The New York Times

Almost all biofuels used today cause more greenhouse-gas emissions than conventional fuels if the full emissions costs of producing these “green” fuels are taken into account, two studies published Thursday have concluded.

The benefits of biofuels have come under increasing attack in recent months, as scientists took a closer look at the global environmental cost of their production.

These plant-based fuels were originally billed as better than fossil fuels because the carbon released when they were burned was balanced by the carbon absorbed when the plants grew. But that equation proved overly simplistic because the process of turning plants into fuels causes its own emissions — for refining and transport, for example.

These studies, published in the prestigious journal Science, for the first time take a detailed, comprehensive look at the emissions effects of the huge amount of natural land that is being converted to cropland globally to support biofuels development.

The destruction of natural ecosystems — whether rain forest in the tropics or grasslands in South America — not only releases greenhouse gases into the atmosphere when they are burned and plowed, but also deprives the planet of natural sponges to absorb carbon emissions. Cropland also absorbs far less carbon than the rain forests or even scrubland that it replaces.

Together the two studies offer sweeping conclusions: It does not matter if it is rain forest or scrubland that is cleared, the greenhouse-gas contribution is significant. More important, they discovered that, globally, the production of almost all biofuels resulted — directly or indirectly, intentionally or not — in new lands being cleared for food or fuel.

“When you take this into account, most of the biofuel that people are using or planning to use would probably increase greenhouse gases substantially,” said Timothy Searchinger, lead author of one of the studies and a researcher in environment and economics at Princeton University.

Searchinger’s team determined that corn-based ethanol almost doubles greenhouse-gas output over 30 years when the land-use changes to grow corn are considered. Cellulosic ethanol made in the U.S. from switchgrass, a fuel that has been singled out by President Bush as a way to reduce the country’s dependence on oil, produces 50 percent more emissions than gasoline does, the study said.

The clearing of grassland releases 93 times the amount of greenhouse gas that would be saved by the fuel made annually on that land, said Joseph Fargione, lead author of the second paper, and a scientist at the Nature Conservancy. “So for the next 93 years you’re making climate change worse, just at the time when we need to be bringing down carbon emissions.”

Searchinger said the only possible exception he could see for now was sugar cane grown in Brazil, which takes relatively little energy to grow and is readily refined into fuel. He added that governments should focus on developing biofuels that did not require cropping, such as those from agricultural waste products. “This land-use problem is not just a secondary effect — it was often just a footnote in prior papers,” Searchinger said. “It is major.”

Industry groups, like the Renewable Fuels Association, immediately attacked the new studies as “simplistic.”

“Biofuels like ethanol are the only tool readily available that can begin to address the challenges of energy security and environmental protection,” said Bob Dineen, the group’s director, in a statement issued after the Science reports’ release.

In the wake of the new studies, a group of 10 of the United States’ most eminent ecologists and environmental biologists on Thursday sent a letter to President Bush and the speaker of the House, Nancy Pelosi, urging a reform of biofuels policies.

The U.S. recently enacted legislation boosting biofuel production to 36 billion gallons in 2022 from 7.5 billion gallons in 2012. The European Union requires 10 percent of transportation to use biofuels by 2020.

The European Union and a number of European countries have recently tried to address the land-use issue with proposals stipulating that imported biofuels cannot come from land that was previously rain forest.

Fargione said that the dedication of so much cropland in the United States to growing corn for bioethanol had caused indirect land-use changes far away — for instance, by increasing pressure on Brazil to meet soybean demand. “Brazilian farmers are planting more of the world’s soybeans — and they’re deforesting the Amazon to do it,” Fargione said.

There should be more focus on producing biofuels from municipal waste and from land that can’t be used for food crops, said Alex Ferrell, an energy and resource professor at the University of California, Berkeley. Soil and plants are essential stores of carbon, containing more than the atmosphere, he said.

Ferrell, who wasn’t involved in the two studies, said the economic model used in Searchinger’s study will have a “profound” impact on the biofuel debate because it questions the rationale of governments who see biofuels as a way to limit global warming.

Well, of course, better regulations and enforcement of regulations. But for poor countries, often, economic growth could have positive impacts.

http://www.economist.com/world/europe/displaystory.cfm?story_id=10533886

This is going to change the world. This is where policy is translating into real action and real dollars. We’re talking countries being binded to caps and having to either cut emissions or buy credits to make the target. Now it is time for America to join, and China to follow.

In the long term, coal prices/demand will not come down, mostly due to rising other commodity costs, more and more builds of coal plants and investments, as well as governments backing the industry. Look for companies that own real coal assets.

Look for solar to rebound once coal/oil prices go up, as solar prices are still dependent on those other sectors’ prices.

Below from the Economist:

Comfort in numbers
But risk management can be a lonely business. Mattel’s monitoring of its suppliers is said to have been state-of-the-art, but that did not save it from costly embarrassment in China. With the best will in the world and the most energetic efforts to create codes, talk to stakeholders and support hospitals and schools, companies can still find themselves uncomfortably exposed, especially as what is expected of them can vary so much from country to country.

The answer, many have decided, is to spread the risk. Groups of them are getting together to agree on codes of conduct—usually within a particular industry, but also across industries and in consultation with governments, UN agencies and NGOs. This has become one of the most striking recent trends in CSR.

http://www.economist.com/people/displaystory.cfm?story_id=10496503

So what does that mean to the world? The comeback of nuclear seems imminent -> what’s the call on oil prices in the future? Keep rising?

http://www.economist.com/research/articlesBySubject/displayStory.cfm?story_id=9070135&subjectID=348924&fsrc=nwl&emailauth=%2527%252A%2520%253E05%255CCDV%2540GD%250A

Tackling Climate Change

Europe is including greenhouse-gas cut promise in the Berlin declaration celebrating 50 years of declaration, while;

US recognize climate change as an issue but will not institute an emissions cap unless China does so also, while;

China refuses to institute an emissions cap if that means slowing economic growth.

http://www.economist.com/research/articlesBySubject/displayStory.cfm?story_id=9059486&subjectID=348924&fsrc=nwl&emailauth=%2527%252A%2520%253E27LWOV0D%2520%250A

Treaties that pay to pollute

EU’s emission trading system counter excessive emissions by allowing for “flexible mechanisms”. Flexible mechanisms are projects that reduce any of six greenhouse gases. For example, projects that reduce HFC-23, which is very cheap to contain, generate huge numbers of CO2-equivalent credits to sell into the EU.

http://economist.com/world/international/displaystory.cfm?story_id=E1_JDRQRNJ

A Nuclear Test of Wills

India has not signed the Nuclear Non-Proliferation Treaty (NPT), and Congress set out a new Hyde Act that rules out selling India any equipment or technology – India is currently needing plutonium, but it won’t seek nuclear parity with China.

Market Knowledge

http://www.accenture.com/NR/rdonlyres/39F59E5D-EC8E-4B7F-A8E1-D60A9EBAEB81/0/strategies_success.pdf

Future of Gas Market – Risk Hedging will be increasingly important

- Future of Natural Gas

o Fast-changing gas market will create need for risk hedging

o Liquefied Natural Gas (LNG) will change the market

§ Stranded gas reserves can be developed

§ Regional markets will turn global

o Countries with growing need of natural gas:

§ US

§ UK

§ China, Korea, Japan

o Growing competition to supply the US gas market

§ $11B Shell Gorgon gas project off West Australia Coast will supply 2.5M tones of Gorgon LNG to US West Coast

- Outlook of US Gas Market

o Risks:

§ Cycle time between liquefaction (5-10 years) and regasification (3-5 years) facilities

§ Whether US Energy Bill is passed to eliminate bureaucratic blocks to LNG facilities

o Three types of players:

§ Major Suppliers to US market

· E.g. ExxonMobil, Gazprom

· Needs:

o Secure vast gas resources in Qatar, Russia

o Identify the most attractive segments to obtain minimum credit risk

o Pursue more gas trading, price arbitrage, and risk-management ability

§ Principal marketers to US market

· E.g. BP, Shell

· Skills:

o Risk-management to minimize disruptions to supply chain

o Long-term contracts with delayed price indexation to oil-product prices, price floors/ceiling to ensure willingness of customers to invest in gas-fired infrastructure

§ Companies focused on LNG markets

· E.g. Tractebel, British Gas (BG)

· Skills:

o Already have LNG infrastructure, can move gas between European and US markets

o Occupy strong US niche positions (New England, Gulf Coast)

http://www.accenture.com/Global/Research_and_Insights/By_Industry/Energy/NorthSeaLandscape.htm

How Gas Infrastructure Players Must Deal With Changing North Sea Landscape

o Maturation of North Sea (in Europe) gas fields will force Europe to import 70% of their natural gas by 2020

o Challenges to natural gas suppliers:

§ Filling pipeline capacity (marketing to existing and new customers): maximizing pipeline capacity by management the mix and risks of the contracts in their supply contracts.

§ Use of Third Party Agreements: spare capacity can be made available to third parties through either tariffs or commercial agreements

§ Competitive Market: With increasing buyer power, buyers do not want to hold unnecessary inventories of gas, reserve transportation, or storage capacity unless they are able to pass on the additional cost to other market players

· Demand greater ability to return unwanted supply, and increased peak gas supply

§ Flexibility into the allocation of capacity to various customers

§ Price negotiations effectively

§ Build up customer profiles on which customers add the most value to their businesses

§ Analyze downstream strategies and how it fits with the ST and LT objectives

http://www.accenture.com/NR/rdonlyres/9303F1E4-183A-40B6-B77E-48E012556FE5/35000/PetroluemReviewFebruary5.pdf

Replacing indigenous supplies in the European gas markets

o Europe is facing decreasing indigenous natural gas supplies

§ Rely on Russian, Norwegian, and LNG supplies

§ Shifting to spot gas pricing

· Established first continental gas trading exchange in 2005 to decouple gas prices from oil prices

§ UK will enter LNG market

§ North European Gas Pipeline, delivering Russian gas to Western Europe

§ Nabucco Pipeline, delivering Turkey/Caspian gas to Western Europe

o Key Challenges:

§ Respond to increased gas market price volatility

§ Manage a diverse supply portfolio with shorter-duration contracts

§ Realize large supply infrastructure projects on time and on budget