Biofuel and CDM:An assessment

Institute for Global Environmental Strategies Biofuel and CDM:An assessment Institute for Global Environmental Strategies 4 March 2009

Contents o Biofuels and CDM o Overview of biofuel policies in Asia o Assessment of current situation o Future of biofuels in CDM o Way forward 2

Biofuels and CDM As petrol prices continue to rise, biofuel production, domestic use and trade reduce oil import dependency and increase energy security. Biofuel production creates employment, encourages economic diversification and promotes rural development. It contributes to the Kyoto Protocol reduction targets, using the financial incentive provided by the Clean Development Mechanism. Biofuels can help developed and developing countries alike meet commitments to combat climate change and achieve the Millennium Development Goals. ~ Supachai Panitchpakdi, Secretary-General of UNCTAD Video Message to the 11th Session of the Conference of the Parties of the UN Framework Convention on Climate Change and the First Meeting of Parties of the Kyoto Protocol on the occasion of the launch of UNCTAD s Biofuels Initiative Montreal, Canada, 7 December 2005 3

Biofuel policies in selected Asian countries Country Blending rate Major feedstocks Strategy/ Goal/ Economic measures India E5 Jatropha, sugarcane Indian Biofuel National Strategy, 2008 / 20% biodiesel and bioethanol by 2017 / 11.2 mil ha of jatropha planted and matured by 2012 for the target blend of 20% / fixed prices for purchase by marketing companies China E10 Corn, cassava Biofuel share 15% of transportation energy by 2020; incentives, subsidies and tax exemption for production Malaysia 5% Palm National Biofuel Policy, 2006 / B5; Diesel: plans to subsidise prices for blended diesel Indonesia BDF: 10% E5 Palm, jatropha National Energy Program, B20 and E15 in 2025; Diesel: subsidies (at same level as fossil fuel) Thailand E5, E10; B2 Palm Biodiesel Development and Promotion Strategy / Enforce nationwide B2 in April, 2008 / B5 in 2011 / B10 in 2012; Ethanol: price incentives through tax exemptions Philippines BDF: 1% Coconut Biofuel Strategy 2006 / BDF mixing rate 1%, 2% by 2009 / Ethanol: 5% by 2009, 10% by 2011; tax exemptions and priority in financing Japan upper limits E3 B5 Sugarcane, waste oil Plan to replace 500 ML/year of transport petrol with liquid biofuels by 2010; subsidies for production Source: IGES (2008), Romero (2008) 4

Indian biofuel national policy o Blending mandate o Indicative 20% blending by 2017 for biodiesel and bioethanol o Current blend: 5% ethanol in gasoline in 20 states o Planned to double to 10% ethanol in gasoline starting Oct 2008 but was postponed due to surge in sugarcane costs o Sustainable production & land usage o Focus on non-edible energy crops: jatropha, pongamia (keranj), sugarcane, sweet sorghum; more R&D for second-generation feedstocks o Propagation in marginal / waste / degraded / under utilized land o Fiscal and financial incentives o Promote biofuels by classifying biodiesel and bioethanol as declared goods to ease commerce within and outside the country s states o Elimination of tax and duties on biodiesel o Minimum price for oil seeds o Minimum price for bioethanol based on actual production and distribution costs 5

Theoretical potential of biofuel in Asia (2030) Source: MRI, 2007 biofuels can a complementary solution if planned and managed well 6

Current situation... o Overestimated what we know o Underestimated the uncertainties energy security economic gains climate change 7

The future ain t what it used to be ~ Yogi Berra o falling oil price o global recession 8

Who gains? The jatropha case: o Greening of the environment o Rural economy and livelihood o pro-poor initiative to cultivate underutilized marginal land o labor intensive (could employ village women and children) o planting o fruit picking o jatropha oil could be utilized to fuel simple machines in villages rural electrification o Commercial viability still in question o marginal land ~ marginal harvest o must be produced in volume o current technology still inefficient o germplasm o harvesting process o logistics o limited number of established refineries o relies on government subsidies Should governments infuse more money for R&D and demonstration projects given the current financial crisis? 9

Who gains? Jatropha case study in Yunan, China: o Greening of the environment o 1,200 ha planted in hillside o Rural economy and livelihood o to augment farmer s income o jatropha planted not in arable land o Feedback from farmers o wait and see attitude o no existing market for jatropha o they will only harvest the fruits if the price will be competitive o no established refineries o deemed too risky 10

Good for environment? o Biofuels are not created equal o LCA results still fuzzy o The gains in burning cleaner fuel can be offset by unsustainable production practices o rainforest destruction o peat land conversion o heavy fertilizer use o induce water scarcity o Questions on sustainability of biofuels partly derails its inclusion in the CDM portfolio o as of 1 January 2009, no biofuel projects among the 1300 projects approved in the CDM portfolio 11

Overcoming barriers in CDM o Biofuels perceived as carbon neutral have initial high expectations to be a major focus of CDM projects o Co-benefits from biofuel production (job creation, rural development) reinforces the SD component of CDM o Currently only the CO2 reduction potential is monetized in CDM o Under the current system with limited approved methodologies applicable to biofuels, the chance for approval of biofuel CDM project on a significant scale is highly unlikely. 12

Biofuels in CDM Meth. Title / Description No. 69 30 TPD Biodiesel project using oil seeds from jatropha and pongamia in Andra Pradesh, India 82 Baseline methodology for the production of sugar cane based anhydrous bio-ethanol for transportation using LCA 108 Biodiesel production and switching fossil fuels from petro-diesel to biodiesel in transport sector GHG Host Remark reduction country 26 ktco2 India C 53 ktco2 Thailand C 26 ktco2 India C 109 Sunflower Methyl-Ester Biodiesel Project in 33 ktco2 Thailand C 129 Generalized baseline methodology for transportation biofuel production 33 ktco2 Thailand C project with LCA 142 Palm Methyl Ester Biodiesel Fuel (PME-BDF) production and use for transportation 180 BIOLUX Benji Biodiesel Beijing Project production of waste cooking oil based biodiesel for use as fuel 218 ktco2 Thailand C 123 ktco2 China A 185 Khon Kaen Ethanol Project 40 ktco2 Thailand B 223 Biodiesel Project 205 ktco2 South Africa C 224 Manufacturing of Biodiesel from Crude Palm Oil and Jatropha Oil 60 ktco2 India C 228 AGRENCO Biodiesel project in Alta Araguala 335 ktco2 Brazil WIP 233 Palm Methyl Ester Biodiesel Fuel (PME-BDF) production and use for 143 ktco2 Thailand WIP transportation in Note: A = Approved by the Executive Board (EB); B = Project participants / EB must make some changes; C = Rejected / new Project Design Document (PDD) must be submitted; WIP = work in progress Source: Woo (2008) using data from UNEP Risoe. 13

Biofuels in CDM Current CDM approved methodologies applicable to biofuels Methodology Description AM 0047 AMS-II.F AMS-III.B Production of biodiesel based on waste oils and/or waste fats from biogenic origin for use as fuel Energy efficiency and fuel switching measures for agricultural facilities and activities Switching fossil fuels AMS-III.C AMS-III.T Emission reductions by low-greenhouse house emitting vehicles Plant oil production and use for transport applications Note: AMS refers to Small Scale CDM Methodologies Source: http://cdm.unfccc.int/methodologies/pamethodologies/approved.html 14

Can CDM be made to work for biofuels? o more CDM approved methodologies needed o second generation biofuels maybe more feasible o explore use of biofuel feedstock wastes for use in biomass energy generation CDM approved methodologies which could be applied to biomass energy utilizing biofuel feedstock solid waste Methodology AM 36 ACM2 ACM6 AMS-I.C. AMS-I.D. AMS-III.E Description Fuel switch from fossil fuels to biomass residues in boilers for heat generation Version 2.1 Grid-connected electricity generation for renewable sources (no biomass) Grid-connected electricity from biomass residues (includes AM4 & AM15) Thermal energy for the user with or without energy Grid-connected renewable energy connection Avoidance of methane production from decay of biomass through controlled combustion, gasification or mechanical/thermal treatment Source: http://cdm.unfccc.int/methodologies/pamethodologies/approved.html 15

Way forward o current biofuel situation maybe bleak need to revisit ambitious targets o change in policy direction biofuel for transport and rural electrification o we need a way out of our shock and trance tendency when oil prices are low o work on sustainability issues - learning from mistakes not just best practices o more biofuel R&D will be needed, especially for second generation biofuels o more R&D for biofuel feedstock wastes for use in biomass energy generation o need to develop additional methodologies for biofuels in CDM or other future climate regime Thank you for your attention. 16