By Boyd Cohen, CO2 IMPACT
In previous posts, I have written about climate capitalists generating carbon offsets, and climate capitalists pursuing opportunities across three generations of biofuels. There was significant interest in both topics that I thought I should write about the potential for integrating carbon offsets with biofuels. This Wednesday, from 4-5 Pacific Time, I will be helping lead a #biochat on Twitter on this very topic.
While there is significant debate in the scientific and business community about the sustainability of biofuels, advanced biofuels and even some first generation biofuels have the potential to significantly reduce emissions while providing a cleaner source of energy.
While carbon offsets generally can’t be leveraged to finance the entire cost of a low-carbon technology project, they can be used to offset (pun intended) some of the costs, and to improve the ROI of a project.
Carbon offsets are relatively new to North America although they have been around for several years as part of the EU’s Clean Development Mechanism (CDM) and the global voluntary carbon market as well. We can therefore learn about potentially viable carbon offset projects in North America by learning from projects around the globe.
In the case of biofuels and carbon offsets, there are at least 3 potential sources of carbon offsets: feedstock, generation and sale, and the use of waste biomass for energy on site.
1.) Avoided Methane from biomass. As many of you know methane gas is 21 times as potent as CO2, so in the carbon markets, avoiding one ton of methane actually creates 21 tons of CO2 equivalent offsets, making methane an attractive gas. Biomass such as basgasse (waste sugar stalks), coffee and corn waste, etc. release methane as they degrade. By securing waste biomass for the conversion to biofuels, biofuels producers are diverting methane from the atmosphere and, depending on the volume and circumstances of that biomass, producers may be eligible to gain carbon offset revenue to help subsidize the cost of their operations.
2.) The very act of producing and selling biofuels into a market can also generate carbon offsets for either the producer or the buyer of those biofuels. If the biofuels will be used to replace fossil fuels, carbon offsets can be obtained. This is called a ‘fuel switch’ project in the world of carbon markets. In most carbon markets, biofuels are treated as zero emissions fuels, meaning almost 100% of the existing emissions from the fossil fuel are removed from the switch, leading to a potential high volume of carbon offsets in commercial applications. (Note: not everyone agrees (but the EPA does for now) that biofuels are in fact carbon neutral due to the sequestration of CO2 that occurs while the planted biomass is alive).
3.) Finally, some biofuel production facilities reuse waste biomass to generate on-site energy. Many of the mechanized sugar-based ethanol plants in Brazil, for example, rely exclusively on energy generated from basgasse and other waste biomass.
A recent project registered in the Clean Development Mechanism (CDM), consists of oilseed production for the production of biodiesel in Paraguay. Two plants will eventually generate up to 7 million liters of biodiesel. The project is expected to generate about 17,000 tons of carbon offsets per year for 10 years, leading to a total of 120,000 tons of offsets for the life of the project. At current prices for a ton of CDM registered certified emissions reductions (CERs) of approximately 11 euros, the project will lead to an estimated $1.8 million in additional financial support for the biofuels project. While that will not cover a majority of the costs it definitely helps make the project viable for the developers and investors.
With biofuel demand expected to rise, and absent sufficient policy support for their adoption, climate capitalists are seeking additional financial incentives to bring their operations to commercial scale. Perhaps carbon offsets in the Western Climate Initiative (WCI) or in the Clean Development Mechanism (CDM) or the numerous voluntary programs can play a role in scaling the introduction of sustainable biofuels in the U.S. and around the globe.
Boyd Cohen is the CEO of CO2 IMPACT, a carbon origination company based in Vancouver, Canada and Bogota, Colombia. Boyd is also the co-author of the forthcoming book, Climate Capitalism: Capitalism in the Age of Climate Change.
This series will use the hashtag #climatcaptlsm