BIO ENERGY: SECTOR OUTLOOK

INTRODUCTION

Although fossil fuels are the main source of energy for our modern global economy, when burned they produce high levels of carbon dioxide (CO2). A steady increase in CO2 production over the last three decades - culminating in 2016 being forecast as the hottest year on record - has been the critical factor affecting current concerns surrounding global warming and the future of the planet.

Together, four countries produce almost 50% of the world’s greenhouse gas emissions: China leads with nearly half this figure, with the United States, India and Russia following in its wake. Along with 191 other countries, these world leaders now recognise their collective impact on climate change; Earth Day 2016 saw the ratification of the Paris Agreement, which had been proposed at the 21st UN Framework Convention on Climate Change in December 2015.

Coming into force on 4th November 2016, each country was required to submit its 2030 strategy for combatting climate change to the 22nd UN Conference in Marrakesh. Of the four largest contributors to emissions, China had the most ambitious target: a reduction of up to 65% of its greenhouse gas emissions per unit of Gross Domestic Product (GDP). India believes it can reduce emissions per unit of GDP by up to 35% by 2030 - but highlighted a requirement of at least $2.5 trillion in foreign direct investment to do so – while the United States intends to achieve up to 28% by 2025.

"The International Energy Agency's goal is for biofuels to meet more than one quarter of global demand by 2050"

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BLENDING TARGETS

An area where reductions are already being made is in transportation fuel. In the United States, fuel for cars and lorries accounts for more than 70% of the country’s entire oil consumption. With almost 800 vehicles for every 1,000 inhabitants, only the microstates of San Marino and Monaco have more cars per head.

Fossil fuels make up more than 95% of transportation fuels worldwide, but biofuels are slowly gaining ground; bioethanol and biodiesel, the two main products, now account for almost 3% of fuels used for road transport. Bioethanol is an alcohol made by fermentation of carbohydrates produced in sugar- or starch-based crops and, when used as an additive to petroleum fuel, both increases octane levels and improves vehicle emissions. Biodiesel, meanwhile, is produced from oils or fats and is used as a diesel additive to reduce levels of particulates, carbon monoxide and hydrocarbons.

Although more than 30 countries worldwide have targets for blending fossil fuel-based fuels with biofuels, the United States and Brazil lead the pack, accounting for more than 90% of production combined. The United States implemented the Renewable Fuel Standard, which increases by 100 million gallons per year, and ultimately aims to blend two billion gallons of biofuels into road transportation fuel in 2017. The UK, meanwhile, has a 10% target for renewable fuel sources by 2020, equivalent to replacing 4.3 million tonnes of fossil fuels each year.

The International Energy Agency’s goal is for biofuels to meet more than one quarter of global demand by 2050. Members of the UN International Biofuels Forum, formed by Brazil, China, India, Pakistan, South Africa, the United States and the European Commission, are strongly encouraging of attempts to increase domestic production of such fuels.

ECONOMIC FACTORS

As well as polluting our atmosphere, fossil fuels are in limited supply. Those which are easily extractable – without the need for environmentally damaging techniques such as hydraulic fracturing, also known as fracking – will run out in the next 50-100 years, according to estimates. Not only will blending help to ensure the future availability of these resources for longer, it will also advance the energy sustainability of countries employing such techniques.

Some of the world’s largest economies are net importers of energy: Japan, China, South Korea and India are in the top five and, despite having the largest shale gas reserves in the world, the United States’ vast appetite tops the list. The energy security of these and other countries remains vulnerable until alternative fuels, to at least supplement fossil fuel-based options, are developed; it is likely these will be based on indigenously produced, renewable feedstocks. According to India’s Ministry of New and Renewable Energy, biofuels are a “ray of hope in providing energy security”.

Biofuels are viewed as key to stimulating economic growth outside of urban centres, creating employment opportunities for thousands of rural workers. But such technologies do not come cheap - as highlighted by India’s prediction of a requirement for $2.5 trillion to achieve its 2030 targets. To facilitate this, the government is strongly encouraging foreign direct investment; internationally backed biofuel projects (for domestic use) will gain automatic approval for up to 100% funding.