1. Environmental Issues with Feedstocks for Biofuels and Biochemicals Don O’Connor (S&T) 2 Consultants Inc. SCA Sarnia, June 12, 2012

2. Sustainable Chemistry Alliance 2012 (S&T) 2 Agenda  Sustainability  Food vs. Fuel  Indirect Land Use Change  The Models  The Evidence.  What needs to be done to close the gap?  Other Fuel’s Indirect Impacts?

3. Sustainable Chemistry Alliance 2012 (S&T) 2 Introduction  Any new market participant represents a threat to the established industry players.  New technologies from new participants always face criticism as they represent a threat to the status quo.  So it has been with biofuels, and while biochemicals have so far flown under the radar, they too could face criticism.  The environmental benefits of biofuels has been questioned by many.

4. Sustainable Chemistry Alliance 2012 (S&T) 2

5. Sustainable Chemistry Alliance 2012 (S&T) 2

6. Sustainable Chemistry Alliance 2012 (S&T) 2 Bioenergy Sustainability  Europe has made this a requirement for biofuels and biofuel feedstocks that are sold in the EU.  Mandatory requirements  Minimum GHG emission reductions  No new land, land must have been in production before 2008.  Voluntary schemes  Also looking at social issues and other environmental impacts  The devil is in the detail and in the interpretation of the requirements.

7. Sustainable Chemistry Alliance 2012 (S&T) 2 Bioenergy Sustainability  It appears that Canadian producers can meet the requirements, as they are currently interpreted, with minimum efforts.  ISO 13065  International effort to develop a standard for bioenergy sustainability.  ISO standards have to go through a WTO screen so a successful standard should stop “criteria creep”  Not clear after 2 years if consensus on a standard can be reached.  Comparability is a stumbling block.

8. Sustainable Chemistry Alliance 2012 (S&T) 2 Food vs. Fuel  This remains an emotional issue.  In North America the food supply is arguable more secure now than it was a decade ago.  Next years crop is no longer dependent on support from the government for this years crop.  In North America increased demand from population increases is met by increased yields.  People don’t comprehend that most agricultural land is used for feed production and not food production.

9. Sustainable Chemistry Alliance 2012 (S&T) 2 US Corn Demand

10. Sustainable Chemistry Alliance 2012 (S&T) 2 US Corn Demand

11. Sustainable Chemistry Alliance 2012 (S&T) 2 The ILUC Hypothesis

12. Sustainable Chemistry Alliance 2012 (S&T) 2 The ILUC Hypothesis  The new land comes from pasture and forest.  Both result in carbon emissions from working the soil.  Forests release the above ground carbon to the atmosphere.  The net impact is a large increase in GHG emissions and the headlines that biofuels are more GHG intensive than gasoline or diesel.

13. Sustainable Chemistry Alliance 2012 (S&T) 2 The Models  Econometric models are used for the estimation of land use changes.  GTAP  Mirage  FAPRI  FASOM  The models do a reasonable job of estimating the substitution effects.  That is what they were designed to do.  But most are static models and they don’t account for changes in technology or demographics.

14. Sustainable Chemistry Alliance 2012 (S&T) 2 Some Results IFPRI adjusted to 30 year time period for comparison

15. Sustainable Chemistry Alliance 2012 (S&T) 2 Some Results

16. Sustainable Chemistry Alliance 2012 (S&T) 2 Some Results

17. Sustainable Chemistry Alliance 2012 (S&T) 2 The Evidence  Biofuel production has increased dramatically in the past decade.  What has happened to land use?  What has happened to land use change emissions?

18. Sustainable Chemistry Alliance 2012 (S&T) 2 United States  Ethanol Production increased from 8 to 50 billion litres between 2002 and 2011.  Agricultural land decreased.  Forest land increased.  Agricultural exports increased.  The various models all predict the opposite would happen.

19. Sustainable Chemistry Alliance 2012 (S&T) 2 Europe  Large increase in biodiesel production in the past decade.  Agricultural land decreased.  Forest land increased.  Also opposite to what the model are predicting.

20. Sustainable Chemistry Alliance 2012 (S&T) 2 Carbon Pools and Fluxes

21. Sustainable Chemistry Alliance 2012 (S&T) 2 Global Carbon Budget

22. Sustainable Chemistry Alliance 2012 (S&T) 2 Global Carbon Budget

23. Sustainable Chemistry Alliance 2012 (S&T) 2 Global Carbon Budget

24. Sustainable Chemistry Alliance 2012 (S&T) 2 Global Carbon Budget

25. Sustainable Chemistry Alliance 2012 (S&T) 2 What Needs to be Done to Improve the Models?  Many of the models guess what the yield on new land will be, and guess low, about 50% of the yield on existing land.  The evidence suggests that the yield on new land is about the same as on old land.  The models don’t factor in the capital costs of land conversion, even though they are economic models!  As a result, for new land they choose between pasture and forest based on the proportions of each available.  The evidence suggests that 20 to 30 times as much pasture will be converted compared to forest. Most models are about 2 to 1.  Uncertainty about carbon stocks on converted lands.

26. Sustainable Chemistry Alliance 2012 (S&T) 2 Land Databases  The models don’t have a good database of what land is available.  Idle cropland is not a category in most models.  Some models include this land in cropland in some countries, include it as pasture land in other countries. There is no consistency even in the same models.  When idle land is included in the cropland category, the models can’t access it. They will choose pasture and forest land instead.

27. Sustainable Chemistry Alliance 2012 (S&T) 2 Idle Cropland  The quantity of idle cropland could be as large as 400 million ha. About one third of the utilized cropland.  The change in harvested area between 2005 and 2011 represents 10% of the idle land.  EU land requirements for biofuel were 1.8 million ha in the IFPRI modelling of ILUC.  No good estimates of double cropping potential, nor can most models estimate this factor.

28. Sustainable Chemistry Alliance 2012 (S&T) 2 Dynamic Economies  The models are static models. They introduce a shock and look for the economy to change to a new equilibrium without the passage of time.  That is not how the real world works.  What changes are we seeing over time?  There are big changes in the developed world in our eating habits.  The US eats 10% more meat per capita than it did 30 years ago but uses 20% less feed to produce the meat.

29. Sustainable Chemistry Alliance 2012 (S&T) 2 Meat Consumption and Feed Demand

30. Sustainable Chemistry Alliance 2012 (S&T) 2 Land Requirements for US Meat

31. Sustainable Chemistry Alliance 2012 (S&T) 2 Land Requirements for US Meat 20 million ha freed 80 billion litres ethanol

32. Sustainable Chemistry Alliance 2012 (S&T) 2 Land Requirements for Canadian Meat

33. Sustainable Chemistry Alliance 2012 (S&T) 2 Indirect Effects Petroleum  Crude oil is refined to produce transportation fuels and light oils for heating.  The refining process produces a large number of co-products, some with high value and some with low value.  The low value products (residual oils, bunker fuels, petroleum coke, etc.) are generally burned to produce heat and power in large conversion devices.

34. Sustainable Chemistry Alliance 2012 (S&T) 2 Residual Prices

35. Sustainable Chemistry Alliance 2012 (S&T) 2 Indirect Effects Petroleum

36. Sustainable Chemistry Alliance 2012 (S&T) 2 Estimate of the Magnitude  If there were no production of residual oil, what would be used instead?  LCA work done in Europe has used natural gas to replace the lost production of residual oil.  The emission credit for natural gas compared to residual oil is about 35 kg CO 2 eq/GJ.  At 15% of the barrel, the indirect effects of petroleum fuels amount to 5.2 kg CO 2 eq /GJ.  Each crude oil and refinery would have different indirect effects.

37. Sustainable Chemistry Alliance 2012 (S&T) 2 Outlook  Food vs. Fuel and ILUC arguments will continue to evolve.  Issues are different in the developed world compared to the developing world.  Not sure that the indirect effects of fossil fuels will be incorporated into the models.  Even though it could be beneficial to the oil sands emissions picture.  There is a group of activists questioning the CO 2 cycling benefit of biomass.  This could be the next big issue, it has started already in some regions for woody biomass.

38. Sustainable Chemistry Alliance 2012 (S&T) 2 Outlook  In the past several years there have been a lot of biofuel and biochemical processes developed that utilize “low cost sugars”  What happens to the public support for the bioeconomy if the “low cost sugars” are produced from corn?  If the bioeconomy is based on lignocellulosic feedstocks where does that leave agriculture when crop yields are doubled by 2030?

39. Sustainable Chemistry Alliance 2012 (S&T) 2 Thank You