Climate Capitalism and Biofuels Ready to Break Out in 2011


By: Boyd Cohen, CO2 IMPACT

Our “addiction” to highly polluting and emitting fossil fuels presents serious challenges to achieving meaningful reductions in greenhouse gases (GHGs) in North America. Beyond that, the BRIC countries of Brazil, Russia, India and China continue to grow and contribute to our unsustainable path. China even recently surpassed the U.S. as the largest emitter in the world. While energy efficiency and renewables such as wind, solar and hydro are key contributors to getting us on a more sustainable path, I believe sustainably sourced biofuels will also play an instrumental role in our transition to a low-carbon economy.

Biofuels have received a lot of negative press for their negative affects on deforestation and food security. These criticisms of many current biofuels are well founded. Biofuels made directly from food crops such as corn and sugar can obviously divert these staples from the dinner table, or at the least, cause those staples to cost more, thus exacerbating poverty. And of course, clear-cutting forests to make room for planting crops to grow energy has a detrimental impact on biodiversity, local economies dependent on those forests, and of course, global warming.

However, over the past several years, we have seen significant advances in the development of biofuels in favor of more sustainable practices. And given the growing demand for biodiesel, ethanol-blended gasoline and other biofuels, many climate capitalists from investors to entrepreneurs are making bets on the future of sustainable biofuels.

Biofuels are currently classified in three (or even 4 now) “generations” of biofuels.

1st Generation Biofuels
Biofuels made from food staples such as wheat, corn and sugar are known as first generation biofuels. Most of the criticism of biofuels comes from first generation biofuels because they commonly come from edible sources. In fact, the majority of ethanol produced and consumed in the U.S. is from corn. The U.S. Energy Information Administration reports that 20% of all corn supply in 2006 was diverted for ethanol production. Not all first generation biofuels are created equally however.

Brazil, in contrast to the U.S., derives most of its biofuels from more sustainably harvested sugarcane fields. UNICA, the Brazilian sugarcane industry association, reports that only 2% of Brazil’s arable land is used for ethanol production. Furthermore, the mechanization of the industry has reduced its need to burn its waste biomass and instead turns its basgasse and other biomass into energy resulting in a nearly closed-loop system. Most ethanol production facilities produce all their own energy. Brazil’s ethanol industry represents 35% of the total global production of biofuels. Brazil’s transport sector has made a massive shift to biofuels and flex-fuel cars which can operate on a range of ethanol intensity up to 100% pure ethanol (B100). This transformation, with more than 10 million flex fuel vehicles on the road in Brazil, has led to an estimated 600 million tons of CO2 reduction from the transport sector in Brazil, while creating a multi-billion dollar opportunity for climate capitalists.

2nd Generation Biofuels
Second generation biofuels use primarily non-edible biomass such as plants and wood waste. These more advanced forms of biomass reduce the risk of food security challenges and have been picking up steam. Biofuels Digest just released a report claiming that 110 advanced biofuels projects are now in development around the globe and that by 2015 these projects will represent 4 billion gallons of capacity. Mascoma, a New Hampshire based biofuels company, has raised more than $100M in financing from Silicon Valley venture capital titans Khosla Ventures and Kleiner Perkins among others and even from mainstream oil and gas companies like Marathon Oil. Just last week, Mascoma announced a $50m partnership with Valero, an oil refiner, to develop a commercial scale ethanol refinery in Michigan. When the facility is in operation, it is projected to produce 40 million gallons annually of ethanol from woody biomass.

3rd Generation Biofuels
Even more sustainable but further from commercialization are third generation algae-based biofuels. In 2009, Continental Airlines became the first U.S. airline to conduct a test flight leveraging algae-based biofuels. Algae-based biofuels hold significant promise because algae can produce up to 300 times more fuel per acre than most first generation sources such as corn and soybeans. Just last week, Algae.Tec, an Australian-based algae biofuels startup, went public on the Australian Stock Exchange (ASX) raising $5M in funds to develop a demonstration plant in New South Whales, Australia. While commercial-scale algae production has yet to be obtained, stay tuned as algae appears poised for take off in the near future.

Climate capitalists interested in profiting from the transition to the low-carbon economy would be wise to keep an eye on the evolving global biofuels market. Government, NGO, and consumer pressure have pushed the industry to focus on more sustainable, less energy intensive, non-edible sources of biomass, which is a good thing. I expect this decade will see some major breakthroughs in biofuel technlogy and we will begin to see large-scale commercial production of biofuels for use in everything from cars and planes to electricity.

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.

Twitter: boydcohen

This series will use the hashtag #climatcaptlsm

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 Climate Capitalism: Capitalism in the Age of Climate Change.Twitter: boydcohen