Navigant Research Blog

Indirect Land Use Change from Biofuels Explained

— December 27, 2017

Full decarbonisation of transport will be hard without biofuels, but sustainability concerns have made policymakers weary of stimulating crop-based biofuels. The debate on the indirect impacts from biofuels in particular has increased recently. For example, on December 2, 2017, a group of Dutch scientists called on the Dutch cabinet to stop the use of food crops for biofuels. The lead argument refers to the GLOBIOM report, though it mainly follows the interpretation by the non-governmental organization Transport & Environment.

What Is ILUC?

Indirect land use change, or ILUC, is the rippling effect that an increasing demand for biofuels feedstock can have on global agriculture. This could lead to land expansion and deforestation elsewhere, with the subsequent effect of increased CO2 emissions.

ILUC is not measurable, as it takes place via complex economic interactions and is manifested only in small variations in the large dynamics of the global agriculture system. It can only be analysed through detailed modelling. In 2015 and 2016, the European Commission contracted Ecofys, a Navigant company, and the International Institute for Applied Systems Analysis (IIASA) to assess ILUC with the GLOBIOM model.

What Do We Know About ILUC?

From this study, we see that ILUC effects depends on the type of biofuels crop, among other factors:

  • ILUC impacts from sugar- and starch-based ethanol are small. The contribution of these types of biofuels can be increased without ILUC risks.
  • The same holds for wood- and straw-based biofuels.
  • Higher ILUC values are found for European oil crop-based biofuels, but ILUC is paid back within a few years by the savings resulting from replacing fossil fuels.
  • ILUC emissions are very large for soybean and palm oil. It is advised to decrease the volumes of biofuels based on these crops unless they are produced (certified) without ILUC.

It is crucial to be aware of the ultimate sources of ILUC emissions in tropical countries: mainly deforestation and peatland drainage caused by sectors that are not held accountable to EU biofuels standards. Top policy priority should therefore be to stop deforestation (globally) and agricultural expansion into peatland (mainly in Indonesia).

How to Avoid ILUC

From the biofuels production perspective, ILUC can be avoided in several practical ways:

  • Produce additional crops on abandoned agricultural or degraded land so that it does not interfere with normal crop production.
  • Use investments in biofuels to innovate in agriculture, to sustainably increase EU yields, and to bridge yield gaps in developing countries.
  • Produce additional crops within the current agricultural land; for example, through sequential cropping.

What Does This Mean for Biofuels in General?

It is important to remember that crop-based biofuels can contribute to the greening of transport in a sustainable way. The ILUC concept should not be used to categorically decrease their contribution. Other aspects should be considered in addition to ILUC. Specific considerations can put impacts in perspective and certain solutions can make the challenges manageable. This does not mean we should give carte blanche to increasing the levels of any and all biofuels. But it is possible to govern the sustainability performance and limit the ILUC impact. A generic call for the phaseout of all crop-based biofuels is ultimately counterproductive in the fight against climate change.


Biofuels: A Guide for the Next Couple of Years

— June 16, 2015

Six months after its official deadline to propose the Renewable Fuel Standard for 2014 (yes, 2014), the U.S. Environmental Protection Agency (EPA) has finally released a draft proposal for the annual standards for 2014, 2015, 2016, and for the 2017 biomass-diesel volume.

The EPA played it safe for 2014, matching the standards with the actual consumption of biofuels such as transportation fuel, heating oil, or jet fuel in the contiguous United States and Hawaii. For the upcoming years, the EPA is proposing a slight increase in the total mandate: 9.2% in 2 years. Most of the growth is expected to come from advanced biofuels, which are set to increase by almost 31% by 2016, while conventional biofuels (grain-based ethanol) are expected to grow only grow 5.6% in the same period. The mandate will likely not make too many people happy, and that is probably good.

Fats Are In, Carbs Are Out

For conventional biofuels, the news is not good but perhaps not surprising. In the original mandate, conventional biofuels had a target for 2015 of 15 billion gallons (1.6 billion gallons more than in the new proposal), but the adoption of ethanol has been limited by what the industry calls a blending wall, or a technical/regulatory limit that impedes older gasoline vehicles to consume fuel blends containing more than 10% of ethanol by volume.

The supply-demand balance in the industry seems in favor of buyers. The Renewables Fuel Association reported June 1 that operating capacity of the industry was 14.57 billion gallons per year, which implies that the mandate will cover 92% of its capacity in 2015 and 96% in 2016. They might be able to sell more ethanol if enough gasoline in consumed in the United States (increasing the volumes allowed under the blending wall), but they will have to price it below gasoline to attract buyers. The lower mandate is expected to hit harder the producers with old and inefficient plants. Leading producers like POET, Green Plains Renewable Energy (GPRE), or Abengoa are anticipated to perform well.

The picture for the rest of the industry is rosier. The new standards for biomass-based diesel (produced from vegetable oils or animal fats) is high enough to absorb the current capacity. The National Biodiesel Board plant database aggregate capacity  sums 808 million gallons, although it does not account for the whole biomass-based diesel industry. The new standard will benefit producers like the Renewable Energy Group (REGI) and Neste Oil – both large producers of biomass-based diesel.

The Underdog Story

Finally, the EPA kept a large enough carve-out for cellulosic fuels. The United States used 26 million gallons of ethanol-equivalent cellulosic fuels in the first four months of 2015. If the country continues producing them at the same rate, the annual production would reach 78 million gallons, or 28 million gallons below the 2015 mandate. Although a lot of investment has gone into technologies that promise to produce liquid fuels from cellulosic material, it is the biogas producers that are benefiting the most from this mandate, as they are supplying virtually all the cellulosic-based biofuels. This is surprising given that biogas was only approved as a cellulosic fuel halfway through last year.


Iowa Key to Biofuels’ Future

— May 12, 2015

With presidential candidates from both parties descending on Iowa to gear up for the 2016 general election, the state is quickly becoming ground zero for the ongoing debate around the future of biofuels in the United States. Earlier this year, Iowa Governor Terry Branstad announced a major new bipartisan campaign called America’s Renewable Future to promote the Renewable Fuel Standard (RFS) in the 2016 Iowa presidential caucuses.

The backbone of the country’s biofuels industry, RFS is an ambitious regulation first introduced under George W. Bush and later revised and expanded in 2007. Iowa has benefited mightily from the mandate, serving up a sea of corn and soybeans, both commodities that have played a crucial role in fueling America’s first-generation biofuels capacity growth. Since the revised standard went into effect, biofuels production in the United States has doubled. According to Navigant Research estimates, first-generation biorefineries concentrated throughout the Midwest currently account for just under half of global biofuels production capacity installed today.

New Reality

For an industry that to this point has enjoyed broad regulatory support across Europe, Brazil, and North America, biofuels are quickly losing momentum.

Although corn starch ethanol and soybean-derived biodiesel have been popular with both political parties over the last decade, times have changed. The price for a barrel of oil today is roughly a third what it was in 2008, when Barack Obama was first elected. Meanwhile, capacity build-out for next-generation facilities has been slow to materialize, resulting in advanced biofuel production totals that significantly trailing targets established under the RFS.

While Branstad’s campaign will focus on the economic benefits associated with biofuels industry development, the number of critics who say the RFS is not working continues to increase. Last month, Jim Stock, former White House economic advisor, released a report that proposes several reforms to RFS. A combination of forces, the report observes, are imposing costs on the market while failing to provide the future benefits associated with domestically produced advanced biofuels.

To put it bluntly, the industry to this point has failed to make the leap from first generation biofuels to next generation alternatives. Facing a similar reality, policymakers in Europe have signed off on reforms that cap the production of first generation biofuels and opted to extend only reforms targeting next generation fuels out to 2020.

Seeking a Niche

Still struggling for traction in a rapidly shifting market, advanced biofuel producers are examining niche opportunities such as biomethane or renewable natural gas (RNG) production and other biofuel applications that can be integrated with the power grid.

Amendments to the RFS last year, for example, have allowed RNG—biogas upgraded to natural gas specs—to count toward cellulosic biofuels quotas in certain applications like fueling an electric vehicle or being consumed as liquid natural gas. In isolated markets like Hawaii, where generation infrastructure includes a high percentage of facilities that burn petroleum products shipped across the ocean, locally grown biofuels can provide a plug-and-play renewable alternative and help the state move toward a proposed mandate of 100% renewables by 2045. Further down the road, algae conversion platforms that utilize carbon dioxide as a feedstock may offer coal producers that face tightening emissions regulations another tool for cleaning up their operations. Both options mitigate the investment needed to replace existing infrastructure.

Meanwhile, back in Iowa, companies are changing course. Fiberight, which sought to build first-of-their-kind facilities converting waste to advanced cellulosic biofuels, recently announced plans to switch to producing biogas. Considering the scale of investment needed to upgrade the power grid, presidential hopefuls may find a willing partner in a biofuels industry grasping for strong market signals.


Biomethane Offers Solution to Energy-from-Biomass Limitations

— February 6, 2015

My colleague Mackinnon Lawrence recently provided a thorough examination of the prospects for biofuels as a viable source of energy for transportation and power generation in the coming years – from both negative and positive points of view.  Last week, the negative outlook was reinforced by a World Resources Institute report that found that using valuable farmland to grow crops for energy is a wasteful practice that will never supply a significant portion of the world’s energy and that will divert land more urgently needed for growing food crops.

By 2050, the report states, the amount of calories available from crops will need to expand 70% simply to keep up with increased demand for food.  Since three-quarters of arable land is already used to provide human needs, “a growing quest for bioenergy exacerbates this competition for land.”  Bioenergy supporters have called for biofuels to supply 20% of the world’s total energy demand by 2050 – a goal that would require about 225 exajoules from biomass each year.

“That amount, however, is roughly equivalent to the total amount of biomass people harvest today—all the crops, plant residues, and trees harvested by people for food, timber, and other uses, plus all the grass consumed by livestock around the world.”

All Aboard

That is simply unrealistic, especially given the anticipated growth in consumption of plants for food and other human uses such as clothing, timber, and so on.  What’s more, clearing forests to burn wood pellets for energy results in a net carbon increase, once you factor in loss of the CO2 removal capacity of the standing trees.  The numbers don’t add up for massive increases in biomass cultivation for energy.

There is, however, another source of renewable, bio-based energy that could be scaled up without robbing food producers of land: biomethane, often called renewable natural gas (RNG).  Biomethane can come from cultivated crops, such as corn silage; but other, more promising sources include municipal waste and livestock operations.  (Navigant Research’s report, Smart Waste, explores the potential for diverting municipal waste streams for energy recovery.)

One advantage of biomethane is that it is chemically indistinguishable from the methane that constitutes natural gas, which means that the infrastructure – pipelines, turbines, vehicle engines – that uses conventional gas collected underground can also run on RNG.  A “poo-powered” bus, fueled entirely by gas collected through sewage treatment, went into service in the U.K. city of Bristol last November.

Not the Trees, Please

On the electricity side, the United Kingdom now has 28 biomethane-to-grid projects connected to the gas distribution network, using gas produced from the transformation of food, brewery, and van wastes – and energy crops.  “These plants have the capacity to produce 1.8 billion kilowatt-hours of gas per year, enough to meet the heating and cooking needs of around 100,000 homes,” reported the Green Gas Certification Scheme, the organization advocating increased use of RNG in the United Kingdom.

In Canada, biomethane advocates are aiming “to have a fully developed RNG marketplace by 2020 that helps meet energy needs, supports growth and innovation for business, and offers a solution to issues associated with waste emissions,” according to a December, 2014 report from the Canadian Gas Association (CGA).  The report found that the potential supply of energy from various biomethane sources could reach as high as 1.3 trillion cubic feet of RNG – equal to one-half of Canada’s natural gas consumption in 2012.

Such optimistic projections must be tempered, though, by the limits on sourcing biomethane from crops.  More than half of the supply of biomethane projected in the CGA report would come from one source: forests.


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