In this session, we're going to understand the principle behind the usage of bio fuels for energy production, and we are going to distinguish between corn and sugarcane based biofuels. We're going to understand why the energy efficiency is so different. We're going to look at some of the externalities that they impose and this is probably the main purpose of dwelling at some length on this aspect. We're going to touch on the political aspect of subsidies because it is an example which I think is very important and it is a transferable example. So I am not of course, I do not have other the time or the competence to look in detail at every possible source of energy that could be either renewable or reduce emission of CO2. We have looked at wind, we've looked at solar, we looked at nuclear and we're looking at biofuels, there are many others. I am bringing up the biofuels not because they are a game changer, but they came because they exemplify some considerations which are transferable and should be kept in mind when looking at different initiatives. So what is the idea behind biofuels? Well, the idea biofuels came in the 1970 from Noble laureate, Melvin Calvin. And his idea was not to use crops, he did not want to use crops because he said crops should be used to feed people, and I think it was a very good point as we shall see later on. And he wanted to create genetically modified plants exactly for use of producing fuels. Professor Calvin's idea did not come to fruition, but two crops are currently used as biofuels, one is corn and one is sugar cane. The original motivation to produce energy from biofuels had nothing to do with reducing the CO2 emissions, it was in the 1970s. The motivation then was more geopolitical and economic. The idea was to reduce the US dependence on expensive and politically tricky input, import of oil. At the current moment the US partly because of shale oil and other sources is no longer a significant importer of oil and therefore that motivation is no longer there. However, we have become more conscious about not sending emissions, CO2 emissions to the atmosphere and that is why there has been a renewal of interest in the year 2000s about biofuels. In theory, the idea today is to obtain a carbon-neutral source of energy. In reality, the topic has become enmeshed with the politics of agrobusiness as we shall see. First thing to understand, why is burning of biofuels CO2 neutral? Doesn't the burning of anything send CO2 in the atmosphere? Yes it does. However, as we have seen many times when I burn biofuel, I'll have it as now but has grown in the last year, in the last few years. I am basically bringing back into the atmosphere, spewing back into the atmosphere carbon that was subtracted one or two years ago. So I am not sending into the atmosphere carbon that was sequestration by plants millions of years ago as it happens when they burn a fossil fuel. We've seen the carbon cycle that will say key thing to understanding all of this. We have seen plant respiration and that is the continuous flux, but we have also seen that plants and biomass stores carbon as it grows. So burning of this simply releases spec what is just be taken out. So in theory it is carbon neutral. Why did I say in theory? Well, at the present moment, about 1.5 to 2 billion people in the world have no access to commercial energy, therefore they burn plants for cooking and heating. Now this is carbon neutral as long as they use locally grown plants. Why locally grown? Because there is no cost of transportation, and without use of fertilizers. If there is no use of fertilizers and there are locally grown plants, then yes, it is really carbon neutral. However, modern farming techniques require fertilizers, require transportation, require agricultural equipment, and therefore a realistic calculation of the net CO2 balance must take all these different sources into account. Fertilizers cost a lot of CO2 emissions. Okay, we got the big picture. We're going to talk about coal and sugarcane. The two major biofuel producers at the moment are US and Brazil. In the US, corn is grown and the starch is first converted into sugars. In Brazil, sugarcane is grown and sugar is obtained directly and that's why it's called sugarcane. In both cases, sugars are converted into alcohol through fermentation, which is the same process which you make whiskey. The direct use of edible products, corn or sugarcane for the production of fuel is called Phase one. That also phase two, which is the the idea of using the whole plant, not just the sugar to make cellulosic ethanol. This is a development stage, we won't go too much into that. So let's compare corn and sugarcane. There are three ways of comparing a biofuel. We can compare the CO2 equivalent emission for a certain amount of energy produced after all the attending costs are taken into account. We can compare the energy required to produce ethanol, the stuff that is burned, and the energy that ethanol produces. And finally, we can look at this cost relatively to gasoline. Let's look at the three measures of efficiency in turn. On the basis of the energy-equalized all-in cost of production, only sugar cane reduce you to a mission by a significant amount compared to gasoline. With corn-produce ethanol, you could just as well put gasoline in your car. Also on the basis of the energy required to produce ethanol, only sugarcane brings a significant benefit. On the basis of castrated to gasoline is 1.4 liters of ethanol produce the same energy as one liter of gasoline. So to make the comparison, I should do 1.4 to 1. Unfortunately, oil prices are volatile so making a price comparison is not very telling because of the volatility of oil prices. Thing to remember however, is that sugarcane, ethanol always cost less than corn ethanol for the same energy produced. Why does corn score so low? Well, first of all there are lots of CO2 emissions needed to bring ethanol to your car. The CO2 cost to this production and over transmission chain depends on the precise energy mix. For a typical US energy mix, C02 emissions from ethanol either a few percentage worse, or 15% better than gasoline on the same energy basis. So it is really not a game changer. However, US legislation starting with the Farm Bill of 2002, mandated a goal of 9 billion gallons of ethanol to be used by 2009, and 36 billion by 2022. The total corn production in the US is 11 billion bushels per year in 2012. This means that 30% of the corn production has to be diverted to the production of corn based ethanol. Melvin Calvin had a point when he was trying to find a genetically modified plant to use for biofuel. And this also gives a good example of what we will discuss later over shortcomings of mandating a policy, a policy based on a mandatory standard and furthermore, the fraction of corn production diverted to fuel grows over time. This is a huge impact on the price of basic food input and on land usage. Now, how does this situation develop and persist? As I said, the origin of a corn production mandates is in the Farm Bill of 2002. In the run up to the 2004 election, the prospect for ethanol were hyped to capture the vote of the corn-belt states. And both parties, the democrats and republicans outbid each other in their corn enthusiasm. By the time it became clear that ethanol actually is not very efficient and it does not have particularly green credentials, it has become politically impossible to remove the huge subsidies and the production quotas for the corn-belt voters. So, corn quotas have become political untouchables. Why is the sugar cane different? Obtaining ethanol from sugarcane is much more efficient. It is a one third, one third, one third. One third of sugarcane (leaves and stems) are left on the field. And as we have seen, leaving organic matter in the field is a way of achieving some sequestration. One third is a liquid which is very high in sugar, and the rest, which is called bagasse is burned to run the ethanol making factory, and this is a big advantage. Brazilian law mandates that at least 20% of ethanol should be mixed with gasoline for car usage, and at this level at 20%, there is no modification needed for the car engine. And the Brazilian Ethanol program is now viable without subsidies that were originally granted in the 1970s. And Brazilian car makers have been very smart because they have created flexi-fuel car engines that can run on any mix of gasoline and ethanol. For all these reasons, the ratio of energy input to energy produced for US and Brazilian ethanol is about 8 to 1. So what is the big message that I wanted to drive home from this brief discussion? Subsidies are an important if expensive tool to encourage climate-reducing technology. We will look at policies and optimal policies later on, but it gives us a first flavor. Some subsidies are targeted to focus industries, or sectors wind energy. Other subsidies favor a group of potential voters, for instance, drivers and farmers. The latter subsidies are almost politically impossible to remove, so one is to be very careful before going down this route. As a consequence, they can become costly and ineffective. So my point here is not the subsidies should not be used, but that one should be very careful in how they are used, how they are designed, and as we shall see in the future session, how they should be a part of a mix of policies. [MUSIC]
