Carbon trading schemes, merchant options, and lifecycle greenhouse gas emissions in view of the energy independence and security act of 2007

Background

Carbon dioxide may be one of the greatest challenges today with respect to emissions control and greenhouse gas minimization. From a global perspective, some 75 million tons daily are emitted to the atmosphere, of which, best case, some 25 million tons daily are absorbed by the oceans. The oceans are approaching a point of high saturation with carbon dioxide, and in the end, the oceanic sink for carbon emissions is not the answer, but a natural mechanism to absorb an ever-growing sum of co2 emissions, driven by an ever-hungry world, with extraordinary energy demands. The world’s oceans are trouble today, with the loss of marine habitats, in part due to ‘oceanic acidification’.

Today’s extraordinary and ever - growing energy demands are highly driven by the internal combustion engine as well as coal and natural gas fired power plants; where the power plants alone can perhaps account for up to 40% of the total carbon emissions in some developed economies. The ever growing demand for the internal combustion engine, due to the lack of other affordable or technically viable options for today’s day to day transportation, will be fueled by huge growth forecasted for growing economies such as china and india. This means more and ever more greenhouse gas emissions. Ethanol has been a friendly and hopeful means to mitigate this extraordinary global problem.

The co2 industry, as a so-called merchant trade, would have a global, annual consumption of up to 22 million metric tons, of which the us is about 40% of this total; this merchant business is growing at less than 3% annually. The ethanol sector, with respect to the supply of raw co2 into the merchant gas scheme within the united states accounts for about 40% of the total amount of raw gas; whereby other sources such as by - product from anhydrous ammonia production, reformer operations, ethylene oxide; and concentrated natural wells are other options for supply of raw gas to the merchant trade. On the other hand, ethanol has been the ‘saving grace’ for the co2 industry, as natural and ammonia sources have been, and will continue to be lost in record numbers. Moreover, the ethanol project can yield a significant multimillion dollar additional revenue stream to the suitable ethanol project. The location of such revenue opportunities should be properly evaluated in full, in order to squeeze out as much revenue for the ethanol producer, when available.

When taking this into consideration, and the growth of both grain sourced, as well as cellulose based technologies, certain new ethanol – based co2 plants will move forward in the term ahead; specific to regional market opportunities and current source changes; of course, a finite number of new plants for merchant co2 will be developed in the years ahead in north america. Globally, this issue is also subject to market forces; but there remains a need to handle the politics, economics, and physical control of the ever growing carbon emission problem globally; aside from a finite of co2 needed and used in many markets as a chemical agent, refrigerant, etc. Some methods to handle excess co2 may include enhanced oil recovery (which does not fully sequester the product), various sequestration schemes of often a conceptual nature, and the development of new types of sinks for carbon; many of which are conceptual today at best.

Carbon trading

Some years ago, the concept of carbon trading was not much of a consideration. Today, however, the market in greenhouse gas emissions could well outpace the traditional commodities markets; and even become the largest traded commodity. This is not overstated, but also an opinion of the ctfc (us commodities trading commission). Globally speaking, the carbon trading market was worth over $60 billion in 2007; however the us accounted for a small portion of this sum.

About $50 billion of this overall sum was carried out under the european union’s emission trading scheme, with practically the full balance carried out under the kyoto protocol, which has not been ratified by the united states, as we all know. Some estimates show by about 2020, the global carbon market would be worth more than $3 trillion; assuming the us should participate via a form of ‘cap and trade’ to limit carbon emissions, as well as probably a version of the current kyoto protocol. Carbon markets impact the power, oil, gas, and coal markets as well. Cap and trade, essentially is a ceiling placed on the emissions of companies, whereby the unused quota is traded with one another. This mechanism is??oping to ensure that carbon emissions are cut at the lowest possible cost. I feel such a mechanism will become a federal mandate next year, after the elections, which is one step toward positive thinking surrounding emissions reduction.

Energy Independence and Security act 2007 ( EISA 07)

The United States is currently consuming about 190 billion gallons of gasoline and diesel per year; of which about 65% or 124 billion gallons is derived from foreign sources – this was a major driver in the new energy act.

This act did not address the need to increase electricity growth demands, plus numerous additional energy issues; however, it does address the most important and demanding issue related to energy today. This volatile and ever growing crude oil supply as a primary source of energy for transportation; under the eisa07 crude oil will be reduced categorically, as well as the import of crude, and the use of gasoline will be addressed.

The means of reducing gasoline will take place in two ways; the first being café, that being an increase in the corporate average fuel economy standards. This represents an eventual reduction in gasoline by about 1.1 million barrels per day in new cars; while inserting 36 billion gallons per year of renewable fuels, like ethanol, while reducing gasoline use in all cars.

These provisions essentially are on target at this time from a realistic viewpoint covering government mandates; which in the end has not been possible for both the consumer and industry to handle on their own for the last number of decades since the oil crisis of the 1970s.

Despite largely misinformation by many sources of the press, that being claims that ethanol sourced by grains has been the major factor in higher food prices and shortages of foodstuffs; this bill was acted upon in a positive manner. As to the truth, those trying to protect the status quo in the oil and gasoline markets, at least this was in part defeated; while under closer examination, it is quite apparent that ethanol is only helping the environment, adding the best and logical choice in alternate fuels available now and anytime soon, and is a large step ahead in global warming reduction, thus offering options of a viable nature vs. today’s catastrophic oil and gasoline markets and price issues, which are absolutely out of control.

Supply chain, greenhouse gas protocol & lifecycle greenhouse gas issues

Today’s common term surrounding the ever growing greenhouse gas concern, is ‘carbon footprint’. Today companies and individuals are seeking a means toward developing a more accurate picture of their emissions, particularly in terms of supply chain, lifecycle, and other factors surrounding emissions. Lifecycle essentially considers all phases of the product development from raw materials thru consumption and disposal.

The greenhouse gas protocol (ghg protocol) is probably the most widely used international accounting tool for government and business leaders to understand, quantify, and manage greenhouse gas emissions. This protocol is about 10 years old, and is a partnership between the world business council for sustainable development and the world resources institute; which is working with government entities, businesses, and various environmental groups globally to develop a new generation of credible and tangible programs for managing climate change problems.

Over the last year or so, many companies and stockholders have been evaluating the ghg protocol to develop new guidelines on supply chain and lifecycle ghg accounting capabilities. In turn, the world resources institute and the world business council for sustainable development outlined a survey to assess the need for new guidelines, and sent this survey to some 400 companies, stockholders, and industry experts. Some 100 replies sent a clear answer for the ghg protocol to develop new guidelines on this subject. The result now, is action to develop a consultation process and develop new guidelines on supply chain and lifecycle greenhouse gas accounting and reporting during 2008. The ethanol industry is key to this as well.

Lifecycle energy and greenhouse gas emissions impacts on various corn based ethanol plant types

Since the US began the development of ethanol as a transportation fuel, the use has grown from 175 million gpy (gallons per year) in 1980 to 4.9 billion gallons annually in 2006. Virtually all of this ethanol has been produced from corn as a feedstock material as well. We were all fine with using grains for fermentation all along, until the press claimed outrageous disasters surrounding famines, food shortages and high prices; which has little to do with ethanol production from grains.

During this growth period, corn farming productivity has grown dramatically, and energy use in the typical ethanol plant has been reduced, in some cases, by 50%; this is a positive view of our carbon footprint. Most corn based ethanol plants are fueled by natural gas; which has skyrocketed in price. This high price for natural gas has brought about a switch to other fuels, such as wood chips and coal. The wide range of ethanol plant types, using a range of process fuels, chp, and wet distiller grains are some factors which define plant types, for example. The range in plant types yield distinctly different energy and greenhouse gas emission effects on a full fuel-cycle basis. This means that greenhouse gas emission impacts vary significantly; from 3% increase when coal is a fuel to a 52% reduction when wood chips are used.

The end result essentially is an examination of plant types, via process, fuels, etc, for the production of corn ethanol, whereby corn ethanol production can move toward a more sustainable path. When speaking of new ethanol plant types, this can include the following; where i am illustrating nine different modes for plant modifications toward a greener path:

• Plants fueled by natural gas; the newer plants are more efficient from a gas consumption point of view today; and are becoming more efficient.

• Plants fueled by natural gas and producing wet dgs; if the new ethanol plant is near the feedlot, the wet dgs then eliminates the need to dry the dgs, thus an energy savings is gained.

• Plants fueled by natural gas and chp (combined heat and power) systems; this can yield a substantial drop in power usage purchase (from the grid) and an overall plant energy use.

• Plants fueled by coal; new coal fired boilers, even with emission control equipment can be more efficient than older gas fired boilers, this is applicable to the larger scale new projects

• Plants fueled by coal and producing wet dgs; some of the above combined effects can be noticed by this hybrid option, all contingent upon epa guideline approvals with coal.

• Plants fueled by coal and chp systems; again this hybrid can gain in energy reduction, and would be subject to epa guidelines due to coal as a fuel.

• Plants fueled with wood chips; this could include wood chips, corn residue, crop residues, etc. Today plants are developing wood chip gasifiers to produce a syngas. The end result can be an energy savings.

• Plants using natural gas and producing corn syrup. Corn plus in Minnesota has installed this technology. The use of corn syrup as a process fuel accounts for 19% of the total dry mass of dgs.

• New plants fueled with DGs; while the potential for Dgs to flood the animal feed market exists, the use as a fuel supplement can represent an energy savings.

Summary

Discounting the developments with cellulosic ethanol products, processes, and energy efficiencies; some of this is well ahead of today, from a well scaled plant, but would have a positive result from a lifecycle point of view. Such cellulosic processes of varying types are in a pilot mode, generally sponsored or subsidized by the doe; but refinements and proven large scale operations are not here now. On the other hand, some of this will come to be in the term ahead, and from a carbon footprint point of view, this will be very favorable.

If, on the other hand, the switchgrass, and many types of cellulose based material has to be produced for this purpose, not being that of an otherwise unwanted product, then all of the issues will have to be evaluated short of exchanging this material for foodstuffs, as would be the case for corn, soy and wheat. That being the case, the trade-off v. Corn as a foodstuff is not black and white. Ethanol is here to stay and grow both domestically and globally, and for a long time ahead, if not indefinitely, it is the best hope for means of gaining some domestic energy self-sustainability.

Many estimates consider ethanol production by 2010 in the united states to reach 8 billion gpy in production, historically thought to be composed of 87.5% from dry milling corn plants, and the 12.5% balance from wet milling operations; we shall see what comes of cellulosic operations as such technologies move along. Much evidence points to a cellulosic ethanol as a low carbon fuel; given various assumptions being addressed in a positive fashion, including designs for improved lower energy usage, strategic placement, etc.

As to energy use, which is directly related to low carbon fuels, the nine types of possible new (improved) ethanol plant types (when using corn as a feedstock) as outlined above, represent means of reducing emissions via process, location, by-product, or fuel modifications to the so-called ‘cookie cutter’ plants found throughout the years past. In places such as latin america and asia, sugarcane is the most efficient means of producing ethanol, since the need for the intermediate step of sugar conversion is unnecessary; however, sugarcane is not readily stored long term as would be grain substances, and the dormant plant operating period of 2-4 months exists in these markets, thus the efficiencies gained in sugarcane operations are negated when compared to other feed stocks and ethanol based technologies.

Cap and trade scenarios are an option in the united states in the future as a means of working toward trying to cut carbon emissions. With the iesa07, the effects should be an eventual reduction of gasoline usage in new cars; while inserting 36 billion gallons per year of renewable fuels into america’s market, largely ethanol. The logical renewable fuel is ethanol. The placement of the ghg protocol should yield new guidelines on supply chain and lifecycle greenhouse gas accounting and reporting; all of which represents a new generation of programs for managing climate change programs; all good news for the ethanol industry.

As the ethanol industry transforms into more efficient forms of production, as outlined in the text with perhaps nine models of plant/fuel/process/location modifications, corn based ethanol will yield more and more efficient and viable forms of production for tomorrow’s non-petroleum fuel options. The future developments in cellulosic options are another direction whereby lower emissions and greater efficiencies are available as a transportation fuel v. The ever shrinking global supply of petroleum products. Ethanol as a lower carbon fuel v. Petroleum products, along with future ethanol industry plant modifications and developments; tied into the new energy bill of 2007, fit well into life cycle evaluation and assessment in the ethanol industry, from a raw material in feedstock, to the final fuel product and handling of co2 emissions.

About the author: Sam A. Rushing, president of Advanced Cryogenics, Ltd., of Tavernier, FL, is a co2 and chemical gas consultant, in the industry for 3 decades; of which 19 years a consultant to all phases of the co2 subject, the carbon dioxide industry including technical, process, business, markets, and emissions issues. Contact at 305 852 2597, rushing@terranova.net, www.carbondioxideconsultants.com