An Analysis of the Economic and Environmental Aspect ...
An Analysis of the Economic and Environmental Aspect of Biofuel
Table of Contents 1. Abstract‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐2 2. A Brief Introduction to Biofuel and the Biofuel Industry ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐2 2.1 Introduction of Ethanol‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐3 2.2 Introduction of Biodiesel‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐5 3. The economic effect on various countries from developing biofuel‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐6 3.1 The situation in America‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐7 3.2 The situation in Brazil‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐9 3.3 The situation in Europe‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐9 3.4 The situation in Developing Countries‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐11 4. Does it work for ease the climate change by using biofuel‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐12 5. Conclusion and Summary‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐15
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2. A Brief Introduction to Biofuel and the Biofuel Industry According to the definition, we can find that there are different kinds of biofuel, which include ethanol, biodiesel, ethyl tertiary butyl tether (ETBT), butanol, and others. There are several kinds of technologies for producing biofuel in the current industry, and the technologies are differentiated from the different raw materials which are in the following list. ‐
Sugar crops, including sugar cane, sugar beets, and sweet sorghum;
‐
Starch crops, including corn, wheat, barley, rye, cassava, sorghum grain, and other cereals;
‐
Oilseed crops, including rapeseed/canola, soybeans, sunflower, mustard, and others.
Ethanol and biodiesel are the most common biofuels, with ethanol being compatible with gasoline engines and biodiesel with petroleum‐based diesel engines. Figure 1 shows the trend of ethanol and biodiesel production from 1980 to 2006.
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Figure 1 We can get the general information that, after 2000, in the biofuel industry, the production output increased rapidly, especially the ethanol. Besides, the output of ethanol is about 6 or 7 times more than biodiesel in 2006. In the following part, I will introduce the ethanol and biodiesel respectively.
2.1 Introduction of Ethanol What is Ethanol? Ethanol is also called ethyl alcohol or grain alcohol. It is most often produced by the fermentation of sugars derived from plant materials. In the United States, corn is the most common crop. To be used as a motor fuel or fuel additive, ethanol must meet ASTM standard D4806‐98 and must be diluted with a denaturant, such as natural gasoline, to make it unfit for human consumption. The energy content of ethanol is 83,333 British thermal units (Btu) per gallon versus 124,000 Btu per gallon of unleaded gasoline.
The process of Ethanol The basic steps for large scale production of ethanol are: microbial (yeast) fermentation of sugars, distillation, and dehydration (requirements vary, see Ethanol fuel mixtures, below), and denaturing (optional). Prior to fermentation, some crops require saccharification or hydrolysis of carbohydrates such as cellulose and starch
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into sugars. Saccharification of cellulose is called cellulolysis (see cellulosic ethanol). Enzymes are used to convert starch into sugar. Currently, the top‐five ethanol production countries are US, Brazil, China, India and France. Out of these five, three are developing countries‐ Brazil, China, and India. The production from Brazil is almost similar to the U.S, reaching 4.3 million gallons in 2005, and the total quality is about 4 times more than that of China which is the third‐largest production country. Figure 2 shows the histogram of the comparison to these 5 countries.
Figure 2 Although the ethanol production of America is higher than Brazil, however, the situations in these two countries are totally different; the most obvious difference is the source of the feedstock. Most of the ethanol from U.S depends on distillation from corn; however, Brazil makes use of the large area of sugarcane to produce the ethanol. The different production method determines the different scale of economics of these two countries, and we also find the way of ethanol production in Brazil is better and more sustainable than that in America. Firstly, one liter of ethanol costs $0.28 to produce from sugarcane versus about $0.45 from corn, while one hectare of sugarcane can produce almost twice as much ethanol (7,080 liters) as a hectare of corn (3,750 liters). Secondly, the energy consumed for producing the same weight of ethanol is just 1/6 if we choose sugarcanes as raw material rather than corn.
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Thirdly, it will be less negative effect on the agricultural economics when choosing sugarcanes instead of corn. Lastly, absorption of CO2 by one sugarcane acre is much more than the corn. Therefore, the method of ethanol production in Brazil will be towards a virtuous circle because of various advantages in sugarcane production.
2.2 Introduction of Biodiesel What is Biodiesel? Biodiesel is a fuel produced by mixing vegetable oils, fats or greases with an alcohol (usually methanol but sometimes ethanol) and a catalyst. The production process removes free fatty acids and glycerin from the fuel thus allowing it to be used in any diesel engine with little or no modification to the engine or the fuel system. Biodiesel has improved lubrication characteristics when compared to petroleum derived diesel, as well as an absence of sulfur. Biodiesel contains a bit more than 118,000 Btu per gallon compared to petroleum diesel’s 129,000 Btu per gallon. To be marketed, biodiesel must conform to ASTM standard D6751.
The process of biodiesel There are four major steps to produce the biodiesel. These are purification, neutralization of free fatty acids, transesterification and final process. Biodiesel production has lagged behind ethanol, although the industry has expanded rapidly in the last decade. U.S. biodiesel is produced mainly from soy or waste cooking oil, although some producers are using canola or cottonseed oil. Figure 3 shows the basic industrial process of biodiesel production.
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Figure 3 Let’s have a look at the biodiesel market share in the world. European countries like Germany, France and Italy dominate the global biodiesel production, although the amount of biodiesel production is not high when comparing to the amount of ethanol. America is the second largest producer of biodiesel in the world, and similar to ethanol production, America depends on the soybeans as the main raw materials. However, European countries take rapeseed as main materials to produce biodiesel. Due to the production amount of biodiesel is not high, therefore, the effect on American agricultural economics is limited comparing to that resulted from ethanol production. From the above discussion, we make sense that the various arguments sourced from biofuel are not just energy problems, and that is also related to the issues like national economics, climate policy and even political policy. In the next part, I will discuss the economic aspect of biofuel demonstrate this issue in some developing countries due to the complex issues related to biofuel policy.
3. The economic effect on various countries from developing biofuel As mentioned above, the biofuel development will have different effects on the countries’ economics.
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3.1 The situation in America Firstly, I want to explain the phenomenon in America, because the ethanol production in America is in the highest level within these five countries showed in Figure 2, and ethanol occupies the biofuel market more than the others. Furthermore, America has developed the biofuel for a long time. We can learn the experiences from America. As talked in the last part, the way of ethanol production in America is different from that in Brazil, and the later is depending on the sugarcanes. In U.S, the factories use the corn as the main feedstock to produce the ethanol, and then we can get the sense from the following figure (Figure 4).
Figure 4 If the government starts to develop the biofuel, it will increase the marketing demand for the biofuels. For example, the European Union Transport Ministry proposed a directive that would require each member country to supply 10 percent of its transport fuels from biofuels. This action will decrease the supply of conventional oil. Reversely, corn, as the main production material of ethanol, its price will increase with the increase of demand. Since the demand of corn will increase due to development of biofuel, and then the land price will also increase a lot. See figure 5.
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Figure 5 We can use another supply‐demand curve to illustrate the relationship between land price and demand of feedstock. Because of the limited area for planting, so we assume the supply curve is fixed, and the land price increase because of the up‐trend of the feedstock demand. The demand curve will increase and to reach a new equilibrium Another important reason why the land price increased a lot is that the farmer will to replace the land use, from planting feedstock to crop, because they can get more extensive margin. The price of corn ups from $2.50 a bushel in September, 2006 to, a 10‐year high of more than $4.50 on Feb 26 2007. The definition of extensive margin is that extended margin refers to the range to which a resource is utilized or applied. In this case, if the farmer takes one hectare land to plant corn rather than wheat, and the extensive margin he got is equal to the corn price multiple the number sold of corn minus wheat price multiple the number sold, and because of the high demand of corn, the total revenue of corn is higher than that of wheat although the corn price is lower than wheat price. Certainly, we also find the land use change can also cause the greenhouse gas emission. The increases in greenhouse emissions from land use change follow a chain influenced by a variety of economic and ecological factors.
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It starts with the increased demand for a feedstock, such as corn or vegetable oil, increasing the price. Those price increases cause farmers to switch from producing some crops to others, which reduces those other crops as well and drives up their prices. The price increases cause consumers to buy less food. And they cause farmers all around the world to produce more of the diverted or diminished crops. Where farmers plant more cropland, and which kinds of additional lands they plant, will determine the magnitude of greenhouse gas emissions from land use change.
3.2 The situation in Brazil Let’s have a discussion about the situation in Brazil. I have mentioned that the situation in Brazil is different from that in America. According to the statistics, in 2007, Brazil produced about 50 billion gallons of ethanol, and most output depended on sugarcanes. Moreover, Brazil also produced about 64 million gallons of biodiesel mostly from castor beans. And we can find that both these two plants are not the crops. Therefore, there is almost little effect on the agricultural economics of Brazil. Reversely, the export of soybeans in Brazil has also increased in 2007. However, we should not ignore the indirect negative effect on the agricultural economics. Although it looks like a sustainable way for producing ethanol by sugarcanes or other non‐food‐supply, because more and more lands are converted to planting sugarcanes or some raw plants for biofuel production.
3.3 The situation in Europe Let’s have a discussion of the economic aspect of biofuel in Europe. The situation in Europe is a little different from America, Brazil or China. European countries dominate the biodiesel markets, and the ethanol production is not so important comparing to the huge advantage in biodiesel market. According to the population and stability level of biofuel within Europe, we can divide the European countries into three classifications. The divisions are ‘successful market introduction’, include France, Germany, Spain, and Sweden, and ‘developing a stable market’ consists of
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Czech Republic, Poland, Slovakia and ‘starting with introduction of biofuels’ including Malta, the Netherlands, United Kingdom. The following table (Figure 6) gives a brief summary of the production and consumption in 25 countries in Europe.
Figure 6 The problems in Europe are similar to America: they don’t have enough non‐ crop to produce biofuel. Therefore, they have to depend on the different corn for production. Although there are some negative effects on the economics, however, we find the governments in different countries are trying to get over these mistakes. Furthermore, we can also find some attractive advantages for developing biofuel both in the economic aspect and the environmental consideration as well as climate policy. For example, the development of biofuel helps a lot of poor people get out of the poverty. Brazil and China are the 2nd and 3rd largest ethanol production countries in the world, and also two biggest developing countries in the world. In Brazil, there are lots of slums in the cities, and the average wage of farmers is enough for them to live well. However, a harvestman of sugarcanes can get about 200‐250 dollars per month and the agricultural mechanization in both Brazil (and China) has a far way to
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reach. With the increase of the sugarcane production, more and more people can find a job to earn them, which can also increase the GDP of the country.
3.4 The situation in Developing Countries Hereby, let’s talk about the macroeconomic situation in developing countries when the “over hot” development of biofuel. We can find that the crude oil price is always at a high level these years, and this situation will be more and more common in the future. Therefore, there is no doubt of the rapid increase of biofuel development. However, with the fast development of biofuel, more and more developed countries will benefit from this situation, especially the countries, which export huge amounts of feedstock. However, the developing countries, especially the countries which are lack of both oil and agricultural productivity, will be suffered from restrict of energy and technology. According to the statistics, after 2000, the increase in the crude oil price makes the space and motivation for the increase of the development of biofuel. Currently, the global total output of biofuel is about 800 billion liters, and the main producers are America, Brazil, European countries and Canada and China just like mentioned above. These countries occupy about 90% of the global total output, and from the anticipation from the United Nations' Food Agriculture Organization FAO, the output will reach about 1200 billion liter in the year of 2015. Furthermore, the development of biofuel will affect the profit of the countries which depend on exportation of oil. From the OPEC conference of 2007, the member country first realized that the security issue of the energy supplier. In the other words, OPEC countries have been worrying about the development of biofuel which will affect their profit in energy market. Besides, if the global output of biofuel reaches some ratio, it will also threaten the status of the monopoly of OPEC. By contrast, some developing and non‐energy‐exportation countries are in an embarrassing status. One side, the demand of energy of developing countries is increased rapid for the process of industrialization, and the high price make them too expensive. On another way, most of the developing countries are lack of the basic
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conditions for developing biofuel. They can only receive the results which are unknown from the game between OPEC and developed countries. Furthermore, in the beginning stage, most of the developed countries will support the development of biofuel in the name of environment protection, and when biofuel techniques reach a mature stage, and the productivity of biofuel reaches a stable level, developed countries may create the standard system for further developing biofuel by enhancing the global greenhouse gases discharge regulation to confirm the advantage in the biofuel field, and then most of the developing countries have to follow the routines modified by the developed countries because of the restrict of innovation technology and level of agriculture. In the following part, I will demonstrate the climate or environmental policy by developing biofuel.
4. Does it work for ease the climate change by using biofuel? Currently, some policymaking also thinks it will bring positive effect to the climate change by using biofuel as main energy supply rather than the ordinary oil, because they think possibility of greenhouse resulted from the biofuel is less than that from oil. Although it may work, however, we should realize that the different biofuel has the large difference in contribution to control balance of greenhouse gas, and the volume of greenhouse gas depends on the methods of production and the sources. Sometimes, some crops generate more greenhouse gas than the traditional oil industry. For example, the emission potential of nitrous oxide, one of the gases making earth warm, from nitrogenous fertilizer maybe 300 times higher than carbon dioxide. Furthermore, increase of development of biofuel will have direct or indirect effect on the change of usage of lands, which will also generate the greenhouse gas. We can use the life cycle analysis to analyze the balance of greenhouse gas. Here is the work flow graphic (Figure 7).
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Figure 7 The reason for assessing the general volume of greenhouse gas emission is to make a detailed analysis system for the biofuel, and then to compare the common energy such as gasoline. From the results shown below (Figure 8), we can find that carbon emission reduction is lower 20%‐60% comparing to the fossil fuel by using the 1st generation biofuel such as corn or crops by U.S or Europe. However, the situation of 2nd generation biofuel is much better than the 1st one, the representative is the biofuel produced in Brazil by sugarcanes, and carbon emission reduction reaches 70%‐90%.
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Figure 8 From the theoretical results, we found that the carbon emission is reduced by 20%‐60% by the using of 1st generation biofuel. However, from the realistic practice, we can find the results are not so ideal. According to the report from the OECD (Organization for Economic Cooperation and Development) 2008, we find that the carbon emissions from the 2nd generation biofuel of sugarcane from Brazil is better than the 1st generation biofuel produced by corn in America, and the later is just about 30%, which was overvalued for the contribution to the environment. Furthermore, the report was based on the assumption that it will not bring the new greenhouse gas by planting these corns; however, disappointedly, the assumption is not true. Amazon, as the most important carbon sink in this world, is suffering by cutting the trees for planting sugarcanes or soybeans as the main raw materials to develop the bio‐energy, which makes Amazon shrink a lot. The rain forest in Indonesia is replaced by palm oil trees. One of the research groups found that the emission, resulting from changing forests to plant, is much more than the reduction by taking biofuel instead of oil energy. Moreover, the diversity of animal types is shrinking rapidly because of the most of the animals take Amazon and Southeast Asia rain forests as their habitat. Furthermore, it will also bring the issue like water loss and soil erosion or pollution
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by planting biofuel crops, and the huge usage of chemical fertilizer also make the lands deterioration and the greenhouse effect by nitrous oxide from chemical fertilizer is much stronger than carbon dioxide. Therefore, after the discussion, I reach the conclusion that the biofuel can’t contribute a lot for improving current climate situations. The environmental effect of 1st generation biofuel is not as ideal as theory, and we also need to consider and shoulder some potential risks. After some years’ argument, E.U started to make some changes in the previous biofuel policies, and Euro‐parliament is trying to modify the objective that the consumption percentage of biofuel in the total energy from 10% to 6%, and establish the biofuel sustainable certificated standard in order to protect the environmental problem. With the election of Obama, U.S also started to concentrate on the development of biofuel, and the high‐level biofuel told by Obama is the 2nd generation biofuel, however, it is not clear whether the 2nd generation biofuel works. Therefore, we should increase the energy utilization ratio rather than totally depend on the biofuel development to decrease the greenhouse gas emission, and it’s very important to take advantage of the development of green energy such as solar energy, wind.
5. Conclusion and Summary As discussed above, we have a brief knowledge about the manufacture process of biofuel, and we also talked the topic of biofuel from economic aspect. Furthermore, we discussed how the contribution of biofuel for the climate or environment. Biofuel development is a mainstream in the energy industry and will replace the current oil or coal energy in the future; however, we should take a gradual developing way rather than an aggressive way, and from the current experiences, we can find the way of production in Brazil is much better than that of U.S or Europe, therefore, we
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should take the experiences from Brazil, and then to spread this kind of technologies or experiences to more countries which have the basic conditions such as natural resources or stable economy of scale or politics to develop biofuel. Although, there are also some negative effects on the climate or environment, however, if the total benefit from Biofuel can reach an ideal level, we should spare no efforts to develop it. Reference:
Smart Choices for Biofuels; Jane Earley and Alice McKeown; January 2009;
Biofuel and Global Biodiversity; Dennis Keeney and Claudia Nanninga; April, 2008 ©2008 IATP;
Biofuels for transportation: a climate perspective; Naomi Peña; June 2008;
European biofuel policies in retrospect; E. van Thuijl, E.P. Deurwaarder; May 2006;
The Future of Biofuels: A Global Perspective; William Coyle; NOVEMBER 2007;
The false promise of biofuels; Jack Santa Barbara; September 2007;
Pro‐Poor Biofuels Outlook for Asia and Africa: ICRISAT’s Perspective; ICRISAT; 13 March 2007;
Crop‐Based Biofuel Production under Acreage Constraints and Uncertainty; Mindy L. Baker, Dermot J. Hayes, and Bruce A. Babcock; February 2008;
The Impacts of Biofuels on Greenhouse Gases: How Land Use Change Alters the Equation; Tim Searchinger, Transatlantic Fellow, the German Marshall Fund of the United States
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Table of Contents 1. Abstract‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐2 2. A Brief Introduction to Biofuel and the Biofuel Industry ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐2 2.1 Introduction of Ethanol‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐3 2.2 Introduction of Biodiesel‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐5 3. The economic effect on various countries from developing biofuel‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐6 3.1 The situation in America‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐7 3.2 The situation in Brazil‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐9 3.3 The situation in Europe‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐9 3.4 The situation in Developing Countries‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐11 4. Does it work for ease the climate change by using biofuel‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐12 5. Conclusion and Summary‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐15
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2. A Brief Introduction to Biofuel and the Biofuel Industry According to the definition, we can find that there are different kinds of biofuel, which include ethanol, biodiesel, ethyl tertiary butyl tether (ETBT), butanol, and others. There are several kinds of technologies for producing biofuel in the current industry, and the technologies are differentiated from the different raw materials which are in the following list. ‐
Sugar crops, including sugar cane, sugar beets, and sweet sorghum;
‐
Starch crops, including corn, wheat, barley, rye, cassava, sorghum grain, and other cereals;
‐
Oilseed crops, including rapeseed/canola, soybeans, sunflower, mustard, and others.
Ethanol and biodiesel are the most common biofuels, with ethanol being compatible with gasoline engines and biodiesel with petroleum‐based diesel engines. Figure 1 shows the trend of ethanol and biodiesel production from 1980 to 2006.
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Figure 1 We can get the general information that, after 2000, in the biofuel industry, the production output increased rapidly, especially the ethanol. Besides, the output of ethanol is about 6 or 7 times more than biodiesel in 2006. In the following part, I will introduce the ethanol and biodiesel respectively.
2.1 Introduction of Ethanol What is Ethanol? Ethanol is also called ethyl alcohol or grain alcohol. It is most often produced by the fermentation of sugars derived from plant materials. In the United States, corn is the most common crop. To be used as a motor fuel or fuel additive, ethanol must meet ASTM standard D4806‐98 and must be diluted with a denaturant, such as natural gasoline, to make it unfit for human consumption. The energy content of ethanol is 83,333 British thermal units (Btu) per gallon versus 124,000 Btu per gallon of unleaded gasoline.
The process of Ethanol The basic steps for large scale production of ethanol are: microbial (yeast) fermentation of sugars, distillation, and dehydration (requirements vary, see Ethanol fuel mixtures, below), and denaturing (optional). Prior to fermentation, some crops require saccharification or hydrolysis of carbohydrates such as cellulose and starch
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into sugars. Saccharification of cellulose is called cellulolysis (see cellulosic ethanol). Enzymes are used to convert starch into sugar. Currently, the top‐five ethanol production countries are US, Brazil, China, India and France. Out of these five, three are developing countries‐ Brazil, China, and India. The production from Brazil is almost similar to the U.S, reaching 4.3 million gallons in 2005, and the total quality is about 4 times more than that of China which is the third‐largest production country. Figure 2 shows the histogram of the comparison to these 5 countries.
Figure 2 Although the ethanol production of America is higher than Brazil, however, the situations in these two countries are totally different; the most obvious difference is the source of the feedstock. Most of the ethanol from U.S depends on distillation from corn; however, Brazil makes use of the large area of sugarcane to produce the ethanol. The different production method determines the different scale of economics of these two countries, and we also find the way of ethanol production in Brazil is better and more sustainable than that in America. Firstly, one liter of ethanol costs $0.28 to produce from sugarcane versus about $0.45 from corn, while one hectare of sugarcane can produce almost twice as much ethanol (7,080 liters) as a hectare of corn (3,750 liters). Secondly, the energy consumed for producing the same weight of ethanol is just 1/6 if we choose sugarcanes as raw material rather than corn.
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Thirdly, it will be less negative effect on the agricultural economics when choosing sugarcanes instead of corn. Lastly, absorption of CO2 by one sugarcane acre is much more than the corn. Therefore, the method of ethanol production in Brazil will be towards a virtuous circle because of various advantages in sugarcane production.
2.2 Introduction of Biodiesel What is Biodiesel? Biodiesel is a fuel produced by mixing vegetable oils, fats or greases with an alcohol (usually methanol but sometimes ethanol) and a catalyst. The production process removes free fatty acids and glycerin from the fuel thus allowing it to be used in any diesel engine with little or no modification to the engine or the fuel system. Biodiesel has improved lubrication characteristics when compared to petroleum derived diesel, as well as an absence of sulfur. Biodiesel contains a bit more than 118,000 Btu per gallon compared to petroleum diesel’s 129,000 Btu per gallon. To be marketed, biodiesel must conform to ASTM standard D6751.
The process of biodiesel There are four major steps to produce the biodiesel. These are purification, neutralization of free fatty acids, transesterification and final process. Biodiesel production has lagged behind ethanol, although the industry has expanded rapidly in the last decade. U.S. biodiesel is produced mainly from soy or waste cooking oil, although some producers are using canola or cottonseed oil. Figure 3 shows the basic industrial process of biodiesel production.
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Figure 3 Let’s have a look at the biodiesel market share in the world. European countries like Germany, France and Italy dominate the global biodiesel production, although the amount of biodiesel production is not high when comparing to the amount of ethanol. America is the second largest producer of biodiesel in the world, and similar to ethanol production, America depends on the soybeans as the main raw materials. However, European countries take rapeseed as main materials to produce biodiesel. Due to the production amount of biodiesel is not high, therefore, the effect on American agricultural economics is limited comparing to that resulted from ethanol production. From the above discussion, we make sense that the various arguments sourced from biofuel are not just energy problems, and that is also related to the issues like national economics, climate policy and even political policy. In the next part, I will discuss the economic aspect of biofuel demonstrate this issue in some developing countries due to the complex issues related to biofuel policy.
3. The economic effect on various countries from developing biofuel As mentioned above, the biofuel development will have different effects on the countries’ economics.
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3.1 The situation in America Firstly, I want to explain the phenomenon in America, because the ethanol production in America is in the highest level within these five countries showed in Figure 2, and ethanol occupies the biofuel market more than the others. Furthermore, America has developed the biofuel for a long time. We can learn the experiences from America. As talked in the last part, the way of ethanol production in America is different from that in Brazil, and the later is depending on the sugarcanes. In U.S, the factories use the corn as the main feedstock to produce the ethanol, and then we can get the sense from the following figure (Figure 4).
Figure 4 If the government starts to develop the biofuel, it will increase the marketing demand for the biofuels. For example, the European Union Transport Ministry proposed a directive that would require each member country to supply 10 percent of its transport fuels from biofuels. This action will decrease the supply of conventional oil. Reversely, corn, as the main production material of ethanol, its price will increase with the increase of demand. Since the demand of corn will increase due to development of biofuel, and then the land price will also increase a lot. See figure 5.
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Figure 5 We can use another supply‐demand curve to illustrate the relationship between land price and demand of feedstock. Because of the limited area for planting, so we assume the supply curve is fixed, and the land price increase because of the up‐trend of the feedstock demand. The demand curve will increase and to reach a new equilibrium Another important reason why the land price increased a lot is that the farmer will to replace the land use, from planting feedstock to crop, because they can get more extensive margin. The price of corn ups from $2.50 a bushel in September, 2006 to, a 10‐year high of more than $4.50 on Feb 26 2007. The definition of extensive margin is that extended margin refers to the range to which a resource is utilized or applied. In this case, if the farmer takes one hectare land to plant corn rather than wheat, and the extensive margin he got is equal to the corn price multiple the number sold of corn minus wheat price multiple the number sold, and because of the high demand of corn, the total revenue of corn is higher than that of wheat although the corn price is lower than wheat price. Certainly, we also find the land use change can also cause the greenhouse gas emission. The increases in greenhouse emissions from land use change follow a chain influenced by a variety of economic and ecological factors.
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It starts with the increased demand for a feedstock, such as corn or vegetable oil, increasing the price. Those price increases cause farmers to switch from producing some crops to others, which reduces those other crops as well and drives up their prices. The price increases cause consumers to buy less food. And they cause farmers all around the world to produce more of the diverted or diminished crops. Where farmers plant more cropland, and which kinds of additional lands they plant, will determine the magnitude of greenhouse gas emissions from land use change.
3.2 The situation in Brazil Let’s have a discussion about the situation in Brazil. I have mentioned that the situation in Brazil is different from that in America. According to the statistics, in 2007, Brazil produced about 50 billion gallons of ethanol, and most output depended on sugarcanes. Moreover, Brazil also produced about 64 million gallons of biodiesel mostly from castor beans. And we can find that both these two plants are not the crops. Therefore, there is almost little effect on the agricultural economics of Brazil. Reversely, the export of soybeans in Brazil has also increased in 2007. However, we should not ignore the indirect negative effect on the agricultural economics. Although it looks like a sustainable way for producing ethanol by sugarcanes or other non‐food‐supply, because more and more lands are converted to planting sugarcanes or some raw plants for biofuel production.
3.3 The situation in Europe Let’s have a discussion of the economic aspect of biofuel in Europe. The situation in Europe is a little different from America, Brazil or China. European countries dominate the biodiesel markets, and the ethanol production is not so important comparing to the huge advantage in biodiesel market. According to the population and stability level of biofuel within Europe, we can divide the European countries into three classifications. The divisions are ‘successful market introduction’, include France, Germany, Spain, and Sweden, and ‘developing a stable market’ consists of
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Czech Republic, Poland, Slovakia and ‘starting with introduction of biofuels’ including Malta, the Netherlands, United Kingdom. The following table (Figure 6) gives a brief summary of the production and consumption in 25 countries in Europe.
Figure 6 The problems in Europe are similar to America: they don’t have enough non‐ crop to produce biofuel. Therefore, they have to depend on the different corn for production. Although there are some negative effects on the economics, however, we find the governments in different countries are trying to get over these mistakes. Furthermore, we can also find some attractive advantages for developing biofuel both in the economic aspect and the environmental consideration as well as climate policy. For example, the development of biofuel helps a lot of poor people get out of the poverty. Brazil and China are the 2nd and 3rd largest ethanol production countries in the world, and also two biggest developing countries in the world. In Brazil, there are lots of slums in the cities, and the average wage of farmers is enough for them to live well. However, a harvestman of sugarcanes can get about 200‐250 dollars per month and the agricultural mechanization in both Brazil (and China) has a far way to
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reach. With the increase of the sugarcane production, more and more people can find a job to earn them, which can also increase the GDP of the country.
3.4 The situation in Developing Countries Hereby, let’s talk about the macroeconomic situation in developing countries when the “over hot” development of biofuel. We can find that the crude oil price is always at a high level these years, and this situation will be more and more common in the future. Therefore, there is no doubt of the rapid increase of biofuel development. However, with the fast development of biofuel, more and more developed countries will benefit from this situation, especially the countries, which export huge amounts of feedstock. However, the developing countries, especially the countries which are lack of both oil and agricultural productivity, will be suffered from restrict of energy and technology. According to the statistics, after 2000, the increase in the crude oil price makes the space and motivation for the increase of the development of biofuel. Currently, the global total output of biofuel is about 800 billion liters, and the main producers are America, Brazil, European countries and Canada and China just like mentioned above. These countries occupy about 90% of the global total output, and from the anticipation from the United Nations' Food Agriculture Organization FAO, the output will reach about 1200 billion liter in the year of 2015. Furthermore, the development of biofuel will affect the profit of the countries which depend on exportation of oil. From the OPEC conference of 2007, the member country first realized that the security issue of the energy supplier. In the other words, OPEC countries have been worrying about the development of biofuel which will affect their profit in energy market. Besides, if the global output of biofuel reaches some ratio, it will also threaten the status of the monopoly of OPEC. By contrast, some developing and non‐energy‐exportation countries are in an embarrassing status. One side, the demand of energy of developing countries is increased rapid for the process of industrialization, and the high price make them too expensive. On another way, most of the developing countries are lack of the basic
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conditions for developing biofuel. They can only receive the results which are unknown from the game between OPEC and developed countries. Furthermore, in the beginning stage, most of the developed countries will support the development of biofuel in the name of environment protection, and when biofuel techniques reach a mature stage, and the productivity of biofuel reaches a stable level, developed countries may create the standard system for further developing biofuel by enhancing the global greenhouse gases discharge regulation to confirm the advantage in the biofuel field, and then most of the developing countries have to follow the routines modified by the developed countries because of the restrict of innovation technology and level of agriculture. In the following part, I will demonstrate the climate or environmental policy by developing biofuel.
4. Does it work for ease the climate change by using biofuel? Currently, some policymaking also thinks it will bring positive effect to the climate change by using biofuel as main energy supply rather than the ordinary oil, because they think possibility of greenhouse resulted from the biofuel is less than that from oil. Although it may work, however, we should realize that the different biofuel has the large difference in contribution to control balance of greenhouse gas, and the volume of greenhouse gas depends on the methods of production and the sources. Sometimes, some crops generate more greenhouse gas than the traditional oil industry. For example, the emission potential of nitrous oxide, one of the gases making earth warm, from nitrogenous fertilizer maybe 300 times higher than carbon dioxide. Furthermore, increase of development of biofuel will have direct or indirect effect on the change of usage of lands, which will also generate the greenhouse gas. We can use the life cycle analysis to analyze the balance of greenhouse gas. Here is the work flow graphic (Figure 7).
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Figure 7 The reason for assessing the general volume of greenhouse gas emission is to make a detailed analysis system for the biofuel, and then to compare the common energy such as gasoline. From the results shown below (Figure 8), we can find that carbon emission reduction is lower 20%‐60% comparing to the fossil fuel by using the 1st generation biofuel such as corn or crops by U.S or Europe. However, the situation of 2nd generation biofuel is much better than the 1st one, the representative is the biofuel produced in Brazil by sugarcanes, and carbon emission reduction reaches 70%‐90%.
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Figure 8 From the theoretical results, we found that the carbon emission is reduced by 20%‐60% by the using of 1st generation biofuel. However, from the realistic practice, we can find the results are not so ideal. According to the report from the OECD (Organization for Economic Cooperation and Development) 2008, we find that the carbon emissions from the 2nd generation biofuel of sugarcane from Brazil is better than the 1st generation biofuel produced by corn in America, and the later is just about 30%, which was overvalued for the contribution to the environment. Furthermore, the report was based on the assumption that it will not bring the new greenhouse gas by planting these corns; however, disappointedly, the assumption is not true. Amazon, as the most important carbon sink in this world, is suffering by cutting the trees for planting sugarcanes or soybeans as the main raw materials to develop the bio‐energy, which makes Amazon shrink a lot. The rain forest in Indonesia is replaced by palm oil trees. One of the research groups found that the emission, resulting from changing forests to plant, is much more than the reduction by taking biofuel instead of oil energy. Moreover, the diversity of animal types is shrinking rapidly because of the most of the animals take Amazon and Southeast Asia rain forests as their habitat. Furthermore, it will also bring the issue like water loss and soil erosion or pollution
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by planting biofuel crops, and the huge usage of chemical fertilizer also make the lands deterioration and the greenhouse effect by nitrous oxide from chemical fertilizer is much stronger than carbon dioxide. Therefore, after the discussion, I reach the conclusion that the biofuel can’t contribute a lot for improving current climate situations. The environmental effect of 1st generation biofuel is not as ideal as theory, and we also need to consider and shoulder some potential risks. After some years’ argument, E.U started to make some changes in the previous biofuel policies, and Euro‐parliament is trying to modify the objective that the consumption percentage of biofuel in the total energy from 10% to 6%, and establish the biofuel sustainable certificated standard in order to protect the environmental problem. With the election of Obama, U.S also started to concentrate on the development of biofuel, and the high‐level biofuel told by Obama is the 2nd generation biofuel, however, it is not clear whether the 2nd generation biofuel works. Therefore, we should increase the energy utilization ratio rather than totally depend on the biofuel development to decrease the greenhouse gas emission, and it’s very important to take advantage of the development of green energy such as solar energy, wind.
5. Conclusion and Summary As discussed above, we have a brief knowledge about the manufacture process of biofuel, and we also talked the topic of biofuel from economic aspect. Furthermore, we discussed how the contribution of biofuel for the climate or environment. Biofuel development is a mainstream in the energy industry and will replace the current oil or coal energy in the future; however, we should take a gradual developing way rather than an aggressive way, and from the current experiences, we can find the way of production in Brazil is much better than that of U.S or Europe, therefore, we
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should take the experiences from Brazil, and then to spread this kind of technologies or experiences to more countries which have the basic conditions such as natural resources or stable economy of scale or politics to develop biofuel. Although, there are also some negative effects on the climate or environment, however, if the total benefit from Biofuel can reach an ideal level, we should spare no efforts to develop it. Reference:
Smart Choices for Biofuels; Jane Earley and Alice McKeown; January 2009;
Biofuel and Global Biodiversity; Dennis Keeney and Claudia Nanninga; April, 2008 ©2008 IATP;
Biofuels for transportation: a climate perspective; Naomi Peña; June 2008;
European biofuel policies in retrospect; E. van Thuijl, E.P. Deurwaarder; May 2006;
The Future of Biofuels: A Global Perspective; William Coyle; NOVEMBER 2007;
The false promise of biofuels; Jack Santa Barbara; September 2007;
Pro‐Poor Biofuels Outlook for Asia and Africa: ICRISAT’s Perspective; ICRISAT; 13 March 2007;
Crop‐Based Biofuel Production under Acreage Constraints and Uncertainty; Mindy L. Baker, Dermot J. Hayes, and Bruce A. Babcock; February 2008;
The Impacts of Biofuels on Greenhouse Gases: How Land Use Change Alters the Equation; Tim Searchinger, Transatlantic Fellow, the German Marshall Fund of the United States
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