Fuelling change

The burgeoning growth in biofuels production around the world has prompted a debate on the economics, and ethics, of turning over agricultural land to non-food uses. Mike Spear reports

There's nothing new in using biofuels to power internal combustion engines. As long ago as 1925, Henry Ford predicted "ethyl alcohol [ethanol] is the fuel of the future. There is fuel in every bit of vegetable matter that can be fermented". Even earlier, in 1892, Rudolf Diesel ran his first eponymous engine on peanut oil ? and some 20 years later said: "the use of vegetable oils for engine fuels may seem insignificant today, but such oils may become as important as petroleum and the coal-tar products of the present time."

We may still have some way to go before either of those predictions is fulfilled, but global growth in biofuels production over the past few years is certainly raising questions about the sustainability of a strategy aimed primarily at tackling climate change.

In the US, 115 bioethanol refineries are in operation, with another 75 planned or under construction. Together they will more than double the nation's production to 11,500M gallons per year. The US has just overtaken Brazil as the world's largest bioethanol producer, but lags far behind Europe in the production of biodiesel. In 2005 only 75M gallons of biodiesel were made in the US, while the EU produced 850M gallons - a little more than Europe's bioethanol production of around 720M gallons.

However, compared with the volume of fuel accounted for by petroleum-based fuels, such figures are relatively insignificant.The US's thirst for fuel, for example, is around 140bn gallons a year. But biofuel production is set to rise dramatically after recent political pronouncements around the world.

For example, the European Commission's goal of increasing the use of biofuel from 0.8% of the total road transport requirement to 5.75% by 2010 would need a five-fold increase in EU capacity, assuming no growth in imports (although the UK's department for the environment, food and rural affairs, DEFRA says "it is not expected that either all UK or EU biofuels will be produced domestically").

Similarly in the US, George Bush's call for the nation to replace up to 30% of its current gasoline use with biofuels by 2030 - up to 60bn gallons per year of bioethanol and biodiesel - is almost an order of magnitude higher than the administration's target of 7.5bn gallons per year by 2012.

Behind the biofuels boom is the belief that burning bioethanol and biodiesel, either in combination with, or even as direct replacements for, petroleum-based fuels, is more energy efficient and produces fewer greenhouse gas emissions. Both fuels are also produced from renewable resources. These facts take on added resonance in the US where, in proposed legislation such as the Biofuels Security Act, biofuels are clearly seen as an indigenous alternative to imported oil.

In theory, Henry Ford may have been right in saying anything that can be fermented could be turned into fuel but, in practical terms, bioethanol is produced from a small number of feedstocks - corn (the predominant source in North America), sugar cane (Brazil), sugar beet and cereal grains such as wheat or rye (Europe). Few petrol engines will run on 100% ethanol, but major motor manufacturers are now using FFV (flex fuel vehicle) technology to design cars that will run on E85, a blend of 85% ethanol and 15% petrol.

Diesel engines, on the other hand, have always been a little more forgiving as far as fuel quality is concerned, and this is reflected in the wider range of vegetable oil seeds that can be used to make biodiesel.

Typical oils used in the process - a transesterification of the vegetable oil into a fatty acid ester, rather than the fermentation of sugars into alcohol - are rapeseed, sunflower, soy bean, mustard and, increasingly, palm oil.

These feedstocks, whether for bioethanol or biodiesel, are renewable, but are they sustainable? The problem, as seen by the "anti" lobby, is that as these plants are also feedstocks for the food industry, rising demand from the biofuels industry will push up prices for food producers.

According to Alan Jope, a group

vice-president at Unilever, between 50% and 80% of Europe's rapeseed production would be required to meet current EU targets for biodiesel production. "Ultimately, there could be supply shortages," he said, pointing out that the price of rapeseed to margarine producers had risen by between 20% and 30% over the past year. This was borne out in a paper last year from the CIAA (the Confederation of EU food and drink industries), which showed rapeseed oil prices were approximately 41-45% above the five-year average for 1996-2000 and EU demand was anticipated to increase by 26%.

Gordon Kirkwood, UK commercial director for the Belgian margarine producer Vandemoortele, makes a similar point. He says; "What people are not fully realising is that there has been a huge surge in vegetable oil prices, particularly rapeseed oil, over the past year or so. And now, since June, palm oil prices have soared from below $400/t to $690/t - a massive increase and a near $450M additional cost to the UK food industry alone."

According to Kirkwood, the impact of feedstock price rises "has not been fully felt yet" and he believes the price of processed food products will escalate.

The sudden surge in palm oil prices reflects the growing global nature of the biofuels industry. Some 90% of the palm oil produced in the world comes from plantations in two countries: Malaysia and Indonesia. Last year both announced that they would set aside nearly 40% of their crude palm oil output to biodiesel production, much of it for export to European producers.

Such state intervention into what is effectively a global marketplace is fast becoming the norm for biofuels. US bioethanol suppliers receive a 51¢/gal subsidy and there is a new 10¢/gal tax credit for small producers and farmers. Meanwhile, the EU has recently extended its subsidy of €45/hectare of crops for biofuels to eight of the states that joined the Union in 2004 - and proposed a legally binding commitment from all states to achieve a 10% biofuel target by 2020.

"Subsidy is obviously driving the market," says Robert Outram, leading research analyst with Frost & Sullivan, "but you don't have to have a massive shortage in crops to put the price up quite high". He draws an analogy with crude oil pricing, which can be affected by relatively minor swings in supply and demand. "Small changes on a global scale can have a relatively large impact on pricing," he says. "All the trades are run off global commodity exchanges on a 24-hour basis around the world. All these oils are interchangeable to some extent.

"Biodiesel producers will switch from rapeseed to palm oil because it's cheaper, while the movement in the price of soya affects movements in the price of rapeseed."

To return to the sustainability question, most governments promoting the production of biofuels are assuming that so-called 'second generation' feedstocks will help alleviate the pressure on prime agricultural land.

These are not, in themselves, food crops but rather the residue of food production such as corn stalks and husks, sugar cane bagasse, wheat and rice straw. Fast-growing grasses, wood chips and oil-bearing trees such as Jatropha could also be used instead of food crops.

Processing such materials to bioethanol calls for their cellulose content to be first broken down by enzymes into sugars prior to fermentation. As yet, however, no full-scale commercial cellulosic ethanol plants are in operation, although they are on the way. A demonstration plant is due to be opened later this year in Salamanca, Spain, by the world's second largest producer of bioethanol, Abengoa Bioenergy. Meanwhile, Canadian biotech company Iogen has been operating a pilot plant based on its enzyme technology in

Ottawa.

But, to put this into perspective, while that pilot plant can handle up to 40 tonnes a day of wheat, oat and barley straw, Europe's largest bioethanol plant, operated by CropEnergies in Zeitz, Germany, processes 2,000 tonnes a day of cereal, grown in competition with food crops on normal arable land.

While not opposed to biofuels in principle, Unilever would like policymakers to shift the focus to these next-generation feedstocks that Jope says would have less effect on the food chain.

And while still concerned that the impact of biofuels on food is not fully understood, Vandemoortele's Kirkwood sees some future for non-food feedstocks "provided you don't use prime agricultural land to grow them"

In the CIAA's view, "there are big discrepancies between biofuels, depending on the sources used. As soon as land starts to become scarce, this needs to be taken into account in order to orientate producers into appropriate directions"

Until such time as this happens - and the CIAA is concerned that second generation fuels may not be economically viable much before 2020 - the biofuel versus food debate will no doubt continue, fuelled by some entrenched opinions on both sides. For the moment though, the food industry is beginning to make its views more widely known in the face of what seems overwhelming global governmental support for biofuels.