considers itself a leader in the biodiesel industry.
It is home to four of the nation’s twelve terminals with
the capability to blend biodiesel, as well as 40 retailers that
deliver biodiesel blends and 39 service stations with biodiesel
distribution pumps. Sales
of biodiesel are expected to increase ten-fold in
Indiana
from 2004 to 2005. Last
year 20 million gallons of biodiesel were sold with predictions of
2005 sales hovering around 200 million gallons.
In Governor Daniels’s words, “
Indiana
is a national leader in the development of biofuel technology… and
[
Indiana
] state vehicles will use these types of fuels to showcase the work
of the tens of thousands of Hoosiers already working with the
technology.”
http://www.thesoydaily.com/BiodieselBiobased/indiana04052005.asp
The
Iowa
House passed a bill awarding tax credits for small producers of
alternative energy on May 17, 2005.
SF 390 will allow producers of energy from wind, biomass,
hydrogen, and other alternative energies to be eligible for a tax
credit beginning in July of 2006 for ten years.
The credit would equal roughly 1.5¢ per kwh generated by
wind facilities, $4.50 per million btus of methane from anaerobic
digesters, and $1.45 per tcf of hydrogen fuel. A small producer is
defined as a facility producing less than 2.5 MW of power whose
majority owner is an
Iowa
resident as well as a farm operation or electric cooperative.
Total tax credit payments would equal $2.8 million in FY07
and $5.5 million in 2010.
When State Senator Mary Lou Freeman (R-Alta)
was challenged that this kind of legislation is nothing but an
energy subsidy she retorted, “Our nation literally runs on energy
subsidies. And if you
think what we're doing over in
Iraq
isn't considered a subsidy, then I think we're all mistaken.”
This bill arrives on the heels of Governor Vilsack’s Earth
Day Executive Order 41 requiring state agencies to obtain at least
10 percent of their electricity from renewable sources as well as
reduce energy use in their buildings by 15 percent by 2010 relative
to 2000 electricity use. The
Executive Order also mandates all Iowa state agencies’ light-duty
vehicle fleets, except law enforcement, to consist of
hybrid-electric or flex-fuel vehicles by 2010; all bulk diesel
procured by the state is to contain 5 percent renewable fuel by
2007, and 20 percent by 2010. The
Governor’s office has required all agencies to submit quarterly
reports delineating their progress.
http://www.gazetteonline.com/2005/05/16/Home/News/wind.htm
http://www.irenew.org/legislog.html
http://www.eere.energy.gov/news/archive.cfm/pubDate=%7Bd%20'2005-04-27'%7D#9014
Small
Change to Small Ethanol Producer Tax Credit Definition
Senators Talent (R-MO), Lincoln (D-AR), Thune
(R-SD), and Johnson (D-SD) introduced legislation on April 13 to
update the definition of a small ethanol and small biodiesel
producer. Additional
co-sponsors include Senators Kit Bond (R-MO), Norm Coleman (R-MN),
Chuck Hagel (R-NE), Dick Durbin (D-IL), Tom Harkin (D-IA), and Ken
Salazar (D-CO). Already,
producers that manufacture 30 million gallons or less of biofuel
receive a ten cent per gallon tax credit for the first 15 million
gallons they produce annually. As
similarly introduced in the House by Rep. King, this bill would
broaden the definition for a small producer by applying the tax
credit to producers that manufacture up to 60 million gallons a
year. Again the credit
would only apply for the first 15 million gallons produced.
Senators Talent, Thune, and Johnson all cited economic,
environmental, and security benefits as pressing reasons to update
this important tax credit.
http://www.ethanolrfa.org/ereports/er041205.html
RECENT
STUDIES
Finally,
Someone Answering the Question: How Far Can Biomass Go?
On April 21, 2005, Oak Ridge National
Laboratory released its report titled, Biomass
as Feedstock for a Bioenergy and Bioproducts Industry: The Technical
Feasibility of a Billion-Ton Annual Supply, sponsored by DOE's
Office of Energy Efficiency and Renewable Energy, Office of Biomass
Program. The
report addresses exactly what the title implies, what would be the
implications of 1 billion dry tons of biomass, “any organic matter
that is available on a renewable or recurring basis,” on the
power, fuel, and chemical production industry.
By looking solely at agricultural and forest land,
researchers calculated that a potential 1.3 billion dry tons of
biomass could be utilized annually while still adequately meeting
the nation’s food, feed, and export needs.
The team at ORNL state that only minor modifications of
current land use and forestry practices would have to be adopted to
accomplish this. Their
calculations predict astounding results, should a concerted effort
be realized to adopt biomass resources on a significant scale.
They calculate that fully utilizing applicable biomass for
biofuel production could result in 80 billion gallons in annual
production, or 20 percent of total transportation fuel by 2030.
Already biomass surpasses hydropower as the number one
renewable energy source, roughly 3 percent of energy needs.
This study predicts biomass could comprise of 15 percent of
the nation’s total energy by 2030.
But the savings do not stop there.
The ORNL team did not forget to consider the implication of
biomass use for the chemical industry, in order to further back out
harmful and increasingly expensive petro-chemicals.
This study found biobased chemical production would increase
consistently from 5 percent of total chemical production in 2001
(12.5 billion pounds) to 25 percent by 2030.
Many before have said that one of the
U.S.
’s biggest resources is its land base, consisting of 2,263 million
acres. Half the
U.S.
land base could be utilized to grow biomass, “with 33 percent of
the land area classified as forest, 26 percent as grassland, 20
percent as cropland, 13 percent as urban areas, swamps and deserts,
and 8 percent as special uses such as public facilities.”
http://www.ornl.gov/info/press_releases/get_press_release.cfm?ReleaseNumber=mr20050421-01
Novozymes
and NREL Announce 30-fold Reduction in Enzyme Costs
In a research effort funded by the U.S.
Department of Energy since January 2001, Novozymes and the National
Renewable Energy Laboratory have been feverishly working to reduce
the costs attributed to enzymes in the breakdown of corn stover into
fermentable sugar for ethanol production.
In April, both NREL and Novozymes were proud to announce
success, a 30-fold reduction in cost, in fact.
The project was initially funded at $14.8 million over three
years and was granted another $2.3 million in April 2004.
They have now been able to reduce the enzyme cost for
production down to 10-18 cents a gallon.
Douglas Kaempf, Biomass Program Manager at the U.S.
Department of Energy, lauded Novozymes work by saying, “By
combining NREL improvements to the pre-treatment of corn stover with
new enzymes developed by Novozymes, the cost reduction achieved
provides an excellent example of the synergy that can be harvested
through well-placed government-sponsored research partnerships…
Novozymes should be applauded for their fine efforts in this
collaboration.” While
this reduction in input cost is a huge step forward, Novozymes
admits there are a still a number of improvements that need to be
made in the production process.
In order to explore the commercial feasibility of the
technology, Abengoa Enzymes, one of the largest ethanol producers in
the
United States
and Europe, plans to put Novozymes’s enzymatic process to the test
in their pilot plant in
York
,
Nebraska
. According to Gerson
Santos, R&D Director for Abengoa, “[Abengoa Bioenergy] is
committed to the development and commercialization of biomass-based
fuel ethanol production technology for a more sustainable
transportation sector.” In
relate news, the United Nations’ Food and Agriculture Organization
(FAO) is thinking of bioenergy and biofuels in terms of increasingly
effective poverty reduction tools that once commercially available
will do much to mitigate rural energy costs.
http://www.novozymes.com/cgi-bin/bvisapi.dll/press/press.jsp?id=32730&lang=en
http://www.eere.energy.gov/news/archive.cfm/pubDate=%7Bd%20'2005-04-20'%7D#9004
http://www.fao.org/newsroom/en/news/2005/101397/index.html
Wood-derived Ethanol, Yet
Another Reason to Hug a Tree
As reported in the Christian
Science Monitor on May 5, 2005, the State University of New York
(SUNY) is making headway on research to ferment xylan, the second
largest component of wood. Xylan
is already separated during traditional paper production in which
cellulose is isolated as the main component of paper.
It is currently disposed of as waste, but according to Dr.
Thomas Amidon of the Department of Environment and Forestry at SUNY,
besides its use in ethanol production it could be utilized “for
controlled release of pesticides and as a thickener.”
The commercial process would entail construction of a
biorefinery attached to a traditional paper mill, which would
already be pumping out waste xylan.
The adjacent processing facility would have the capability to
ferment the additional sugar into ethanol as well as produce acetic
acid, which could be utilized for the production of Polylactic
Acetate (PLA). The
fermentation process does not entail using harmful chemicals and
therefore it would not pose a risk for the environment.
The potential scale of this venture is very significant.
Hardwood and softwood trees consist of 35 percent and 9-14
percent xylan respectively. By
simply attaching a biorefining facility at each of the nation’s
paper mills, fermentation of xylan could potentially create 2.4
billion gallons of sustainably produced ethanol.
This development can create out big windfalls for the pulp
and paper industry, by essentially generating a new revenue stream,
thereby enhancing their profitability; and providing forest-rich
states with a reliable source of greenhouse gas emission reducing
biofuel.
http://www.csmonitor.com/2005/0505/p17s01-sten.html
ARS,
Working to Make Hexane Obsolete
At the Agriculture Research Service in
Wyndmoor
,
PA
, USDA scientists have been hard at work modifying the biodiesel
production process. Michael
Haas, in the Fats, Oils, and Animal Coproducts Research Unit of the
USDA-ARS
Eastern
Regional
Research
Center
, has led the effort with a number of other scientists to remove the
air pollutant hexane from the production process.
Working with biologist Karen M. Scott and chemist Thomas A.
Foglia, Dr. Haas has effectively removed the step whereby before
transesterifcation (during which fats and alcohols are reacted to
produce fatty acid esters known as biodiesel) soybeans are soaked in
hexane to extract the soybean oil, by instead soaking soybean flakes
directly in methanol and sodium hydroxide--the same materials used
with the extracted oil. By
also drying the flakes before soaking them, the methanol requirement
was greatly reduced making the production process cost approximately
$1.02 per gallon versus the 38 cent per gallon of the traditional
process. Dr. Haas
intends to do further analysis of this economic model to account for
income from the oil-extracted, protein-enriched animal feed, while
ARS pursues a patent for the process.
Research is planned for a similar process to produce
biodiesel from corn lipids, canola oil, meat, and bone meal.
http://www.ars.usda.gov/is/AR/archive/apr05/diesel0405.htm
NEWS
BRIEFS
Biodiesel, by Land and by Sea
On January 18, 2005 Principal
Deputy Assistant Secretary (Installations and Environment) Wayne
Arny issued a memo outlining the Navy's requirement to utilize B20
(20 percent biodiesel) in all of its non-tactical vehicles by June
1, 2005. According to Joe Jobe of the National Biodiesel Board, the
Navy is the single largest user of biodiesel in the world and he
says, "We commend the Navy for its leadership role in advancing
the use of biodiesel and other alternative fuels… The Navy is
setting a positive example for the rest of the nation with this new
policy." This goal is meant to exceed the Navy's responsibility
to decrease their petroleum dependence. Don Schregardus, Deputy
Assistant Secretary of the Navy (Environment) says, "We decided
to take it a step above and beyond what the military is required to
do. By bringing B20 to virtually every Navy and Marine base
nationwide, we are significantly decreasing reliance on fossil
fuels." Biodiesel is already being used by the Navy, Army, and
Air Force and appears to be a reliable, domestic transport fuel the
U.S. military is willing to adopt on a broad scale.
Source:
http://www.biodiesel.org/news/bulletin/2005/040105.htm
http://lists.emji.net/pipermail/biofuels_class/2005-April/000444.html
India
to Institute Subcontinent-wide Biodiesel Policy
In a country with a population of one billion
spread over a land area of a little over one million square miles,
it is no small feat for
India
to provide adequate transportation fuel.
In addition, a nationwide commitment to adopt B20 would be a
significant undertaking. While
the commitment is not yet official, the Indian government is
expected to make its announcement in August of this year.
Currently,
India
imports 70 percent of its crude oil, approximately 1.2 million
barrels a day resulting in an annual expenditure of $21.9 billion.
Through their B20 commitment, R. Mandal, advisor for the
Planning Commission, predicts
India
would save Rs 20,000 crore (approx. $4.76 billion) annually on
imports. He also
admitted that it would “require 11 million hectares of land and
create 11 million jobs.” The
most readily available biodiesel feedstock is the tree-borne oil
seed, jatropha. One
million hectares have already been identified for jatropha
cultivation with oil refiners entering into buyback agreements with
farmers. Biodiesel
extracting costs in
India
are about a third of European costs (approx. 0.799 euros) or between
Rs 15 to Rs 17 per liter (approx. $1.44 per gallon.)
Should this commitment come to fruition,
India
could well become a hub for production and feedstock of biodiesel.
Source:
http://www.telegraphindia.com/1050509/asp/business/story_4714838.asp
http://www.teriin.org/events/iogc/about.htm
Not Satisfied with Just Being
Number One Ethanol Producer…
Archer Daniels Midland (ADM) has apparently
begun looking over the fence, making eyes at the nascent
U.S.
biodiesel market, with the help of Germany-based Volkswagen (VW).
ADM’s plans to begin building biodiesel facilities, assuming the
$1 per gallon biodiesel tax credit is extended, were made public
after their joint announcement with VW on National Ag Day. VW has
announced they will extend the warranty for their
U.S.
diesel-powered vehicles to run on B5 (5 percent biodiesel) and
strongly hinted they would be doing the same for B20 in the not too
distant future. Frank
Witter, CEO of Volkswagen of America, said, “Our decision to
extend warranty coverage for diesel engines fueled by the B5
biodiesel blend is driven by the shared desire of VW and ADM to
capitalize on the significant environmental, economic and
quality-related benefits of increased biodiesel usage.” For many
in the United States ADM is synonymous with ethanol, but ADM already
has at least two biodiesel facilities in Germany producing almost
double the U.S.’s annual production.
Current
U.S.
production is roughly 20 million gallons with many more facilities
in the planning stages or coming online shortly.
ADM is looking to enter the biodiesel market with a bang by
building a number of plants that would effectively double or triple
that number. In a
written statement ADM said, “We fully believe in the potential for
the biodiesel market in this country and we see the extension of the
tax credit as a vital catalyst to develop demand for biodiesel in
the
United States
.” Already one of the world’s largest processors of soybeans,
ADM will be producing soy-based biodiesel.
Source:
http://www.theautochannel.com/news/2005/03/17/015076.html
http://www.agribusinesscenter.org/headlines.cfm?id=830
Going It Alone So Far, Lone
Star
State
Texas
is setting a precedent, namely the City of
Denton
, by building the first renewably-powered biodiesel production
facility in the world. Opening
ceremonies took place March 29, 2005, on–site at the City of
Denton Landfill
. Speakers for the event
included Denton Mayor Eugene Brock, Joe Jobe of the National
Biodiesel Board, and Darryl Hannah, actress and biodiesel advocate.
The facility is a result of a public-private partnership
between the City of
Denton
and Biodiesel Industries of Greater Dallas Fort Worth, LLC.
This will be the fifth production facility Biodiesel
Industries has built and it will be feedstock neutral.
Besides using virgin oil from oilseeds, local restaurants
will also provide some of their waste cooking oil to be converted to
biodiesel. The facility will be powered by biogas released from the
Denton
landfill and will produce initially three million gallons annually.
This facility should provide
Denton
with adequate biodiesel to run its diesel vehicle fleet on B20,
which will reduce the City’s annual criteria pollutant emissions
by up to 12 tons. The
partnership also plans to sell any additional fuel through regional
distribution channels.
And
if you can do it for biodiesel, why not ethanol?
Not wishing to be outdone, the Panda Group of
Dallas
,
Texas
will be breaking ground this summer on a 100 million gallon ethanol
plant that will be run on biogas.
The biogas will be produced from a combination of cow manure
and cotton gin waste displacing roughly 1,000 barrels of oil a day
that would have been used for energy production.
The $120 million plant will be located in Hereford, Texas
whose Mayor eloquently describes the benefits his community will
receive from this plant, “The community will not only benefit from
new jobs and increased tax base created by the plant, the use of
cattle manure as a fuel to make steam for the facility will also
benefit the local feed lots. We are looking forward to the plant's
start-up and to Panda becoming a part of
Hereford
's business community.” Here’s
hoping these projects inspire further investment in renewably
powered biofuel production facilities.
Source:
http://www.grainnet.com/info/articles.html?type=ar&ID=25652
http://www.rrc.state.tx.us/news-releases/2005/050330mlw.html http://www.biodiesel.org/resources/pressreleases/ele/20050329_denton_tx_1st.pdf
http://www.pandaenergy.com/images/PressReleaseMay-3-2005.pdf
http://www.eere.energy.gov/news/#9068
Elephants, Exotic Animals
with Prolific Piles of Dung
The Rosemond Gifford Zoo in
Syracuse
,
New York
, a world leader in Asian elephant breeding, is looking into the
possibility of producing power from their animals’ manure.
The zoo hopes to significantly reduce its $400,000 annual
expenditure on heat and electricity by turning their waste problem
into an energy solution. According
to Zoo Director Anne Baker, the zoo cares for six elephants capable
of producing 1,000 pounds of dung daily.
Transporting that waste to local farms, where it has been
composted has cost the zoo upwards of $10,000 a year plus fossil
fuel costs. According to
Baker, “this would be just such a good idea on so many levels.”
In terms of energy production, elephants are considered to be
ideal waste producers, their predominant food staple is hay and they
are particularly inefficient digesters resulting in higher
energy-containing feces. The
hope is to use the elephant dung in addition to that of the zoo’s
other hoofed residents, to either produce methane or hydrogen to run
a fuel cell car or generator. The
zoo has begun work on a feasibility study in collaboration with a
New York City-based renewable energy developer, Homeland Energy
Resources Development, to assess the possibility of such a venture.
Source:
http://www.adn.com/24hour/healthscience/story/2363819p-10606258c.html
Grand Forks
,
North Dakota
, Making a Name for Itself
Grand Forks
,
North Dakota
will be the site of the nation’s largest biodiesel plant, capable
of producing 32 million gallons a year.
The project has been in the pipeline for the last 2 ½ years;
construction of the plant will begin in August with the biodiesel
available for market by December 2006.
The legacy of this plant seems to trace back to a
Germany-based company called Science and Technologies Industries
International, whose daughter company, Delaware-based Biodiesel
Holding Ltd., owns North Dakota Biodiesel Inc., the company
officially in charge of the venture.
Biodiesel Holding Ltd. chose this location in
Minot
,
North Dakota
for a number of reasons. First,
in terms of resource,
North Dakota
produces 95 percent of the nation’s canola, with a peak in canola
acreage in 2001 and 2002 of 1.3 million acres.
The plant will be relying on roughly 355,000 acres of North
Dakota grown canola, but even if the facility needs to expand or
should there be any shortfalls in resource availability, Minot is
located conveniently close to the Canadian border where canola
surpluses could be imported from Manitoba and Saskatchewan. Vocal
support from
North Dakota
’s Commissioner on Agriculture Roger Johnson and Senator Kent
Conrad were decisive factors for choosing this site.
In Johnson’s words, “This new biodiesel plant - our first
one - is a significant milestone.
We now need to work together to make sure it is the first of
many.”
Source:
http://www.grandforks.com/mld/grandforks/news/state/11203944.htm?template=contentModules/printstory.jsp
Bush Makes Historic Visit to
Biodiesel Plant
On May 16, 2005, President Bush took time to
tour Virginia Biodiesel Refinery, LLC, a small biodiesel plant in
West Point
,
VA.
The plant has been in operation since March 2004 and produces 3
million gallons annually. The
President was joined by Senator George Allen (R-VA), Secretary of
Agriculture Mike Johanns, Reps. Bobby Scott (D-VA), Jo Ann Davis
(R-VA), Eric Cantor (R-VA), Randy Forbes (R-VA), and Thelma Drake
(R-VA), representatives from the National Biodiesel Board (NBB),
American Soybean Association, and the United Soybean Board, along
with hundreds of industry leaders, Virginia farmers, and local
government representatives. “I
appreciate the folks here at Virginia Biodiesel for showing me
around,” Bush said. “I love the innovative spirit of our
entrepreneurs in this country. And the folks here have got
incredible vision, and they’re willing to take risks to
innovate.”
After thanking the organizers of the event and
his hosts, the President took the opportunity of being behind a
podium to discuss the important role government plays in creating an
entrepreneurial environment for small businesses to take risks and
innovate, in keeping taxes low, saving Social Security, and
providing the country with a much needed energy policy.
In addressing the issue of rising gas prices, Bush outlined a
four step approach he said Americans should embrace in order to be
less dependent on foreign sources of oil, “We must be better
conservers. We must produce and refine more crude oil here in
America
. We must help countries like
India
and
China
to reduce their demand for crude oil. And we've got to develop new
fuels like biodiesel and ethanol as alternatives to diesel and
gasoline.” In talking
about, the nation’s need for reliable and affordable energy, Bush
advocated drilling in ANWR, investing in clean coal technologies,
nuclear energy, increasing domestic production of natural gas and
conservation of electricity. Bush
did set a precedent as the first President to visit a biodiesel
production facility and spent a good quarter of his speech
expounding on the virtues of biodiesel and ethanol.
He expects a “good” Energy Bill to be presented to him by
the Senate and House and ready to be signed by August.
Source:
http://www.whitehouse.gov/news/releases/2005/05/20050516.html?lk=4330497-4330497-0-16979-Fl/VLqN9qtk2EZd/H6t33DqQBTgElHV-
http://nbb.grassroots.com/NBBNewsRelease/Bush_Virginia_Biodiesel/?lk=4330497-4330497-0-16979-Fl/VLqN9qtk2EZd/H6t33DqQBTgElHV-
DOE Makes E-85 Toolkit
Available to the Public
After interest was shown by fleet managers for
a “one-stop shop” information source on building an E-85 fleet,
the Dept. of Energy designed an online toolkit.
The toolkit provides fleet managers a step-by-step guide for
establishing an E-85 fleet, by first outlining the benefits of E85
and providing information on funding opportunities.
Information is also provided on available equipment and
technology, locations of existing E-85 stations, as well as
infrastructure codes, standards, and permits.
For more information on this toolkit, please visit http://www.eere.energy.gov/afdc/e85toolkit/.
Crain Consulting Announces
Biofuel Initiatives by Two Louisiana Companies
Crain Consulting, a financial consulting firm
founded in 2001, has just announced two new bioenergy clients
located in
Louisiana
. The first is Vanguard
Synfuels of Pollack, LA, which plans to retrofit a former ammonia
manufacturing plant into a “state-of-the-art” biorefinery.
Two of the products from this biorefinery will be biodiesel
and ethanol made primarily from available wood waste.
The second group being funded is the Southern Loggers
Cooperative in
Tioga
,
Louisiana
. They plan to work with
Crain Consulting to create and own new fueling centers in order to
increase efficiency and reduce operational costs for their members.
Crain Consulting specializes in assisting companies with
identifying financial options for renewable energy and biobased
product manufacturing projects.
It is considered a leader in the field and has assisted
clients in 38 states.
www.vanguardsynfuels.com
www.crainconsulting.net
Governor’s Ethanol
Coalition Calling on Bush to Act
On April 12, 2005, the 30-member Governors’
Ethanol Coalition (GEC) sent a number of recommendations to
President Bush regarding the need to expand ethanol production and
consumption. They cited
benefits for national security, economic development, and
environmental health. Minnesota
Governor Tim Pawlenty, Chair of the GEC, and his Vice Chair, Kansas
Governor Kathleen Sebelius, claimed the easiest and cheapest support
the Administration could provide for the ethanol industry would be a
Renewable Fuel Standard of at least 5 percent of transport fuels
from ethanol by 2010 and 8 billion gallons produced annually by
2012. They further
insist, “as soon as practical thereafter, the nation should
produce at least 10 percent of its transportation fuel from ethanol
and biodiesel.” To
ensure all regions of the country can benefit from increased ethanol
production, the GEC encourages the development of technology to
utilize a wide variety of biomass resources.
Increased federal R&D funds for cellulosic-derived
ethanol was one of the recommendations they offered as well as a
goal to produce one billion gallons of biomass-derived ethanol.
The GEC urged the Administration to set aside $800 million in
R&D funding over 10 years for this important research, which
they said is the equivalent of four days of
U.S.
oil imports (or $80 million a year).
They also recommended the federal government provide
market-based incentives for commercial demonstration and technology
application projects. The
Governor’s said the issue is urgent and outlined how it addressed
current economic insecurity regarding imported oil, the need to
reduce carbon dioxide emissions to reduce risks associated with
climate change, as well as providing economic development benefits.
The GEC was begun in September 1991, by then Nebraska
Governor Ben Nelson. Current
membership stands at 30
U.S.
Governors, with hopes of expanding to 32 Governors in the coming
months.
http://www.ethanol-gec.org/
http://www.ethanol-gec.org/04132005.htm
NOTABLE
QUOTABLES
“We have to get serious about changing the way we think about energy production. There is only so much oil and other fossil fuels on the planet. We must start turning to cleaner, renewable sources of energy, like ethanol and wind power, and we must do it now.”
- Senator Harkin
"[Biobased products, like PLA and biofuels] aren't exotic or expensive
technologies. They can be mass produced at prices
competitive with petroleum without the global environmental and security
costs of fossil fuels."
-Bill Shireman,
Future 500 president and CEO
Upcoming
Events
|
Date
|
Event
|
Location
|
Further
Information
|
|
June
1-5, 2005
|
United
Nations World Environment Day
|
| |
