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Diversification of farm activities; rural development but concern over environmental impacts
Biofuel technology is land intensive
The EU perspective
A US perspective
Main questions
What is economic viability of biofuel production? What polices are in place to promote production and use of biofuels? What will be effect of biofuels on agricultural land use and markets? Are current biofuels policies sensible?
In terms of economic efficiency, climate change, world hunger, trade and the environment
Reading suggestions
Vast and growing literature Commission documents NGO and interest group documents Impact on agricultural markets (Schmidhuber, OECD, IFPRI) Surveys (Bamire et al., World Bank) Reviews of policies (Global Subsidies Initiative, Commission annual progress reports)
Some definitions
Bioenergy is energy of biological origin, derived from biomass, such as fuelwood, livestock manure, municipal waste, energy crops Biofuels are fuels produced from biomass, usually of agricultural origin
Bioethanol Biodiesel Biogas
Energy crops are crops specifically cultivated to provide bioenergy, mainly biofuels but also (miscanthus, short rotation coppice, eucalyptus) other forms of energy In these lectures we concentrate on biofuel policies
Crops
Annual (cereals, oilseed rape, sugarbeet) Perennial (miscanthus, reed canary grass, short rotation coppice)
Wastes
Straw Animal manure
Source: Mortimer, 2007
Second generation
Biofuel uses
Bioethanol
Used as neat ethanol (E95, blend of 95% ethanol and 5% water) Used as E85 (85% volume ethanol with petrol) in flexfuel vehicles Used as blend smaller than 5% volume (E5) in ordinary petrol or as its derivative ETBE
Biodiesel
Current maximum 5% in diesel blends, otherwise can only be used in modified diesel engines
Current 5.75% EU target cannot be met with ordinary blends of petrol and diesel
Need for separate infrastructure (pumps, storage, delivery for E85 and biodiesel or pure plant oil)
Feedstock costs are the most significant cost of biofuel production, up to 40-50% for US corn based ethanol, 80% for EU biodiesel from rapeseed. Energy is also a major cost component, up to 20% of biofuel operating costs in some countries. The sale of byproducts, such as dried distillers grains, also contributes to a biofuel plants profitability. The ratio of crude oil prices to feedstock prices offers a simple indicator of the competitiveness of biofuel made from various feedstocks.
May make more sense to think in terms of break-even prices for biofuel producers
Given crude oil price, how much can biofuel producers afford to pay for feedstock? Comparing break-even price with current price for sugar, maize etc. indicates potential for further growth in biofuel production, but need to factor in risk and uncertainty discounts
Next slide shows how competitiveness of biodiesel varies with likely scale of biodiesel demand (and thus price of rapeseed feedstock)
S-1%, S-7% and S-9% represent targets for biofuel share of transport fuels Source: Bamire et al., 2007
EU land constraints
EU biofuel directive: 5.75% of EU fuel supply by end 2010 24 mio t biofuels to reply about 18.6 mio t of fossil fuels (due to lower energy content) European Commission estimates
16-18 mio ha needed if all biofuels feedstocks grown in EU Which is about 17% of total arable area: 103.6 mio ha
Area reserve:
About 2.8 mio ha obligatory set aside not yet grown with biofuel crops 3 mio ha arable land currently not used.
Source: Banse, 2007; see also Bamire et al. 2007
Specific results no longer very valuable because of low crude oil price assumptions