LiquidbiofuelFull

Glasnevin
Dublin 9
Ireland
t
f
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+353 1 836 9080
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info@sei.ie
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Sustainable Energy Ireland is funded by the Irish Government
under the National Development Plan 2000-2006 with
programmes part financed by the European Union
04-RERDD-015-R-01
Liquid Biofuels Strategy Study for Ireland
Liquid Biofuels Strategy Study for Ireland
December 2004
Report prepared for Sustainable Energy Ireland by:
Carlo Hamelinck (Ecofys Netherlands)
Richard van den Broek (Ecofys Netherlands)
Bernard Rice (Teagasc)
Alyssa Gilbert (Ecofys UK)
Mario Ragwitz (Fraunhofer ISI)
Felipe Toro (Fraunhofer ISI)
Sustainable Energy Ireland
Sustainable Energy Ireland (SEI) is Ireland’s national energy agency. Established on May 1st 2002 under
the Sustainable Energy Act 2002, SEI has a mission to promote and assist the development of sustainable
energy. This encompasses environmentally and economically sustainable production, supply and use of
energy, in support of Government policy, across all sectors of the economy. Its remit relates mainly to
improving energy efficiency, advancing the development and competitive deployment of renewable
sources of energy and combined heat and power, and reducing the environmental impact of energy
production and use, particularly in respect of greenhouse gas emissions.
SEI is charged with implementing significant aspects of the Green Paper on Sustainable Energy and the
National Climate Change Strategy as provided for in the National Development Plan.
SEI manages programmes aimed at:
•
•
•
•
•
assisting deployment of superior energy technologies in each sector as required;
raising awareness and providing information, advice and publicity on best practice;
stimulating research, development and demonstration;
stimulating preparation of necessary standards and codes;
publishing statistics and projections on sustainable energy and achievement of targets.
SEI is responsible for advising Government on policies and measures on sustainable energy;
implementing programmes agreed by Government and stimulating sustainable energy policies and
actions by public bodies, the business sector, local communities and individual consumers.
i
Executive summary
The EC Biofuels directive 2003/30/EC demands from the member states that a share (“Reference
Percentage”) of 2 % on energy basis in 2005 and 5.75 % in 2010 of the fossil fuels sold on their
transportation markets should be replaced by biofuels. To assist the Irish government in the formulation
of goals and strategies as required by this Directive, Sustainable Energy Ireland has commissioned a
consortium of Ecofys, Teagasc, and the Fraunhofer Institute to quantify the impacts of the establishment
of an Irish biofuel industry and to identify the most strategic routes towards the implementation of the
EC transport biofuel directive.
Biofuel resources availability
Ireland is able to produce about 12 PJ of biofuels, being about equal to the 2010 target. However, that
would imply that part of the current feed crops is to be used for energy purposes. This normally induces
additional feed import. If such induced import is to be avoided, a realistic estimate of the Irish biofuel
resources availability (being 2.8 PJ) comprises about 79 % of the 2005 and 23 % of the 2010 target.
Significantly larger amounts of advanced biofuels (12 PJ) could be produced from lignocellulose
residues, if these become available in the medium (post 2010) and long term.
Technical and legal limits to introducing biofuels
Meeting the 2005 Reference Percentage is possible under current fuel standards and directives with all
biofuels considered. However, these standards and directives do not give sufficient space for meeting
the 2010 Reference Percentage of the biofuel directive. One can only meet this directive by applying:
•
(Partly) using biofuels that do not meet the current gasoline directive regarding ethanol or
the current diesel standard.
•
Adapting the standards that maximize the ethanol and biodiesel percentages, before 2010.
•
Introducing new biofuels (other than ethanol and FAME) that meet the current gasoline and diesel
directives and standards
Benefit for the environment
The best estimate of the well-to-wheel (WTW) greenhouse gas (GHG) emission for biodiesel from rapeseed is about 50% of that of conventional diesel. Bio-methyl ester from RVO emits about 16% of the
diesel WTW GHG emission. Bioethanol from sugarbeet emits about 45 % as compared to gasoline, and
from wheat this is about 33% of the gasoline emission.
Delivered biofuel cost
Because of different heating values, costs of biofuels and fossil fuels are best compared on the basis of
their energy content. Biodiesel from rape seed at the refilling station* costs about 25 €/GJ (0.80 €/l),
which is about 2.5 times higher than the cost of fossil diesel. Biodiesel produced from tallow or RVO costs
*
This cost includes cost for blending, and costs and margin for fuel distribution and retail, but excludes excise duty and VAT.
ii
about 17 €/GJ (0.56 €/l). Ethanol (from wheat) can be delivered at about 27 €/GJ (0.58 €/l), as compared
to 11 €/GJ (0.33 €/l) for gasoline
In the long term, Fischer Tropsch diesel is expected to be produced for a cost that is roughly 30% higher
than current fossil diesel costs. Long-term estimates for ligno-cellulosic biomass indicate cost levels of
about 16 €/GJ (0.33 €/l).
In order to get equal litre prices for the consumer at the pump for RME an excise duty exemption is
required of about 47 ct/l (being higher than the actual excise, 37 ct/l). In the case of RVO based biodiesel,
the required excise exemption would be about 22 ct/l. In the case of ethanol from wheat, the excise
exemption needed would be about 25 ct/l (as compared to an excise of 44 ct/l).
Greenhouse gas emission reduction costs about 340 €/tonne CO2-eq. when using biodiesel. With RVO
based biodiesel this is about 100 €/tonne. In the case of bioethanol, this is 300 - 450 €/tonne.
Import of biomass and biofuels
The countries of the EU-15, as well as the EU-25, show large surplus potentials of biodiesel or bioethanol,
compared to the targets of the biofuel Directive for 2005. For 2010, the countries of the EU-15, as well as
the EU-25, show surplus potentials only when there is a focus on bioethanol.
The export potentials from other world regions (in particular from Brazil, China and Thailand) are very
large compared to the size of the Irish (and EU) market. The costs (including transport to the EU) can be
significantly lower than EU biofuels’ production costs.
Macro-economic impacts
Although employment involved will generally be higher, the introduction of (5.75%) biofuels will
contribute less to the Irish GDP than the current use of fossil fuels. The main reasons for this are the
difference in cost price and the fact that, in order to achieve the 5.75%, Ireland will need a significant
amount of (direct and/or indirect) import.
Importing ethanol from Brazil may be more attractive for the Irish treasury than using Irish wheat, that is
currently used for feed production, for local bioethanol production.
Policy incentives, and evaluation
Most EU countries currently choose excise duty exemption as the central policy instrument for the
implementation of the biofuel directive. It is relatively easy to implement. Disadvantages to this
instrument are the fact that it generally gives no long-term guarantee, which is a disincentive for
investments and innovation. Another disadvantage is that the cost to the government is relatively high.
An alternative is an obligation in combination with a certificate system. The sellers of transport fuel are
then obliged to redeem a certain amount of biofuel certificates at the end of the year. An advantage of
this system is that one has the guarantee that the target will be obtained using the market mechanism as
a driver. Furthermore, it is a flexible system, which could incorporate other elements, such as information
about the sustainability of (imported) biofuels, in the longer term. Other interesting policy alternatives
may be a levy/subsidy system or a tendering system.
iii
Contents
Sustainable Energy Ireland
i
Executive summary
ii
Contents
iv
1
1
2
3
4
5
Introduction
1.1
Ireland and the European biofuels context
1
1.2
Biofuels
1
1.3
Selection of biofuels to be analysed
2
1.4
Neat fuel comparison basis
3
Irish Transportation Fuel Context
4
2.1
Current and future use of transport fuels
4
2.2
Niche markets
6
Availability of Biofuel Resources in Ireland
8
3.1
Crop production, yields and costs
8
3.2
By-products and residues
15
3.3
Summary of the results
19
Technical Issues Relevant for Biofuels Chains
22
4.1
Blending Ethanol with gasoline
22
4.2
The use of animal fats and recovered vegetable oil for FAME
24
4.3
Maximum of biofuels allowed in blends
26
4.4
Infrastructure for fuel production and distribution [42]
27
Environmental Impacts
29
5.1
GHG emissions - method
29
5.2
GHG emissions – Results
31
5.3
Other emissions
33
5.4
Other environmental impacts of biofuel feedstock production [58; 59]
35
iv
6
7
8
Costs
37
6.1
Biodiesel
37
6.2
Bioethanol
38
6.3
Future biofuels
39
6.4
Fuel delivered costs
40
6.5
Excise duty exemption required to avoid a cost impact for the customer
42
6.6
Cost of GHG emission avoided
43
Macro-Economic Impacts
45
7.1
Introduction
45
7.2
Results
45
7.3
Conclusions on the macro-economic results
49
Import of Biomass and Biofuels
51
8.1
UK policy background
51
8.2
Biofuels from the EU25
53
8.3
Biofuels from the world market
62
8.4 Main conclusions
9 Policy Incentives, and Evaluation
64
65
10 Conclusions
69
11 Policy Recommendations
74
12 References
75
Annex A Directive 2003/30/EC
80
Annex B Summary CAP Reform 2003
85
Annex C Arable Aid Applications
86
Annex D Maximum Guaranteed Area for Oilseeds
90
Annex E Basic Methodology of Input-Output Analysis
92
E.1
Macro-economic modelling
92
E.2 The impact of an individual project (or product) on the Gross Domestic Product
(GDP) and employment
92
E.3
The standard input-output table
93
E.4
The standard input-output method
95
E.5
Application of the standard IO method to new products
96
v
1 Introduction
1.1
Ireland and the European biofuels context
Directive 2003/30/EC (see Annex A) demands from all EU Member States that a minimum proportion of
transport biofuels or other renewable fuels should be sold on their markets. The EC gives Reference
Percentages of 2 % by 31 December 2005 and 5.75 % by 31 December 2010. These reference
percentages are on the basis of energy content* of all gasoline and diesel for transport purposes.
All member states are required to set national indicative targets, and to report on the measures taken to
promote biofuels, the amount of national resources allocated for the production of these biofuels, and
on the actual biofuel sales. To assist the Irish government in the formulation of goals and strategies as
required by this Directive, Sustainable Energy Ireland has commissioned a consortium of Ecofys, Teagasc,
and the Fraunhofer Institute to quantify the impacts of the establishment of an Irish biofuel industry and
to identify the most strategic routes towards the implementation of the EC transport biofuel directive.
1.2
Biofuels
Many types of transport biofuels exist: ethanol from sugar and starch crops, biodiesel from oil, pure bio
oil, and fuels produced from wood or grasses by advanced technologies. All have very different
properties Figure 1-1 contains an overview of a few main routes for the production of transport biofuels.
Some of these fuels can be delivered to a central point or gas stations by existing infrastructure, while
others need new tanker trucks or pipelines. Most biofuels are suitable for current internal combustion
engine vehicles (ICEVs) as well as future fuel cell vehicles (FCVs) using on-board reforming. In some cases
the fuel can be used without any change to the engine, but in most cases adaptations (fuel system
materials, calibration) are necessary [1]. Refuelling and on-board storage (especially for hydrogen) may
involve technologies that are not yet commercially available.
* On a Lower Heating Value (LHV) basis
1
Hydrogen
(H2)
(H
2)
Water gas shift
+ separation
Gasification
DME
(CH3OCH3)
(CH3OCH3)
Syngas
Catalysed
synthesis
Lignocellulosic
biomass
Anaerobic
digestion
Purification
SNG
(CH4)
(CH4)
Bio oil
Hydro treating
and refining
Biodiesel
(C
CxHy
xHy )
Sugar
Fermentation
Ethanol
(CH3CH2OH)
(CH3CH2OH)
Esterification
Biodiesel
(alkyl esters)
Hydrothermal
liquefaction
Sugar/starch
crops
Oil plants
Milling and
hydrolysis
Pressing or
Extraction
FT Diesel
(C
CxHy
xHy))
Biogas
Flash pyrolysis
Hydrolysis
Methanol
(CH3OH)
(CH3OH)
Vegetable
Oil oil
Bio oil
(vegetable oil)
RVO /
animal fat
Figure 1-1. Overview of conversion routes to biofuels [2; 3] Φ
Some transport biofuels are already in use. Extensive experience with alcohol (ethanol) use for
transportation exists in Brazil, the USA, and some other countries. In Brazil, cheaply available cane sugar
has allowed a large and competitive ethanol fuel market to supply 11.3 % of the total primary energy
consumption [4]. A National Alcohol Programme was created in 1975 (ProAlcool) to reduce oil imports, to
protect the sugarcane plantation industry, to increase the utilization of domestic renewable-energy
resources, to develop the alcohol capital goods sector and process technology for the production and
utilization of industrial alcohols, and to achieve greater socio-economic and regional equality through
the expansion of cultivable lands for alcohol production and the generation of employment [4-6].
Ethanol is produced from maize (corn) in the USA and, on a much smaller scale, from wheat and sugar
beets in Europe [7]. Biodiesel (methyl ester) is produced from rape-seed in Europe (especially Germany
and France) and from soybeans in the USA.
The EU production and use of biofuels has increased rapidly over the past 10 years: biodiesel ten-fold
and ethanol almost five-fold.
1.3
Selection of biofuels to be analysed
The focus in this study is on the short-term implementation of mainstream biofuels. Mainstream means
that the biofuels or blends do not require any adaptations to the common transportation fleet, and that
they can be bought at ordinary refilling stations. These fuels will have to meet official standards and
directives (see Chapter 4). Biofuels that cannot be certified as a mainstream fuel, such as pure plant oil,
Φ
See reference section of the document
2
are therefore not included in this report. Several biofuels that may be used within official standards and
directives mentioned, are technically fully proven and can be implemented on a commercial scale at this
moment are selected for this study (see Table 1-1).
Table 1-1. Biofuels selected for this study.
Short-term
Gasoline replacement
Diesel replacement
Ethanol from wheat
Ethanol from sugar beet
Ethanol from biomass residues
Biodiesel from rape-seed
Biodiesel from recoverable vegetable oil
Biodiesel from tallow
Long term
Ethanol from lignocellulosic biomass
Fischer-Tropsch diesel from lignocellulosic biomass
The abovementioned short-term biofuels can be implemented directly. However, there is also a range of
very promising biofuels, that may be implemented in the medium (e.g. towards 2010) to long term. Two
examples of these fuels that can (partly) replace gasoline or diesel will also be discussed.
1.4
Neat fuel comparison basis
In this study, the main focus will be on the introduction of biofuel via blends with fossil fuels. The main
advantage of blends, as compared to pure biofuels, is that existing transportation fuel specifications can
be met, allowing the fuel to be used in all cars without the need for vehicle adaptations. This would
facilitate a relatively fast transition towards biofuels.
To illustrate the differences between biofuels and fossil fuels, we use the “neat fuel comparison basis” in
the analyses in this report. This means that, as shown in Figure 1-2, we concentrate only on that part of
the blend that is affected by the introduction of biofuels.
Main basis for
comparative analysis
in this report
Amount of
biofuel
introduced
Amount of
fossil fuel
replaced
Fossil fuel to Blend of fossil
be replaced fuel and biofuel
to be introduced
Figure 1-2. Schematic representation of the “neat fuel comparison basis” for the comparison
between a 100% fossil fuel and a fossil fuel / biofuel blend
The introduction of a certain amount of biofuel in a blend, means that a corresponding amount of fossil
fuel is replaced. We concentrate the analysis on the part within the red square in Figure 1-2, i.e. the part
of the fossil fuel that is actually replaced versus the biofuel that is actually introduced.
3
2 Irish Transportation Fuel Context
2.1
Current and future use of transport fuels
Thirty nine percent of Ireland’s final energy consumption is in transportation, with 26 % of total national
CO2 emissions originating from this sector [8]. There has been a strong growth during the nineties of an
average 6 % per year for gasoline and 9 % per year for diesel. The reason is twofold: The total amount of
vehicles on Irish roads rose by 60 % to 1.68 million, and average engine sizes increased over the same
period. Other factors affecting the huge growth in transport energy usage are: the increase in average
annual mileage per car and congestion, leading to inefficient driving patterns.
Figure 2-1 shows both the Irish historical gasoline and diesel use [11], and the projected future use until
2010. In 2002 the transport fuel consumption was 189 PJ; 44 % of this was diesel, 37.9 % gasoline, and
the rest mainly kerosene for planes. The projection assumes an annual growth rate between 2002 and
2005 of 4% and between 2005 and 2010 of 3.3 % in accordance with the GDP growth [10]. Historically,
there has been a continuing change from gasoline to diesel of 0.5% per year [8].
4,000,000
gasoline (historical)
3,500,000
diesel (historical)
Fuel consumption Ireland (thousands liters)
gasoline (projected)
3,000,000
diesel (projected)
Historical data
2,500,000
2,000,000
Projection
1,500,000
1,000,000
500,000
0
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Year
Figure 2-1. Historical excised gasoline (leaded and unleaded) and diesel consumption [9], and
projection until 2010 [8; 10].
4
In energy values the current energy use in surface transport is 82 PJ diesel and 71 PJ gasoline. Most of
this energy is used for road transport. The majority of the diesel use is in freight and public services, while
the greatest gasoline use is in private cars (see Figure 2-2).
Freight, Public
Service and other
7.08 PJ
Rail
1.72 PJ
Private cars
8.04PJ
Freight, Public
Service and other
72.22
Private cars
63.51 PJ
Figure 2-2. Gasoline (left) and diesel (right) use in surface transport by sector. Fuel use in barges is
negligible.
The projected fuel use of 2.4 billion litres gasoline and 2.7 billion litres diesel in 2005 translates to 74 and
97 PJ respectively. The 2 % target therefore requires 1.5 PJ gasoline and 1.9 PJ diesel to be replaced by
biofuels. Table 2-1 summarises the fuel consumption in the reference years, and the biofuels targets for
Ireland in order to meet the reference percentages. The actual volumes of biofuels depend on their
energy content. If gasoline is to be replaced by ethanol and diesel by biodiesel, the amounts required are
70 and 59 million litres in 2005 and 221 and 211 million litres in 2010 respectively.
Table 2-1. Gasoline and diesel use for road transport in the reference years and the required
amounts of biofuels to meet the reference percentages.
Energy consumption (PJ)
EC reference
Biofuels required (PJ)
2005
gasoline
diesel
total
74
97
172
2%
1.5
1.9
3.4
2010
gasoline
diesel
total
82
120
202
5.75 %
4.7
6.9
12
5
2.2
Niche markets
It may be advantageous from a policy point of view to introduce biofuels only into certain niche markets.
Therefore in this section we will investigate whether such niche markets of sufficient size may exist in
Ireland. An ideal niche market would have the following characteristics:
•
Can fill in a large part of the biofuels target
•
Have a limited amount of actors
•
Is homogeneous
•
Has separate refilling stations
Ireland consumes a relatively small amount of transportation fuel relative to other European countries.
Currently, fuel consumption data is statistically available divided into type of fuel and broad sector, as
shown in the Table below.
Table 2-2. Fuel use by sector (energy basis).
Sector
Fuel
Energy Consumption (PJ)
Share in total (%)
Air
Air
Road (Private Car)
Road (Private Car)
Road (Private Car)
Road (Freight, Public Service & Other)
Road (Freight, Public Service & Other)
Rail
Rail
Inland Navigation
Inland Navigation
Gasoline
Kerosene
Gasoline
LPG
Diesel
Gasoline
Diesel
Diesel
Electricity
Fueloil
Diesel
0.08
33
64
0.2
8.0
7.1
72
1.7
0.08
0.7
0.04
0.04%
18%
34%
0.11%
4.3%
3.8%
39%
0.92%
0.04%
0.38%
0.02%
Looking at diesel alone, the table shows that the key consumption area is road transport: Private cars
represent 4.3 % and the remaining road transport, i.e. freight, public service and other, represents 39 %
of total transport fuel consumption, with rail and inland navigation making a negligible contribution.
The forecasts identified in Table 2-1 show that for Ireland meeting the EU reference values by
substitution of either diesel or gasoline, the sum of biodiesel and ethanol use would need to represent
3.4 PJ in 2005 and 12 PJ in 2010. The table above illustrates that the private car section of the market
could cover this in 2005, but only if pure biodiesel or a high blend of ethanol in gasoline would be used
by the vast majority of private cars driven on diesel. Because of the large amount of stakeholders
involved here, this is not likely to happen.
Other road diesel users need further analysis. There is limited information available that breaks down the
figures further, however fuel consumption data is available on the two largest bus companies in Ireland,
the agricultural sector, and the railways.
In 2003, Ireland’s two largest bus companies, Dublin Bus and Bus Éireen consumed 1.1 PJ and 0.94 PJ
diesel respectively [12]. In total this makes 2.1 PJ, which would be just sufficient to meet the EU reference
point for diesel in 2005 but would be insufficient in 2010. Discussions would be necessary with these bus
companies to understand if a switch to the use of pure biodiesel is feasible in terms of the engines,
refuelling infrastructure and costs. However, using this data as an estimate of the entire bus sector, it
appears that the bus sector alone would be insufficient to meet the EU reference point in 2010, which for
diesel in Ireland equates to roughly 6.9 PJ.
6
Irish farmers and contractors use about 13 - 15 PJ fuel oil (diesel) for farm operations, mainly in tractors
and machinery. Agricultural road vehicles consume 2.2 PJ of mainly gasoline [13]. This sector has a lot of
actors and would be difficult to address as one niche.
The diesel use in rail transport is 1.7 PJ (see Table 2-2). Diesel trains may be an interesting niche, because
they have a limited amount of distribution points. Details on whether the engines would be suitable for
running on pure biodiesel, or the costs for conversion are not known. This niche market is not large
enough to meet the 2005 reference point for diesel only.
There is no readily available consumption information for other road diesel categories that might include
potential niche markets e.g. trucks. Furthermore, some of the sector fuel consumption reported by the
Department of Communications, Marine and Natural Resources was derived from a sector analysis
carried out in 1990, which officials recognise may be in need of updating [14].
In conclusion, there is a lack of data on which to estimate whether niche markets exist that can fulfil the
full Irish biofuel directive target. However, we expect that it is unlikely that a sufficiently large
homogeneous niche market will be found, since the largest niche market found, the national bus
companies, are insufficient to fill even the full 2005 target.
7
3 Availability of Biofuel Resources in Ireland
3.1
Crop production, yields and costs
Production areas
The total area currently used for arable crops in Ireland is 0.4 Mha, which is 9 % of the total area devoted
to agriculture. The remaining 91 % is used as grassland or for rough grazing. Four arable crops are
produced in significant quantities: cereals (300 kha), sugar beet (32 kha), potatoes (14 kha) and forage
maize (15-20 kha).
Cereal grain production in Ireland has been around 2 Mtonne/yr over the ten years from 1992 to 2002
[15]. In 2003 production was 2.1 Mtonne/yr, broken down as shown in Table 3-1 [16].
Table 3-1. Cereal area, production and yield, 2003.
Crop
Area (kha)
Yield (tonne/ha)
Production (ktonne)
Wheat
Barley
Oats
95.7
183.1
21.0
8.3
6.5
7.4
794
1198
155
The beet area has been falling slowly, under the influence of a static sugar quota and increasing sugar
yields. The potato area has been falling more rapidly, due to a static ware (table ware) market, a
reduction of losses, little expansion in processing and an end to the use of potatoes for animal feed as
small growers ceased production.
Rape-seed production has always been small in Ireland. In the early nineties it was about 6000 ha, and it
has now fallen to little more than 2000 ha (see Table 3-3).
Some of the land currently used as grassland has the potential to be converted to arable use. Figure 3-1
shows the distribution of land suitable for arable production (land use types A1, A2, A3 and B2). This land
is mainly in the south-east of the country and amounts to roughly 1 Mha. In the distant past the tilled
area was much bigger than at present. However, the tilled area has remained fairly stable for the past
half-century, and a big increase at this stage would have to overcome obstacles including a large
investment in tillage machinery and some re-training of farmers. So in the short-term any estimation of
the land available for arable biofuel crops should assume no more than a very small increase in total
arable area.
8
A1: Arable, dairying, dry stock
A2: Arable, sheep, dry stock
A3 Arable, dry stock
C1: Dry stock, arable, dairying (low)
C2: Dry stock
B1: Dairying (high), dry stock (average)
B2: Dairying, dry stock (low), arable (high)
B3: Dairying, dry stock
D1: Hill sheep (high), hill cattle (low)
D2: Hill cattle (high), hill sheep (low)
Figure 3-1. Agricultural land-use types in Ireland [17]. The land use types A1, A2, A3 and B2
(coloured green) are suitable for arable production.
9
There are few agronomic limits to an expansion of the cereal area. Contracts to grow beet for sugar
production include a clause limiting production to every third year in the rotation. Rape-seed production
is not recommended more often than one year in five, and it should not be grown within two years of
sugar beet. Also in the EU allocation of quotas following the Blair House Agreement, Ireland was granted
only 4500 ha of rape-seed (see Annex D). Following the recent CAP review, it seems likely that the limit
on eligible land no longer applies, and that a new Irish set-aside quota will be negotiated [18]. In this
report, it is assumed that there will be no regulatory limit on rape-seed production.
One could exclude about 100 kha of arable land from sugar beet production on the basis of remoteness
from the two sugar processing factories that would be the most likely sites for any sucrose-based biofuel
process. If one also assumes no increase in the rape-seed area (about 2 kha rotated on 10 kha of arable
land), the theoretical maximum area of beet that could be grown is about 95 kha. On the other hand, the
theoretical maximum area of rape that could be grown is about 80 kha (i.e. one-fifth of the tilled area).
This derivation is summarized in Table 3-2.
In practice the area of either crop that could be grown is considerably less than these figures. Small
holdings and farms with inadequate resources would not be suitable for these crops, and many part-time
farmers would not be interested. Reasonable targets for the medium term might be about 40-50 kha of
beet and 10-15 kha of rape-seed.
Besides the 0.4 Mha currently in arable use, the remaining arable land of 0.6 Mha may be tilled as well
beyond 2010. This would, however, require considerable adaptations in the agricultural sector.
Table 3-2. Potential areas for beet or rape-seed for the short and middle term, that could be
realised within the area currently in arable use and current rotation. The total area for agriculture and
the area currently in arable use are factual, the other numbers are estimations.
Total agriculture
Total arable land
Total current arable in use
Cereals
sugar beet
potatoes
forage maize
rapeseed
4.5 Mha
1 Mha (page 12 in pdf draft - also attached)
0.4 Mha
300 kha
32 kha
14 kha
15-20 kha
2 kha
Deployable for sugar beet production
Restriction because of remoteness
Rotation
Beet potential
Realistic
100 kha
1 out 3 years
(400 - 100 - 10) / 3 ~ 95 kha
40 - 50 kha
Deployable for rape-seed production
Rotation
Rape-seed potential
Realistic
1 out 5 years
400 / 5 = 80 kha
10 - 15 kha
Crop yields
There has been a slight increase in overall crop yields masked by big annual fluctuations in the yields of
the main crops over the past 10 years (Figure 3-2 and Figure 3-3). Winter wheat yields have been
among the highest in Europe. Other cereal yields are also reasonably high, but the large proportion of
spring crops limits overall yields. Sugar beet yields are limited by the relatively cool summers and are
lower than those of the prime beet-growing areas of France, the Netherlands and Germany. Potato yields
10
are also relatively low; apart from climatic limitations, the ware market preference for high-dry-matter
varieties has ruled out the use of the highest yielding varieties.
Rape-seed yields have been reasonable (Table 3-3, Figure 3-2); the apparent fall in yield in the past
decade has been mainly due to a swing from winter- to spring-sown crops. Arable farmers have the
competence and technology to grow the crop successfully, and many would welcome a break crop from
cereals in the rotation. The major deterrent has been the lack of profitability in comparison with cereal
crops. Area aid payments for oil-seed crops have been reduced more quickly than those on cereals, and
the price available for seed has not increased sufficiently to compensate.
Set-aside land
The Irish set-aside area has been a minimum of 10 % of the arable area (30 kha) for several years up to
and including 2004, but this figure will change to 5 % (15 kha) in 2005. By its nature set-aside is in small
fragmented areas and the land is often below average quality. In most cases it is maintained in
permanent pasture that is topped in summer and grazed in autumn. The use of set-aside for biofuel
production will be dictated by profitability in the first instance, but is also likely to be confined to larger
growers, in particular those with no animal enterprise. To date the only non-food use of set-aside has
been a small area of oil-seed rape. The potential of 15 kha of biofuels is unlikely ever to be achieved; a
realistic target is probably about 5 kha.
Table 3-3. Production and yield of oil-seed rape [15].
Year
Rape-seed area (kha)
Yield (tonne/ha)
Production (ktonne)
1990
1995
2000
2002
5.4
4.1
2.7
2.2
3.6
3.3
3.2
3.1
20.0
13.0
8.6
6.7
Crop yield (t/ha)
12.0
10.0
Winter wheat
Spring wheat
Winter barley
Spring barley
8.0
Oil-seed rape
6.0
4.0
2.0
0.0
1985
1990
1995
Figure 3-2. Yields of cereals and oil-seed rape, 1990-2003.
11
2000
2005
60
Potatoes
Sugar beet
Crop yield (t/ha)
50
40
30
20
1988
1990
1992
1994
1996
1998
2000
2002
2004
Figure 3-3. Yields of sugar beet and potatoes, 1990-2003.
Crop production costs
Estimates of the variable costs of producing the main crops are shown in Table 3-4 [19]. Contractor
charges were used in the estimation of machinery costs; with sensible machinery management many
farmers would expect to achieve costs lower than these.
Table 3-4. Estimated variable production costs of the main arable crops.
Crop
W. wheat
W. barley
S. barley
W. rape
S. rape
Beet
Potatoes
Material costs €/ha
Machinery hire €/ha
Miscellaneous €/ha
Total €/ha
Assumed yield tonne/ha
Prod. cost €/tonne
516
337
61
913
9.3
98.2
449
309
53
812
7.7
105.5
311
295
39
645
6.4
100.8
415
396
39
850
4.0
212.5
252
314
17
582
2.7
215.6
621
509
232
1363
49.1
27.8
2820
3614
0
6434
34
189
Contractor charges are used to estimate machinery costs. Assumed yields are the mean national yields
for the 5-year period 1999-2003, with the exception of rape where separate winter and spring crop yields
are not available.
Estimates of overhead costs of farms where arable crops are the main enterprise, are given in Table 3-5
[20]. The margin for the farmer follows from the difference between market price plus area aid and
variable plus overhead costs.
12
Table 3-5. Overhead costs per ha on mainly arable farms [20].
Size unadjusted (ha)
1)
Size adjusted (ha)
Overhead costs
Land rental (€)
Car/elec/phone
Hired labour
Interest charges
Machinery operating
Buildings maintenance
Land improvement maintenance
Other
Total
Overheads per adjusted ha
1)
67
61
5528
2067
4042
1707
6207
621
633
2817
23622
387.2
Adjustments are intended to remove unproductive areas of the farm
Markets
The main characteristics of the Irish cereals market are described by the Cereals Association of Ireland
[21]:
1.
A demand for about 1.3-1.4 Mtonne of feed grains for native animal feeding. A fall in animal
numbers is predicted as a result of the mid-term CAP Review and measures to control nitrate
leaching and greenhouse gas emissions. On the other hand, other factors may lead to an increase in
the proportion of cereals in animal rations:
•
The increasing cost of silage relative to grain.
•
The need to increase ration energy content to reduce the slaughter age.
Overall, the most likely outcome is little change in this demand.
2.
A demand for about 240 ktonne of malting barley for the domestic brewing industry
3.
Fluctuating exports of feed grain to Northern Ireland and malting barley to continental markets.
4.
An import of about 200 ktonne of milling wheat for the flour industry.
5.
A domestic seed requirement for about 50 ktonne.
6.
A self-sufficiency of about 100% in barley and 60% in wheat (Table 3-6).
In effect, any substantial demand for Irish cereal grains for an energetic use would be met by a small
increase in the total arable area, or by competing for that grain with the animal feed market , which in
turn would lead to an elimination of feed grain exports or an expansion of imports.
The average moisture content of grain at harvest is about 20%. Traditionally up to 80% of grain is sold
from the combine and dried and stored at merchant premises before being formulated into animal
rations. There is adequate merchant drying capacity for all but the wettest years. About 0.2 Mtonne goes
into “coarse” rations following rolling at moistures up to 20%. Much of the grain for this purpose is
treated with organic acids at merchant intake as an alternative to drying.
13
Table 3-6. The grain market in 2001/2 and 2002/3 [16].
Crop
Year
Production
(ktonne)
Import
(ktonne)
Export
(ktonne)
Domestic
(ktonne)
use
Self-sufficiency %
Wheat
2001/2
2002/3
769
867
575
770
177
175
1164
1466
66
59
Barley
2001/2
2002/3
1277
963
64
115
215
89
1185
998
108
96
Sugar beet is grown solely for sugar extraction. The current contract price for A Quota beet is about 50
€/tonne; for B Quota there is a levy of about 10 €/tonne. In years of high yields when growers’ production
exceeds their B-quota the surplus is used as animal feed.
Potatoes are grown almost exclusively for sale as food. About 40 ktonne of a total production of 480
ktonne are processed as crisps or chips. Only a small proportion of the crop is grown on contract and
prices are extremely variable.
Until recently, all oil-seed rape was exported to the UK for oil extraction. Two small cold-pressing plants
with a combined capacity of 2 ktonne/year have now commenced operation in Ireland. Recent prices
have been about 200 €/tonne from the combine.
Likely price and availability of biofuel crops
A farmer's income from crop production follows from the difference between the excess of variable
production costs and the sum of the following incomes:
•
Price received for crop
•
Price received for residues (e.g. straw)
•
Area Aid payments
•
Possible carbon premium of 45 €/ha for biofuel crops on "eligible" land.
Area Aid payments for 2004/5 are € 383 per ha for cereals, oilseeds, hemp, flax and linseed (but excluding
sugar beet and potatoes) grown on eligible land. The same payment applies to set-aside land, which may
be left fallow or used to produce any of a list of industrial crops including cereals, oil-seed crops, sugar
beet (not for sugar production) and potatoes (Annex C).
While the contribution of cereal straw to profitability has been significant in the past, in recent years
straw prices have fallen to a level that barely covers baling and collection costs. With falling animal
numbers, a stagnant or declining mushroom industry and in the absence of any new market, an increase
in cereal straw price in the near future is unlikely. Rape straw has had no market to date and is ploughed
back in situ.
For a farmer to decide to grow an industrial crop on set-aside, the main criterion is that the return from
the crop exceeds the variable production costs after a small allowance (~30 €/ha) is made for the cost of
maintaining fallow set-aside. The desirability of a break crop in the rotation and increased weed control
problems after fallow set-aside are also important considerations. To date, virtually the only crop grown
on Irish set-aside has been a small amount of rape-seed.
14
On eligible land, cropping decisions are based mainly on a comparison of variable production costs (as in
Table 3-5) with expected market prices, with cereals as the reference point. Other considerations are
straw prices, rotation constraints and the 45 €/ha carbon premium for biofuel crops.
Teagasc specialists suggest that the Irish grain market is inelastic and that large quantities could be
procured at prices slightly (~ 5 €/tonne) higher than the market price for feed grains. An increase in
cereals demand could be met initially by a reduction of feed grain exports, or a small increase in the
arable area. A major increase would probably be met by imports. Grain prices are expected to be about
100 €/tonne for feed barley ex combine (108 €onnedry) rising slowly in storage, possibly to about 125
€/tonne by the following June. Wheat prices are expected to be similar but about 5 €/tonne higher.The
availability of the carbon premium may reduce the price of biofuel cereals by about 5 €/tonne
At this level of cereal prices, a price for rape-seed of about 220 - 250 €/tonne would be required for
significant numbers to switch to rape production. Demand for sugar beet contracts is always high. Beet
prices for non-sugar use would probably need to be at about B-Quota price to be attractive to growers.
3.2
By-products and residues
Cereal straw
There are very few direct measurements of straw production. As estimates of grain/straw ratio, a
summary of German research suggests the following [22]:
Winter wheat
1:0.8
Spring wheat
1:0.9
Winter barley
1:0.9
Spring barley
1:1.0
Oats
1:1.2
These results refer to measurements made about 1995. In the interim, advances in breeding may have
increased grain yields without a corresponding increase in straw yield. The results also reflect the amount
of straw that would be possible to recover with a combine harvester, rather than the actual amount
harvested in practice.
The only Irish trials in which straw and grain yields were measured were at Oak Park in 1997 - 2000. Those
trials included winter wheat, spring wheat and spring barley at two levels of nutrient and pesticide use,
i.e. normal commercial practice and reduced input levels. In the case of N fertiliser the input reduction
was 20-30%.
The average harvested straw and grain yields in these trials over the four-year period were as in Table
3-7. The straw/grain ratios are well below the German estimates. In the trials, as in normal farming
practice, the cutting height was chosen to facilitate the grain harvest and much straw was left as high
stubble. If the straw had a higher value, the cutting height would be reduced and more straw would be
harvested. Nevertheless, the trials are probably an accurate reflection of current normal farming practice.
15
Table 3-7. Grain and straw yields, Oak Park 1997-2000.
Crop
Input level
Grain yield
(tonne/ha @ 15% m.c.)
Straw yield
(tonne/ha @ 15% m.c.)
Straw/grain ratio
W. wheat
Normal
Reduced
Normal
Reduced
Normal
Reduced
Normal
Reduced
11.2
10.6
7.4
6.7
9.5
8.3
8.2
7.4
6.1
5.8
4.1
3.4
5.3
4.5
7.1
6.4
0.55
0.55
0.55
0.51
0.56
0.54
0.86
0.86
S. barley
W. barley
W. oats
Based on these results, a straw/grain ratio of 0.55 was used to estimate the national straw harvest.
Applied to a grain yield of 1992 ktonne (the 2003 wheat + barley grain harvest) would give a straw
production estimate of 1096 ktonne. This is somewhat lower than the estimate of 1300 ktonne in the SEI
Study [23].
To date straw goes to three uses:
•
•
•
Mushroom compost production takes about 100 ktonne. This outlet is not increasing and the
industry is struggling to remain competitive.
An amount estimated at 50-100 kt is ploughed back in situ; this may increase rapidly if the cereals
market remains depressed.
Animal bedding and feeding takes most of the remainder.
In recent years supply has exceeded demand and the price has fallen to levels little above the cost of
baling and collection. No additional market other than energy can be foreseen; apart from ethanol, it
could be burned in baled, chopped or pelleted form to produce heat or electricity. For energy use, wheat
straw would be most readily available, followed by barley.
In attempting to estimate the volume of straw that might be accessible for energy use, the SEI report
suggests between 80 and 325 ktonne [23]. Given the depressed state of the market in recent years, it is
likely that amounts up to or exceeding 100 ktonne could be bought for 25 €/tonne in the field, i.e before
baling and bale collection. The cost of these operations is estimated at about 15 €/tonne, giving a total
of 40 €/tonne before road transport. Straw storage in dry conditions to provide a year-round supply
could be a significant problem.
Rape-seed straw
German estimates of the above-ground straw/grain ratio for rape are from 2.9 to 4.2; with normal losses
of leaf and stubble this is estimated to reduce to about 1.7 [22]. In Oak Park trials of 1998-2002, the area
ration of harvested straw to grain was 1.26. With an area of no more than 2000ha at present, straw
production amounts to about 7500t. Rape straw will only become of significance if a number of
vegetable oil projects like the existing two get under way, and especially if a biodiesel project using
some rape-seed oil is realised.
16
Recovered vegetable oil
Currently recoverable vegetable oil (RVO) is used for animal feed in Ireland, a practise which will become
illegal from November 2004. This will free up a large amount of RVO that is already part of a collection
process and can be used in biofuels. The SEI Study estimates that 19.8 ktonne of RVO was collectible in
the whole of Ireland in 2003, and will reach 21.9 ktonne in 2010 [3]. Breaking this down by population
(3.9 M south, 1.7 M north) gives 13.8 ktonne in the Republic and 6.0 ktonne in Northern Ireland.
Assemblers estimate a loss of 10-15% during the cleaning process; a loss of 12.5% would reduce the
above to 12.3 ktonne in the Republic, 5.3 ktonne in the north. The long-term forecast is that 25,400
tonnes may be available in 2020.
Movement across the border is easy, the RVO will move to whichever side has the best financial supports.
At present, assuming de-excising in the south and with an excise reduction of 0.20 st•/litre in the north,
the supports would be about equal. In this situation, the availability of larger quantities of tallow and
potentially some rapeseed oil may make it easier to achieve the capacity needed for a biodiesel plant in
the Republic.
Given that not all RVO would be made available by the collectors, a target for a biodiesel plant of 10-11
ktonne of RVO is probably a realistic estimate. This figure may increase slowly with the years as
restrictions on alternative disposal methods get tighter and fast food consumption increases.
The price of this material has fluctuated in recent years since its use in animal feed came under threat.
Most Irish RVO is exported to the UK, where its main use has been in animal feed. When it is banned from
this use in Nov. 2004, in the absence of an Irish market it is likely to be taken up by biodiesel producers or
electricity generators in the UK or other European countries. The current price in Ireland has increased to
about 240 €/tonne, still much lower than that in most other EU countries where renewable energy prices
are higher. Collectors do not pay for the RVO and in some cases collect a gate fee.
Prediction of future RVO prices in this situation is hazardous. Assemblers feel that a price of 260-320
€/tonne would be satisfactory for as long as competition does not force the collectors to pay for the RVO
at their collection points.
It is important to remember that both tallow and RVO can be used as biodiesel or as fuel for heat and/or
electricity production. Both of these markets are affected by different factors including global
commodity prices and national customs, excise duties and other government incentives. These factors
will influence choices made about using RVO and tallow as biofuels in Ireland.
Tallow
There is a growing interest in the use of animal fats in biodiesel production processes by several of the
traditional producers who see a potential for this material in the future.
The amount of tallow produced in Ireland in 2003 was just over 78 ktonne, processed in the eight
rendering plants in Ireland (raw material input of roughly 500 ktonne). From the predicted 10 % fall in
animal numbers it can be expected that tallow production will be 71.7 ktonne in 2010 and 63.4 ktonne in
2020. The actual reduction in tallow production may be somewhat greater, as earlier slaughter will lead
to smaller carcass sizes with less fat [3].
Almost half of the current production is risk material (SRM). Four of the rendering plants process non-risk
material, roughly half of which is of high grade and half of which is lower grade. The ratio of risk to nonrisk material can be subject to change depending on regulations affecting the raw material. Roughly
17
80% of Irish non-risk tallow production was exported in 2003 for use as animal feed, or in the
pharmaceutical industry.
The risk material is currently used for process heat in rendering plants, and animal health controls are
unlikely to allow its use for any form of transport fuel. So the material of interest is low-grade non-SRM
material; The SEI report estimates the volume of this material at 21.9 ktonne in 2003, falling to 20.0
ktonne in 2010 and 17.6 ktonne in 2020. This is currently used in animal feed, which use is not under any
immediate threat. Forthcoming European legislation on the use of animal by-products will restrict the
use of tallow in animal feed. Forecasts published in the SEI December 2003 study estimated the amount
of lower-grade tallow with no BSE risk that could be used for biofuels, assuming current tallow market
conditions and fossil fuel prices. The amount available for biodiesel use could be estimated at about 17
ktonne at present falling to 15 ktonne in 2010 and 13 ktonne in 2020.
The price is again unpredictable; it is likely to increase from its current level of about 220 €/tonne, but lag
slightly below that of RVO due to transport difficulties. A slowly increasing price of 250 - 300 €/tonne is
suggested.
Sugar industry by-products
As a by-product of processing 1.6 Mtonne of beet, about 55 ktonne/annum of molasses is produced.
Molasses is sold at about 80 €/tonne, and the current market is mainly animal feed. The sugar industry
also produces about 110 ktonne of beet pulp at 27% moisture that sells at 33 €/tonne, i.e. 45 €/tonne of
dry matter. This also goes to animal feed.
Wood residues
COFORD have estimated that residues from forestry and saw-milling will exceed the demand from the
panel board industry by increasing amounts over the coming decade [24], see the table below.
Table 3-8. Estimate of wood residue surpluses, 2000-2015. Production in excess of current demand
(ktonne)
Fuel source
2000/1
2005
2015
Pulpwood (60% m.c)
Sawmill residue (45% m.c.)
Forest residues (45% m.c.)
168
89
209
95
129
223
732
280
291
COFORD also estimate the delivered cost (0-40 km) of these materials as €21-35 for pulpwood, sawmilling residues 14 - 25 €/tonne and forest residues 21 - 56 €/tonne; the wide range of costs is mainly due
to the range of alternative technologies that might be employed in tree harvesting.
The only alternative markets that can be envisaged for this material are other energy uses e.g. pellet
production, CHP plants and co-firing in peat or coal burning power station. Some pellet and CHP
developments are already under way.
18
3.3
Summary of the results
The various cropping areas currently in use, and the areas potentially available are summarised in Table
3.9. Reckoning with existing domestic uses of some feedstock, this results in realistic amounts of
feedstock for biofuels.
Table 3-9. Summary of the area available for biofuel crops (kha), the resulting amounts of
feedstock available (ktonne), and the assumed biofuels yield used for calculating the potential
amount of biofuels in Ireland.
Area (kha)
Current
Potential
Realistic
Crops
Cereals total
forage maize
Beet
Potato
300
20
32
14
300
20
95
14
15
Rapeseed
2
80
Potential (ktonne)
Potential
Realistic
2)
3)
2)
50
14
2455
476
90
90
15
320
60
450
Residues
Molasses
Beet pulp
55
110
55
110
55
110
610
90
RVO
Tallow
11
15
11
15
11
15
1000
900
Lignocellulose, beyond 2010
Straw
wood residues
1100
325
1283
2)
3)
4)
140
biofuels yield
(l/tonne)
2455
120
4665
476
1)
565
1)
National
356
4)
220
4)
220
The national potential is defined as the realistic potential minus those areas on which currently already feed-crops are
grown, and whose replacement would basically lead to additional import.
E.g. wheat on set-aside land.
The realistic amount of cereals available takes into account that there is a domestic use for wheat and barley.
220 l/tonne equals a thermal conversion efficiency of 40 % biomass to Fischer Tropsch diesel, electricity is co-produced
but not accounted for here.
The amount of feedstock that could potentially be made available for biofuels production within Ireland
is very large. Multiplication by the biofuels yield per tonne of feedstock gives the potential amounts of
biofuels, see Figure 3-4. The realistic total roughly equals the 2010 target. However, one has to realise
that this implies that current feed crops are then to be used for energy purposes. This will then normally
induce additional feed imports. On the other hand, as by-products of biofuels cropping (e.g. rape meal)
will be used for animal feed, the extra import may be smaller than the amount of feed crops replaced.
19
Fuels amount (PJ)
40
Biofuels demand
35
Wheat set-aside
30
Tallow
RVO
25
Rapeseed
20
Beet pulp
15
Molasses
Potato
10
Beet
forage maize
0
Oats
W Barley
W Wheat
Te
ch
n
ic
al
po
R
ea
te
lis
nt
ia
tic
l
po
t
en
D
em
tia
l
an
d
20
D
em
05
an
d
20
10
Te
ch
ni
ca
lp
R
ot
ea
en
lis
tia
tic
l
po
t
en
D
em
tia
l
an
d
20
D
em
05
an
d
20
10
Te
ch
ni
ca
lp
R
R
ot
ea
ea
en
lis
lis
tia
t
ic
tic
l
po
na
te
tio
n
na
tia
l
lp
ot
e
D
nt
em
ia
l
an
d
20
D
em
05
an
d
20
10
5
Bioethanol
Biodiesel
Total biofuels
Figure 3-4. The potential bioethanol and biodiesel production from Irish feedstock expressed in
energy content (PJ). “Demand 2005” and “Demand 2010” refer to the replacement of 2 %
respectively 5.75 % of the total amount of gasoline and diesel with bioethanol respectively
biodiesel.
Fuels amount (Ml)
1800
Biofuels demand
1600
Wheat set-aside
1400
Tallow
1200
RVO
Rapeseed
1000
Beet pulp
800
Molasses
600
Potato
400
Beet
200
forage maize
Oats
Te
ch
ni
ca
lp
R
ot
ea
en
lis
tia
tic
l
po
t
en
D
em
tia
l
an
d
20
D
em
05
an
d
20
10
Te
ch
ni
ca
lp
R
ot
ea
en
lis
tia
tic
l
po
t
en
D
em
tia
l
an
d
20
D
em
05
an
d
20
10
Te
ch
ni
ca
lp
R
R
ot
ea
ea
en
l
is
lis
tia
tic
tic
l
po
na
t
en
tio
tia
na
l
lp
ot
en
D
em
tia
l
an
d
20
D
em
05
an
d
20
10
0
Bioethanol
Biodiesel
W Barley
W Wheat
Total biofuels
Figure 3-5. The potential bioethanol and biodiesel production from Irish feedstock expressed in
volume (million litres). “Demand 2005” and “Demand 2010” refer to the replacement of 2 %
respectively 5.75 % of the total amount of gasoline and diesel with bioethanol respectively
biodiesel.
20
The real additional national potential can be considered as being limited to the available residues and
the crops that can be produced on currently non-productive set-aside land. This realistic national
potential comprises about 79 % of the 2005 and 23 % of the 2010 target. National means that one can
use these feedstock for biofuels within Ireland without interfering with other uses. In other words, no
streams are used that have a current use for food or feed, which would require necessary compensation
by imports.
From the residues that could be converted to transport biofuels with current technology (i.e. RVO and
tallow to diesel substitutes, molasses and beet pulp to ethanol) about half the 2005 reference target
could be reached. The balance could be produced from crops already in production e.g. an additional 10
kha of sugar beet or a combination of 5 kha of rape-seed and 15 kha of cereals. This could be achieved
with little disruption of existing crop rotations or markets.
Potentially large amounts of lignocellulose residues will become available for the production of
advanced biofuels in the medium and long term. It has been assumed that the necessary technologies
for the production of these biofuels will not yet be available at a sufficient large scale by 2010. However,
the amounts of straw and wood residues could supply 12 PJ (280 Ml) of Fischer-Tropsch diesel, which is
more than the demand for biomass-derived diesel in 2010, and equals the total 2010 target.
Alternatively, a similar amount (on energy basis) of ethanol could be produced by hydrolysis
fermentation. The potential for dedicated energy crops (post 2010) has not been assessed, but will
increase this number.
21
4 Technical Issues Relevant for Biofuels Chains
4.1
Blending Ethanol with gasoline
Ethanol may be made available as a biofuel in different forms: As a neat ethanol (E95, actually 95 vol %
ethanol with water), as E85 (85 vol % ethanol with gasoline) to be used in flexible fuels vehicles, as a
blend smaller than 5 vol % in gasoline, or as its derivative ETBE.
Vapour pressure
The properties of ethanol are very different from those of gasoline. This means that the properties of an
ethanol/gasoline blend will, in general, deviate more and more from those of gasoline with increasing
ethanol content. The vapour pressure* is an example of a property that behaves differently. Although the
vapour pressure of ethanol is much lower than that of gasoline, the vapour pressure of the blend peaks
between 0 and 10 vol % ethanol.
Figure 4-1 and Figure 4-2 demonstrate this effect schematically. The figures are only indicative since
exact values are strongly determined by the exact composition of the base gasoline. Increases in the
(RVP) of 6 - 8 kPa can already be expected with ethanol additions of only 3 vol % to base gasoline with
normal volatility. The RVP only drops consistently below the gasoline RVP with blends of ethanol greater
than 30 vol %.
The legal limit of the vapour pressure is 60 kPa (European Directive 98/70/EC and its amendment
2003/17/EC). Since gasoline is usually at, or close to, this maximum level, the vapour pressure of current
European gasoline would be increased above the legal limit by addition of 2 % or 5.75 % (by energy†) of
ethanol.
To be able to meet the vapour pressure requirement, the base gasoline composition would have to be
modified. Reducing the butane content is a well-known solution in this case [25; 26]. Reducing the
butane content of gasoline brings associated costs in refineries. In the case where this modified base
gasoline would have to be produced alongside conventional gasoline, the cost would increase further, as
would storage costs because a separate storage tank would be necessary. Estimates of this cost
component will be included in the cost analysis.
*
The RVP is a measure of the vapour pressure of a liquid as measured by the ASTM D 323 procedure and is commonly applied to
automotive fuels. For automotive fuels, the Reid Vapour Pressure (RVP) measured at 37.8 °C is used to define the fuel
volatility [25].
†
The targets in the biofuel directive are expressed on energy basis, most blending issues and legalities are on volume basis.
Section 4.3 explains the relation between volume and energy fractions.
22
Figure 4-1. Example of the Reid Vapour Pressure with High Blend Ethanol; solid line --- [27],
dashed line - -[28].
•
10
•
Blend RVP [ psi]
•
9
•
0
5
10
15
Volume % ethanol in the blend
Figure 4-2. Example of the vapour pressure (RVP, expressed in psi; 10 psi equals 68.95 kPa) of a
certain gasoline ethanol blend. The base gasoline in this case is Indolene HO III [25] and not
European gasoline. Therefore, the figure is only representative regarding the type of shape of the
curve and not regarding the absolute figures.
Maximum allowed ethanol in blends
The directive 98/70/EC allows 5 vol % ethanol (as oxygenates) in direct blends (E5), and 15 vol % ETBE
added to gasoline (equals 7% ethanol). On top of this also a maximum oxygen content is defined. Since
the focus in this report is on ethanol, we will concentrate on the 5 vol % maximum ethanol content.
Ethanol fuel efficiency
On a per litre basis, the energy density of ethanol is 32 % lower than European gasoline. One would
therefore expect that driving on ethanol would increase the volumumetric fuel consumption for ethanol
blends as compared to gasoline. For a blend of 5 % ethanol in gasoline this would be about a 1.6 %
increase. Some literature, reporting practical fuel efficiency numbers, does not observe this increase in
fuel consumption. This could be caused partly by the fact that the addition of oxygenates, such as
ethanol, increases the octane number of gasoline and increases the fuel efficiency, so that the lower
23
energy content of ethanol/gasoline blends would be - at least partly - compensated by a more complete
combustion of the fuel [1; 25; 28-33].
However, research and reports on the influence of ethanol content in blends with gasoline are limited.
Also the scope of research is limited and results from the USA may not be directly applicable to the
European situation, due to differences in fuel composition, differences between vehicle engines and
differences in test cycles. Other limitations of the available information are, for example, that for some
tests older (1990) vehicles have been used, that fuel consumption for a limited number of engine loads
has been measured, that research was only on one engine design, and that most research focuses on
ethanol percentages of 10 % and higher. Additionally, it is not always clear if results on volumetric fuel
consumption or on actual energy consumption (energy efficiency) are reported. Some researchers
observed a slight increase in energy consumption while others report a slightly lower energy
consumption. Finally it is important to note that oxygenates are already added to gasoline. It is not clear
in how far this has been accounted for by the quoted authors.
The above mentioned 1.6 % increase in volumetric fuel consumption is generally smaller than changes
due to differences in tyre pressure, outside temperatures or driving style. This makes it very difficult to
measure in a normal drive cycle.
For blends with larger ethanol percentages than 10 vol %, an increase in volumetric fuel consumption
must be expected, which is roughly linear with the difference in heating value. The larger the ethanol
content, the higher the volumetric fuel consumption will be.
Summarising, on the one hand, literature tends to an equal volumetric efficiency of gasoline and ethanol
blends (with less than 10% ethanol). On the other hand, there are indications that circumstances in
which this may occur are limited as well. Due to this high degree of uncertainty, we work with the
conservative assumption that the fuel engine efficiency when using low ethanol blends is equal to that
of gasoline. In other words, in this report 1 GJ of ethanol is assumed to equal 1 GJ of gasoline.
4.2
The use of animal fats and recovered vegetable oil for FAME
Diesel specifications
The European Commission and the oil and automotive industries agreed in the Auto-Oil programme on
tighter fuel specifications to reduce greenhouse gases and other pollutants. Auto Oil I resulted in
specifications for the year 2000, in directive 98/70/EC; which came into effect on 1 January 2000. The
directive also agreed some specifications for 2005 on sulphur and aromatics for gasoline and sulphur for
diesel and banned the general sale of leaded gasoline from 1 January 2000. The directive has been
amended by 2003/17/EC, with which the sulphur content is further limited. These European fuel
directives cover the technical requirements, including chemical composition for gasoline and diesel
[34].
Diesel further also must meet EN 590 (version 2003), the European standard for diesel, which describes
the physical properties that all diesel fuel must meet if it is to be sold in the EU, Iceland, Norway or
Switzerland.
EN 590 allows the use of additives on the condition that the final product meets the limits, thus a blend
of biodiesel in diesel should also meet the current standard for ordinary diesel, the EN 590. It is explicitly
stated that diesel fuel may contain up to 5 vol % biodiesel, providing the biodiesel meets the EN
14214:2001 specification, also refered to as the FAME specification.
The recent biofuel directive 2003/30/EC requires that biofuel blends in excess of 5 percent will be clearly
labelled at the point of sale. This is to protect consumers from unknowingly filling their vehicles with fuel
24
that may be unsuitable for their vehicle and that could invalidate their warranty. The directive refers to
the FAME specification EN 14214.
To date, there were several national standardisation processes for biodiesel (see Table 4-1). In 1997 the
European Commission gave a mandate to CEN (Comité Européen de Normalisation) to develop
standards concerning minimum requirements and test methods for biodiesel.
Table 4-1. Existing European national standards for biodiesel [35; 36].
Austria
Czech Republic
France
Germany
Italy
Sweden
1)
2)
2)
Standard / specification
Year
Application
ON C1191
CSN 65 6507
1)
JORF
E DIN 51606
UNI 10635
SS 15 54 36
1997
1998
1997
1997
1997
1996
FAME
RME
VOME
FAME
VOME
VOME
Journal Officiel de la République Française 14.9.1997
FAME : fatty acid methyl ester, RME: rapeseed methyl ester, VOME: vegetable oil methyl ester.
This evolved in the specification EN 14214. It is broadly based on the German DIN 51606, which is
considered to be the highest standard currently existing, and is regarded by almost all vehicle
manufacturers as evidence of compliance with the strictest standards for diesel fuels. During the drafting
it was decided to use the same requirement for both FAME use as sole diesel fuel and FAME as blending
component to EN 590 diesel fuel. A blend of 5 vol % FAME certified biodiesel in diesel can be expected to
meet the EN 590*, which has been demonstrated in practice. The result will still have to be diesel
certified. The biofuels directive requires labelling of blends > 5 % and these blends cannot be certified EN
590. FAME to be used as a heating fuel is described in a separate standard: EN 14213.
Car specifications [37]
Car manufacturers will usually repair damage that occurs to a vehicle within the guarantee if proper fuel
was used, i.e. that which falls within the specifications. However, if a fuel is used that falls outside the
EN590 specifications car manufacturers will not repair them at their own cost.
The most serious problem, where engines fuelled with uncertified fuels are concerned, is the insufficient
oxidation stability of the fuels which causes polymerization and the formation of sludge within the
engine, leading to damage.
Tallow [3; 38-40]
Animal fats are currently used in the production of biodiesel in some processes in Europe. The biggest
problem with low-grade tallow is the high level of free fatty acid, which gives very low yields in a simple
single-stage process. Therefore, a pre-treatment or two-stage esterification is necessary, either of which
increases process costs.
There are some issues that relate to the use of tallow in fuels that need to meet the EN 14214 standard
for biodiesel. The key technical limitation to its use in standardised biodiesel and diesel is the
poor behaviour of animal fat-methyl esters (animal fat-ME) at low temperatures. Animal fat-ME has a
*
From the specifications it cannot directly be concluded that a blend of certified biodiesel in diesel automatically meets EN 590,
because a few items of the FAME standard are defined less strict or different, as compared to EN590.
25
Cold filter plugging point* (CFPP) of about 10 - 15 °C, which implies that use at lower temperatures
potentially causes plugging in engines. This is likely to mean that pure animal fat-ME does not meet the
FAME standards, however in some instances national governments have transcribed the European
standard, which does not specify a CFPP, in such a way that a high CFPP will not compromise the fuel
meeting the standard. This is a technicality though, and the high CFPP is effectively a barrier to meeting
the FAME standard in most countries. The CFPP of blends is close to the weighted average of diesel and
biodiesel CFPP (proportional relation).
Other limitations that could stop animal fat–ME from meeting the standards are the high level of
cholesterol in the fuel, and the iodine content.
Because of these limitations, animal fat ME should only be used when blended with other biodiesels e.g.
rape-seed methyl ester, or with mineral diesel. Opinions vary on how high the proportion of animal fat
can be in a blend with mineral diesel. Estimates are as high as 5 % in a blend with 95% mineral diesel.
However, this blend would need the technicality described above to allow qualification as FAME.
Other blends, with smaller quantities of tallow, appear more realistic, and these would have to be
determined empirically. The percentage tallow that would meet all FAME specifications in all member
states would depend on the quality of the animal fat used as well as the processing technology. Some of
the information on blending percentage is considered commercially sensitive as a result of the
proprietary technologies used.
Recoverable vegetable oil [3; 38-40]
As with animal fats, the technical limit for the use of recoverable vegetable oil (RVO) in FAME standard
biofuels comes from its poor low temperature behaviour. RVO-ME has a CFPP of about 0 °C.
Because RVO has already been used in frying for a long time, at high temperatures, the properties of the
original vegetable oil will have changed, introducing some level of saturation and modifying chains to
provide a variation in chain length. The oxidation stability of RVO-ME may be less than that of RME. On
the other hand, RVO-ME and Animal fat-ME fuels may have better engine properties than RME because
of higher cetane numbers. Provided that the biofuels or blends that are used meet the FAME standards,
there should not be a problem with the engine.
As a result the esterified product will differ from that of the pure oil. Furthermore, each batch of RVO,
with a different provenance, will have different properties. Therefore, as with the animal fats, a degree of
experimentation is necessary to discover which blends of RME and RVO-ME meet the FAME (EN 14214)
standard.
Estimates from experts put a likely blend at 15 - 20 % RVO in a biodiesel blend. Previously we have found
expert estimates of a maximum of 10 % [41]. Other limitations may be in occasional high viscosities and
high carbon residue (CCR) levels.
4.3
Maximum of biofuels allowed in blends
It was found that ethanol and biodiesel are only allowed to be blended to a maximum of 5 vol % in
gasoline and diesel respectively (fuel standards EN 228 and EN 590). The reference percentages for the
2005 and 2010 targets are on energy basis. When correcting for the energy content per litre, the
*
The CFPP is defined as the highest temperature (expressed as a multiple of 1 °C) at which the fuel, when cooled under the
prescribed conditions, will not flow through a fine wire mesh filter, or requires more than 60 seconds for 20 ml to pass
through or fail to return completely to the test jar.
26
maximum allowed by the standards is 3.4 % and 4.6 % respectively (see Table 4-2). Under the current
fuel standards, it is thus not allowed to introduce blends of 5.75 % biofuels labelled as gasoline or diesel.
Table 4-2. Reference percentages and maximum allowed of ethanol in gasoline and biodiesel in
diesel, on energy and volumetric basis.
Reference percentage
Energy basis
Volume basis
Maximum allowed
Energy basis
Volume basis
2005
Ethanol
Biodiesel
2%
2%
2.9 %
2.2 %
3.4 %
4.6 %
5%
5%
2010
Ethanol
Biodiesel
5.75 %
5.75 %
8.2 %
6.2 %
3.4 %
4.6 %
5%
5%
A legal maximum for blending RVO and tallow derived biodiesel in FAME specified biodiesel, under
condition that the blend is still FAME specified, has not been found. It seems that any blend would again
need to obtain a FAME specification.
4.4
Infrastructure for fuel production and distribution [42]
Ireland has one refinery in Co. Cork which has been in operation since 1959, and a well-developed
product distribution network involving both large multinationals and domestic independents.
The Whitegate refinery in County Cork produces a range of products including gasoline, liquefied
petroleum gas, diesel fuel and heating oil. These products are then distributed to other parts of Ireland
by sea or road, with some product being sold on the international market.
Roughly 35% of Irish demand for fuel is served by the Whitegate refinery [43] with the remaining 65%
being imported. Imported fuel comes mostly from the UK, with some input from Norway. The balance
depends on decisions made by the major oil companies.
Imported oil comes into one of several sea-fed terminals at:
•
Dublin (main port);
•
Cork;
•
New Ross;
•
Limerick;
•
Galway; and
•
Drogheda
Most of the UK-sourced oil comes from Milford Haven, with some also coming from Stanlow, Fawley and
other UK refineries. The choice of refinery at origin and sea terminal depends on the companies
involved.
Over 150 distributors operate in Ireland distributing products from any of the terminals to consumers
and filling stations in all parts of Ireland. Distributors range greatly in size and nature, some are branded,
some owned by major oil companies and others have formal agreements with the oil companies.
27
There are storage facilities across the country and some, including Bantry Bay and the Whitegate refinery
store some of the National Reserves on behalf of the government National Oil Reserves Agency (NORA)
which they currently estimate could last for 900 days with careful use [43].
Truck
Pipeline
Irish refinery (1)
Depot (±25)
Refuelling station (a)
Foreign refinery
Depot
Refuelling station (b)
Open market
Depot
Refuelling station (c)
or barge
Figure 4-3. Existing gasoline and diesel production and distribution infrastructure in Ireland,
it includes 1 refinery and approximately 25 intermediate storage depots.
28
5 Environmental Impacts
In order to look more closely at the environmental impacts of biofuels a selection of greenhouse gas
(GHG) emission studies is made from a list of references. The total greenhouse gas emission equals the
sum of all carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O) emissions, expressed in CO2equivalents.
Six European studies have been selected. The main selection criteria were: country of origin, date of
publication, and comprehensiveness. The selected studies and their acronyms that we use in this chapter
are: General Motors (GM) [44], Ademe/Ecobilan [45], Concawe [46], Sheffield [47], ECN [48] and Arthur D.
Little [49].
5.1
GHG emissions - method
Greenhouse gases are emitted in all parts of the biofuels’ Well to Wheel (WTW) chains. This has been
analysed in several environmental impact studies. The British “Sheffield” study [47] is considered as the
most representative of Irish circumstances, since it is based on the current practice in the UK, where
agricultural growing conditions are considered comparable with Ireland. It is also the most transparent
and well-founded study of a range of selected literature [41]. Moreover the study covers three of our
selected biofuel chains. Therefore, we use their average figures as the best estimate for RME, biodiesel
from RVO/tallow and ethanol from beet and wheat. Results from other literature will be presented as a
range in the final graph.
In this study, allocation is on the basis of societal pressures (market prices) and in contrast with General
Motors and Ademe studies, not on the basis of extension of system boundaries (deduction with avoided
impacts of co-products).
The RME allocation by market prices, according to Sheffield, is adopted for allocation between crude
glycerine and biodiesel, rape meal and crude rape-seed oil, and between rape straw and raw rape-seed.
The allocation of GHG outputs of ethanol from sugar beet is based on the effective prices of pulp for
animal feed and raw juice.
N2O emissions
N2O is a main contributor to the GHG-emissions generated by the plantation of energy crops. The N2Oemissions in practice depend on many factors like soil type, temperature, and precipitation.
Measurements of direct N2O-emissions at the location of the arable land result in a wide range of
estimates. The formation and decomposition of N2O in soils depend on various controlling parameters.
The main factors are aeration, water content and availability of N and organic material. Aside from these
factors, the amount of N2O emitted from soils is influenced by the physical soil characteristics and the
type of crop grown [50]. The applied N fertilizer that is not utilised by the crop is either stored in the soil
profile of the field or is lost from the system through leaching of nitrate to groundwater, runoff of soil or
nitrate to surface waters or volatilized through ammonia volatilisation or nitrification / denitrification as
NOx, N2O and N2 [44].
Within the total crop rotation cycle, the emissions with and without the energy crop have to be
compared. The application of fertilisers causes N2O-emissions in the field. The N2O emissions are
calculated, in most cases, according to the Intergovernmental Panel on Climate Change (IPCC) guidelines
[51]. This is also the recommended method by the life cycle analysis (LCA) experts of the Centre for
Environmental Studies, Leiden, the Netherlands [52]. More details on the way in which various biofuel
studies have dealt with N2O emission are presented by Van den Broek [41].
29
Yield and fertilizer use
Yields are interpreted here as both harvested yields per hectare, but also as the yield of liquid biofuel per
tonne of harvested material. The product of the two can be expressed as a biodiesel yield or bioethanol
yield per hectare. High yields lead to relatively low emissions per unit of product produced. Therefore,
this is an important parameter for the final results.
The selected studies show quite comparable yield figures, There are differences, however, in terms of the
amount of fertilizer applied (see also [41]).
Reference land use system
Reference land use is that land use that would have occurred when no energy crop had been cultivated.
In the GM study the reference system contains rotational set-aside land planted with an N-fixing crop (i.e.
Egyptian clover which displaces synthetic fertilizer), in one scenario, and a non N-fixing crop (i.e. rye
grass) in another scenario. As a result, the plantation with Egyptian clover leads to a net additional use of
synthetic fertiliser for the energy crop.
Sheffield has for RME and ethanol (beet and wheat), a reference system consisting of fallow set-aside,
including diesel fuel consumption for mowing it.
A reference system based on fallow set-aside is incorporated into the calculations. For methylesters (ME)
from recycled vegetable oil, production of the original vegetable oil is excluded from the calculations,
since the primary energy inputs and GHG outputs for this should already be allocated fully to this main
product and its principal uses.
Vehicle efficiency
Most studies presented results in terms of GHG emissions per MJ of fuel. We converted this into per km
figures by means of the GM study. As their base vehicle they used a direct injection current 2002
production European Minivan Opel Zafira with automated manual transmission (MTA). For this purpose
we chose the 2002 version of the Opel Zafira that was considered in the GM study. This has a fuel
consumption that is about 6% higher than the base case Opel Zafira in the GM study, which is a version
extrapolated to the 2010 timeframe. Current fuel efficiencies found elsewhere may be higher, but note
that the choice for the values in Table 5-1 does not have any impact on the comparison between fossil
fuels and biofuels, since we use the same vehicle type as a starting point for all fuels considered.
Table 5-1. TTW Energy requirements of the power train combinations used in this report
Vehicle
Energy requirements (MJ/km)
Gasoline MTA SI
DI Diesel MTA
2.59
2.08
MTA - automated manual transmission; SI – spark ignition; DI – Direct injection; TTW – Tank to wheel.
30
5.2
GHG emissions – Results
Figure 5-1 presents the results of the different studies. For the fossil fuel references we use the GM study,
since this is the only study which showed a detailed fossil fuel well to wheel greenhouse gas analysis.
Bioethanol from wheat
The best estimate well to wheel GHG emission for bioethanol from wheat was at about 1/3 of the
gasoline emission. The high range (of the 14 cases included) is about 80% and the low range about 25%.
Most estimates ranged between 30 and 60%.
Both the low and high extremes come from Concawe. Concawe interprets the EU Commission report [53]
as “overly pessimistic”. Emissions avoided by straw credit are very low in the EU study and the energy
output/input ratio is very high. The ethanol yield at this EU study is low and not in line with the other
studies. The lowest Concawe emissions are from Gover ETSU [54]. No details were found on the
explanation of this extreme value.
WTW Greenhouse gas emissions (g CO2 equivalent/km)
300
250
200
Biofuel logistics
Biofuel production
Feedstock logistics
Feedstock production
Direct car emissions
Distribution
Refining
Crude oil transport
Crude oil production
150
100
50
0
Gasoline
Ethanol
wheat
Ethanol beet
Diesel
RME
RVO
biodiesel
Figure 5-1. Well to wheel GHG emissions of biofuels versus fossil fuels, and breakdown into
various steps in the chains. The bars present the best estimates, and the black lines the ranges in
the literature studied [44; 47; 49].
Bioethanol from beet
The best estimate well to wheel GHG emission for bioethanol from sugar beet was about 45 % as
compared to its fossil alternative. The high range (of the 17 cases included) is about 85 % and the low
range about 20 %. Most estimates ranged between about 40 and 60 % of the fossil fuel emission.
31
The big range is caused by a big difference in use for the by-products. The lowest emissions occur when
the by-product sugar beet pulp is used as fuel e.g. for heat generation, and the farming practices and
N2O emissions are calculated according to Ecobilan. The highest emissions occur with an ethanol plant
integrated in a sugar refinery and rotational set-aside land planted with Egyptian clover which is a Nfixing crop and used as green cover crop which is plowed back into the soil for fertilization, and when the
IPCC method for N2O is used.
Biodiesel from rape-seed
The best estimate GHG emission for biodiesel from rape-seed is about 50 % of that of conventional
diesel. The range of the 23 cases studied varies between 25 % and 90 % of conventional diesel. The
majority of the estimates fall between 30 % and 50 % of the conventional diesel emission.
The very broad range is caused by the GM study. The lowest value uses the Ecobilan N2O method instead
of the IPCC method and the by-product glycerin replaces conventionally produced glycerin. The highest
value has a high use of fertilizer and the glycerin is used as fuel within the RME plant for heat generation.
Biodiesel from RVO
The GHG emissions from RVO biodiesel are 16 % of the conventional diesel emissions with a small range
(14 – 19 %) around it. Only esterification and distribution are assumed to cause GHG emissions here.
Breakdown of the GHG emissions
The emissions of the feedstock production for RME are for almost 90 % caused by the production and use
of the N fertiliser. For 75 % this component originates from N2O emissions in the field. The main
component of the biofuel (RME) production step is the esterification (being 70 % of the total biofuel
production stage). GHG emissions from wheat feedstock production are caused for about 50% by N
fertiliser use. In the case of beet this is about 80%. The wheat feedstock logistics are rather high, because
of a fuel oil based drying step and because of the fact that in the cited study the overall GHG WTW
emission for ethanol from wheat is relatively low. A very important element in the beet ethanol chain is
the distillation step, which is responsible for about 80% of bioethanol production emission.
For fossil fuels, the indirect GHG emissions cover about 13% in the case of diesel and 17% in the case of
gasoline. These indirect emissions are in both cases caused for about 50% by the refining process. Oil
extraction covers about 30% of the WTW GHG emissions. The oil extraction GHG emissions are caused for
about 25% by methane emissions during the extraction phase and for about 75% by CO2 emissions. The
data are based on a crude oil mix that originates for 35% from the North Sea, for 25% from Siberia and for
40% from the OPEC.
Future fuels: Fischer-Tropsch diesel and lignocellulose ethanol
The biomass Fischer-Tropsch (FT) diesel WTW emissions are very low. The best estimate came from the
only full LCA found on FT diesel. It estimated the FT diesel WTW GHG emissions of a chain in which
woody biomass is imported over sea from a distance of about 1000 km, at 15% of the diesel WTW chain:
27 g CO2equivalent/km. Negative emissions of –16 g CO2equivalent/km are reported in the ADL study
[49], where the by-product (naphta) credits were larger than the emissions of the FT chain itself. The high
end of the range found is 60 g CO2equivalent/km [49].
A wide range was found for WTW GHG emissions from ethanol from ligno-cellulosic biomass (LC
ethanol). This partly had to do with the lignin content of the fuel used. Fuels with much lignin, led in
32
some studies (e.g. ADL) to a large by-product credit for the electricity produced, so that the net chain
emissions became negative. However, there are also a few rather high estimates for straw based lignocellulosic chains. However, in the studies concerned, these were also extreme values of a wider range.
The best estimate (also based on straw) was derived from the Sheffield study, since this was very well
documented and since the ethanol wheat WTW GHG emission best estimate was also derived from this
study. Sheffield estimated these emissions at 18 % of the gasoline emissions as used in this study, or 41 g
CO2equivalent/km. All estimates found ranged between –18 % and 81 % of gasoline.
5.3
Other emissions
Non-GHG emissions of biofuels versus fossil fuels have been presented in different ways by Ecotec [55],
IEA [56] and Scharmer [57]. Of course, vehicle operational emissions will have to meet the same EURO 5
emissions standards regardless whether the fuel was of biomass or fossil origin.
Figure 5-2 shows well to wheel SOx, NOx, VOC, CO and PM emissions of biodiesel versus fossil diesel,
according to Ecotec.
According to Ecotec [55], the biodiesel life cycle has only 20% of the sulphur emissions of the diesel life
cycle. In the diesel chain, lower sulphur fuels will reduce tailpipe SOx emissions. However, according to
Ecotec, over 50% of the SOx emission in the diesel life cycle arises during refining. Tailpipe emissions are
only 25% of the overall diesel based SOx emission. This means that the introduction of low sulphur
diesels will only have a limited effect on the overall diesel based SOx emissions.
140%
120%
100%
80%
Diesel
RME
60%
40%
20%
0%
SOx
NOx
SO2- eq.
VOC
CO
PM
Figure 5-2. Biodiesel WTW emissions as compared to fossil diesel WTW emissions. The fossil
emissions have been put at 100% for each of the emissions. On the basis of the SOx and NOx
emission, the SO2 equivalents have been calculated.
Life-cycle emissions of NOx from biodiesel (on a “neat fuel” basis) are about 30% higher than from diesel.
Figure 5-3 shows that this difference mainly occurs during the feedstock production as a result of tractor
use. This is also caused by the relatively low yield of rape-seed per hectare, which cause in field emissions
to end up quite significant in the end result. Although no background data are presented, it is expected
that NOx emissions for the tractors as included by Ecotec are relatively high. This is derived from the fact
that the Ecotec study is based on a study from ETSU of 1996, which probably referred to emission figures
that originate from before 1996. Future more stringent NOx emission standards for tractors would reduce
the indirect NOx emissions in the RME chain.
33
NOx vehicle emissions of biodiesel are estimated by Ecotec [55] to be about 5% higher (on a “neat fuel”
basis) than diesel NOx emissions. This means that when the biodiesel or bio-oil is imported into Ireland,
the NOx emissions increase will be limited up to 5 % for pure biofuel.
In conclusion, the high NOx emission found should therefore be regarded cautiously, since:
⋅
It does not account for future more stringent emission limits (EURO-5).
⋅
Reported values stem from only one literature source.
⋅
The import of rapeseed or biodiesel would imply that indirect NOx emissions are generated outside
Ireland.
⋅
With stricter emission standards also the indirect NOx emissions (mainly by tractors) are expected to
be significantly reduced in the near future.
WTW NOx emissions [mg/km]
1800
1600
1400
1200
vehicle operation
Fuel distribution
Fuel production
Feedstock transport
Feedstock production
1000
800
600
400
200
0
diesel
biodiesel
Figure 5-3. Breakdown of NOx WTW emission for diesel and biodiesel on a “neat fuel” basis. [55].
Emissions of volatile organic compounds from biodiesel are about 50 % of those from diesel. VOCs are
precursors to ground level ozone and associated with certain respiratory problems.
Life cycle emissions of carbon monoxide were about 20% higher from biodiesel than diesel. This arises
mainly from emissions from agricultural machinery. In the future, CO emissions are likely to decline with
the trend to higher yields and lower tractor engine emissions.
Particulate matter emissions, finally, are estimated to be about 15% higher with biodiesel on a WTW
basis. This increase also stems largely from the emissions of agricultural machinery.
Ecotec did not include non-GHG emission data on bioethanol in their analysis. Such data were reported
by the IEA [56].
Regarding bioethanol (from sugar/starch), the IEA data suggest higher NOx emissions as compared to
gasoline, although both the bioethanol and the gasoline range are very large. Since the share of the
agricultural process with bioethanol in general is smaller than with biodiesel one would expect a smaller
share of indirect NOx emissions in the case of ethanol. In general, the IEA data are considered to be quite
generic (high ranges resulting from a wide range of studies), from which it is rather difficult to draw firm
conclusions.
CO and HC emissions appear lower on average with bioethanol, although, especially with HC the
bioethanol range is rather large again. Because the gasoline based PM emissions are estimated to be
34
zero, it makes more sense to compare with diesel here. The WTW bioethanol PM emissions are estimated
to be about 35% of those of the diesel WTW chain. No quantitative data were available on a comparison
on SOx emissions. It can be expected that these will be lower with ethanol because of the fact that
ethanol hardly contains any sulphur (2-3 ppm) [26].
The IEA study shows a very large range regarding the NOx emissions of both diesel and biodiesel.
However, biodiesel especially has a much higher upper level. The average value of biodiesel NOx
emissions is even 50% higher here than the average diesel NOx value. The CO and PM diesel and
biodiesel emission comparison shows quite a similar picture as with the Ecotec data.
A study by the “Union for the promotion of oil and protein plants” [57] cited NOx WTW emissions that are
about 13 % lower as compared to diesel. However, the same study cites sources in which the total
acidifying emission from biodiesel is between 16 and 64 % higher than with fossil fuels. This is mainly
caused by NH3 emissions as a result of fertilisation during rape-seed cultivation.
Note that the emissions standards for petrol and diesel vehicles are expected to be reduced in the near
future (2007/2008). This will especially affect diesel vehicles as they will most likely be forced to include
particulate and NOx storage traps. This would significantly reduce the difference between the emissions
of biofuels and fossil derived fuels, and change the composition of Figure 5-3.
5.4
Other environmental impacts of biofuel feedstock production [58; 59]
Any change to existing land uses, cropping patterns and crop and residue markets has potential
implications for biodiversity, water and air quality and rural landscapes. If biofuel industries are to
develop successfully, it is important that their development be managed from the outset to ensure that
any effects of feedstock supply are positive to the rural environment. These effects are considered for
three categories of feedstock: residue materials, conventional crops already in production for other
markets and new crops produced specifically for biofuel use.
Residues: It is envisaged in this report that these materials could play an important role as biofuel
feedstocks, both in the 2005-10 period (e.g. RVO, tallow, molasses), and after 2010 with improved
technologies (e.g. straw, wood residues). The provision of a profitable alternative outlet for these
materials would reduce the risk of undesirable disposal practices being used for these materials e.g. infield straw burning or RVO disposal via sewers or land-fills. It would also raise some of these materials to a
higher level in the waste pyramid, from disposal/composting to recovery/recycling. No adverse
environmental effects can be envisaged.
Conventional crops: In the first phase of biofuel development (2005-10) no more than a small increase in
the total arable area (and in the area of conventional crops used for biofuels) is foreseen. Even an
increase of 50 kha would leave 90% of agricultural land still in grass, and would do no more than return
the arable area to its level of about 1978.
Within the arable area, restrictions on individual crops imposed by agronomic considerations and EU
quotas would not allow more than minor changes in the current cropping pattern. The least desirable
effect would be an increase in the proportion of cereals, leading to more mono-culture cropping and a
reduction of biodiversity.
A moderate increase in the sugar beet area would have several desirable effects. As well as reducing
continuous cereal production, as a spring-sown crop it would provide a stubble site for some overwintering bird species. The growing beet crop also provides nesting sites for a number of bird species.
The breakdown of plant residues after harvest provides some of the fertiliser needs of the next crop.
There is ecological evidence to suggest that oilseed rape is a relatively beneficial crop for biodiversity, in
comparison with other autumn-sown arable crops (Hope & Johnson, 2003). Spring-sown rape would be
35
preferable; as well as providing an over-wintering stubble site it requires lower pesticide and fertiliser
inputs. A recent UK study of the health effects of rape pollen, while acknowledging that some atopic
individuals may have an allergic response, concluded that “allergic responses to oilseed rape make very
little contribution to the overall burden of allergy in the UK”. On the emission of VOCs, the report
concluded that “on the basis of currently available data there is no direct evidence to suggest that VOCs
are responsible for the adverse health effects reported to be associated with oilseed rape” [60].
Nevertheless, concerns about rape pollen as well as landscape effects should be acknowledged by
avoiding planting close to built-up areas or in highly visible sites.
Little change in cultural practices should be expected where conventional crops are destined for a
biofuel rather than a traditional use. In the longer term, some reduction in pesticide use on biofuel crops
may be possible as a result of differences in quality standards for feeds and biofuels. Decisions that may
be made on the use of genetically modified crops are difficult to predict but are unlikely to be influenced
by the end use of the crop.
New crops: If processes for the conversion of lignocellulose to transport biofuel become feasible, highyielding crops such as short-rotation willow or poplar, miscanthus and hemp may become of interest.
Not much is known about the biodiversity impacts of producing these crops. Coppiced areas are
inhabited by a wide range of small mammals and birds and should favour earthworms and herbivorous
invertebrates. A concern would be the lowering of water table if planted near wetland habitats.
Miscanthus is a non-native woody perennial rhizomatous grass; it requires low inputs, but there are as
yet no reports on plantation biodiversity. Hemp is a spring-sown annual crop with a short growing
season that would normally require no pesticides. It is unlikely to have any major environmental effects.
These crops grow to a height of 2.5 4 metres, so they would have more visual impact than conventional
crops on the rural landscape. Site selection would therefore have to be given serious consideration,
especially for the perennial crops.
Some use is already being made of coppice areas as sites for the disposal of certain effluents in
accordance with nutrient management plans. This greatly improves the economic viability of the biofuel
production with no apparent effects to date on ground-water quality, but its other environmental
impacts need to be further monitored.
Conclusion: The use of residues for biofuel production would be environmentally desirable. The small
short-term changes envisaged in the production of conventional crops would also have little effect, as
long as the proportion of cereals is not increased. What is important is that the most environmentally
friendly practices are used in the production of these crops; a recent UK study shows the effects of
alternative cropping systems on their environmental impact [59]. The impacts of potential new crops are
less well known, and need to be researched in the years remaining before their possible exploitation.
The use of set-aside land for biofuel production may be a cause for some concern. However, with the
upcoming reduction of set-aside to 5% the effect of any change of use will be extremely small. Current
management of fallow set-aside in Ireland is haphazard, and any environmental benefit derived from it is
uncertain.
The transport and processing of these crops could also have unfavourable rural impacts. Many biofuel
feedstocks have a low density, and it is important that they be transported without generating excessive
traffic or structural damage on country roads. The location and scale of process plants would also need to
be carefully planned to minimise traffic, visual impact and other environmental effects and to avoid
difficulties with planning authorities.
36
6 Costs
This chapter starts with analysing the production costs of biodiesel and bioethanol. Also the production
costs of the future biofuels FT diesel and lignocellulose ethanol are reported. The delivered costs include
costs and margins for blending, distribution and retail. Here we will also show uncertainty ranges. The
extra costs of biofuels compared to fossil fuels, combined with the benefit in greenhouse gas emission
reduction, yields the costs of this greenhouse gas emission reduction.
6.1
Biodiesel
The production costs of rape-seed biodiesel are calculated by dividing the total annual costs by the total
amount of biodiesel produced. The total annual costs follow from the feedstock costs (including
agricultural subsidies), operational costs minus co-products revenues, and annual depreciation of the
capital investment. Assumptions on feedstock costs and conversion are summarized in Table 6-1. The
feedstock costs are based on estimate of Irish feedstock production costs, as presented in Chapter 3. The
conversion efficiencies stem from international literature [41].
Table 6-1. Feedstock costs and conversion efficiencies used for the calculation of biodiesel and
Fischer-Tropsch diesel production costs.
Feedstock costs (€/tonne)
Conversion
Biodiesel
rapeseed
RVO
Tallow
250
290
275
356
990
910
Fischer-Tropsch diesel
medium term
long term
52
26
200
230
1)
1)
(l/tonne) [41]
Feedstock to fuel.
The capital costs for seed pressing and esterification are taken from a study on the proposed Wexford
installation, a small cold pressing plant at the scale that is likely to be practicable in Ireland. The capital
costs of installations that esterify RVO or tallow are estimated to be 15 % more expensive than rape-seed
oil esterification installations [41]. Revenues for cake are assumed to amount to 180 €/tonne, and for
glycerol 120 €/tonne.
Results for the calculations are given in Figure 6-1. Although rape-seed is an expensive feedstock, the
co-product revenues are considerable and make the total production costs to amount to about 21 €/GJ
or 0.70 €/litre. This is about three times the current production costs of fossil diesel. Biodiesel from RVO
or tallow is cheaper: about two times the production costs of fossil diesel. However, one has to realise
that only a small fraction of RVO or tallow derived diesel may be allowed to be blended in RME to meet
FAME specifications. Therefore, the results for a blend of 10 % RVO in RME are also shown.
37
35
30
(Bio)diesel production costs (€/GJ)
25
20
Gasification and synthesis
Glycerol co-product
Cake co-product
Operating
Esterification
Seed pressing
Dry and store
Feedstock transport
Feedstock total
15
10
5
0
-5
-10
-15
Diesel
Biodiesel
Rapeseed
Biodiesel
RVO
Biodiesel
Tallow
Biodiesel
90% RME
10 % RVOME
Figure 6-1. Production costs of diesel and biodiesel (excluding fuel distribution and blending).
6.2
Bioethanol
In like manner the production costs of ethanol can be calculated. Assumptions on feedstock costs and
conversion are summarized in Table 6-2. Assumptions on the capital investment and co-product
revenues for ethanol from wheat and sugar beet, are taken from an IEA study on bioethanol [61], which
was selected recently as a best estimate within a range of studies. The production of ethanol from
lignocellulosic biomass was previously assessed by Hamelinck [62].
Table 6-2. Feedstock costs (from resource chapter) and conversion efficiencies [41] used for the
calculation of the production costs of ethanol from different feedstock.
Feedstock costs (€/tonne)
Conversion (l/tonne)
Wheat
Sugar beet
Residues
98
28
45
355
90
220
Lignocellulose long term
26
405
The results are shown in Figure 6-2. The production costs of bioethanol from sugar beet are
considerably higher than that for production from wheat. The difference is mainly in the revenue for coproducts. The lower ethanol yield from beet (per tonne wet) is more ore less compensated by the lower
feedstock cost, so that the contribution of feedstock costs to the final costs is similar for beet and wheat.
38
6.3
Future biofuels
Beyond 2010, more advanced biofuels may be produced such as Fischer-Tropsch diesel. This fuel can be
produced by gasification of lignocellulose biomass and subsequent chemical synthesis [e.g. 62]. Cheaper
feedstock (higher yields per hectare, easier logistics) and larger conversion scale could bring the
production costs of those fuels to about 9 €/GJ.
In like manner the production costs of ethanol produced by hydrolysis fermentation from lignocellulose
biomass was determined [41; 62].
35
Gasoline and Ethanol production costs (€/GJ)
30
25
20
Hydrolysis fermentation
Pressing and fermentation
Electricity co-product
Cake co-product
Feedstock transport
Feedstock total
15
10
5
0
-5
-10
Gasoline
Ethanol Wheat
Ethanol Beet
Ethanol Residues
-15
Note that the feedstock for these fuels is produced without any agricultural subsidy.
Figure 6-2. Production costs of gasoline and bioethanol (excluding fuel distribution and blending).
39
Gasoline and Ethanol production costs (€/GJ)
25
20
15
Gasification and synthesis
Hydrolysis fermentation
Electricity co-product
Feedstock transport
Feedstock total
10
5
0
Diesel
FT Diesel
medium term
FT Diesel
long term
Gasoline
Ethanol
long term
-5
Figure 6-3. Production costs of FT diesel and lignocellulose ethanol.
6.4
Fuel delivered costs
To calculate the delivered costs of the fuel at the gas station (delivered to the customer), the costs for
distribution of biofuels, required margins and retail are included. The base costs for distribution of diesel
or gasoline amount 0.10 €/l fuel [41], the extra costs for the distribution of biofuels add about 1 eurocent
per litre for biodiesel and 1.5 eurocent per litre for ethanol [41]. Costs for delivering ethanol also include
the costs for adapting the gasoline to meet the vapour pressure specifications, these costs are about 3.5
eurocents per litre for blends of 5 % ethanol in gasoline. The resulting delivered costs are shown in
Figure 6-4 on energy basis, and in Figure 6-5 on volume basis.
The volumetric results are not the right basis for mutual comparison of the various fuels, because of
differences in heating value and vehicle fuel use of the various fuels considered. These values are
presented, because the consumer is normally confronted with prices on a volumetric basis. The figure
with results on energy basis incorporates the fact that the LHV (Lower Heating Value) of gasoline is 13 %
lower that of diesel, the LHV of biodiesel 8 % lower than that of diesel, and of ethanol 32 % lower than
that of gasoline.
The figures include ranges of values found in literature. Only a few sources reported on the delivered
costs of RVO and tallow biodiesel, in the figures this results in small ranges.
40
50
45
Delivered costs (€/GJ)
40
35
30
adaptation gasoline
Additional distribution
Distribution
Biofuels production
25
20
15
10
5
G
as
ol
Et
in
e
ha
no
lW
he
at
Et
ha
Et
n
ol
ha
Et
Be
no
ha
et
ll
no
ig
lR
no
e
ce
si
llu
du
lo
es
se
lo
ng
te
rm
Bi
od
D
ie
ie
se
se
l
lR
ap
es
ee
Bi
d
od
Bi
ie
od
s
el
ie
se
R
Bi
VO
FT
l9
od
0%
ie
D
s
ie
e
R
se
lT
M
ll
al
E/
ig
lo
10
no
w
ce
FT
%
l
l
R
ul
D
V
os
ie
O
se
e
M
m
ll
E
ig
e
di
no
um
ce
llu
te
lo
rm
se
lo
ng
te
rm
0
Figure 6-4. Cost comparison for fuels delivered at the gas station, on energy basis. Costs include
the cost and margin for distribution and retail and exclude the excise duty and VAT. Ranges for
these delivered costs are derived from various literature sources [41]. The bars represent the best
estimate of Ecofys.
1.00
0.90
Delivered costs (€/l)
0.80
0.70
0.60
adaptation gasoline
Additional distribution
Distribution
Biofuels production
0.50
0.40
0.30
0.20
0.10
G
as
ol
Et
in
ha
e
no
lW
he
at
Et
ha
Et
no
ha
Et
lB
no
ha
ee
ll
no
t
ig
lR
no
es
ce
id
llu
ue
lo
se
s
lo
ng
te
rm
Bi
od
D
ie
ie
se
se
l
lR
ap
es
ee
Bi
od
d
Bi
ie
od
se
ie
l
se
Bi
R
FT
VO
l9
od
0%
ie
D
ie
se
se
R
l
M
Ta
ll
E/
ig
llo
10
no
w
ce
FT
%
llu
R
D
lo
VO
ie
se
se
M
ll
m
E
ig
e
di
no
um
ce
llu
te
lo
rm
se
lo
ng
te
rm
0.00
Figure 6-5. Cost comparison for fuels delivered at the gas station, on volume basis. Costs include
the cost and margin for distribution and retail and exclude the excise duty and VAT. Ranges for
these delivered costs are derived from various literature sources [41]. The bars represent the best
estimate of Ecofys.
41
6.5
Excise duty exemption required to avoid a cost impact for the customer
The delivered costs in these figures are without excise duty or VAT. Whereas VAT will be the same for all
fuels, variation of the excise duty maybe an instrument for stimulating the use of biofuels.
Two starting points could be taken for an excise duty reduction for biofuels. In the first starting point the
price per litre would remain the same as for fossil fuels. However, because of the lower energy content of
the biofuel blend, the consumer would have to tank more litres of fuel. Alternatively the price per GJ at
the pump could be kept the same, in order to compensate for the additional litres that have to be
bought.
If an excise duty would be compelled such that the prices of biofuels and fossil fuels would be the same
on a volumetric basis, a litre of biodiesel from RVO or tallow would be excised with about 14 cent/l. This
means an excise duty exemption of 22 cent/l. Delivered biodiesel from rape-seed, however, requires a
much larger excise duty exemption of 47 cent/l. This is more than the total current excise duty on diesel
(37 cent/l).
Ethanol from wheat requires an excise duty exemption of 25 cent/l compared to the gasoline excise duty
of 44 cent/l. The delivered cost of ethanol from beet is comparable to the delivered cost of gasoline
including duty; The exemption required, 41 cent/l, is almost as high as the duty itself.
1.00
Sell price ex VAT (€/l)
0.80
0.60
excise duty (€/l)
delivered (€/l)
0.40
0.20
0.00
-0.20
Diesel
Biodiesel
Rapeseed
Biodiesel
RVO
Biodiesel
Tallow
Gasoline
Ethanol
Wheat
Ethanol Beet
Figure 6-6. Excise duty (exemption) in €/l required to reach equal pump prices per litre fuel.
42
0.70
0.60
Excise duty (€/l)
0.50
0.40
Diesel
Gasoline
0.30
0.20
0.10
0.00
Ireland
Sweden
France
Germany
Netherlands
Spain
Figure 6-7. Excise duty on gasoline and diesel in several European countries [41; 63]
If one wants to achieve a same GJ price at the gas station, then also ethanol from wheat and beet require
a duty exemption larger than the duty on gasoline. This is because a litre of ethanol contains less energy
than a litre of gasoline. The negative excise duty for ethanol was not found in the recent Dutch study by
Ecofys [41], because the duty on gasoline in the Netherlands is much higher than in Ireland. The excise
duty in Ireland – especially for gasoline – is relatively low compared to other European countries (see
Figure 6-7).
6.6
Cost of GHG emission avoided
The cost of GHG emission avoided can now be calculated by dividing the net cost of using biofuel
(compared to using fossil fuel) in €/km by the net GHG emission reduction of using biofuel (compared to
using fossil fuel) in tonneCO2equivalent/km. This can be expressed by the following formula:
⎛ C driving ,b − C driving , f
C GHGavoided = ⎜
⎜ E
⎝ GHG , f − EGHG ,b
with
⎞
⎟ × 1 million
⎟
⎠
(1)
CGHGavoided = the cost of avoided GHG emissions, in €/tonneCO2equivalent
Cdriving = the fuel costs for driving a car in €/km
EGHG = the Greenhouse gas emission from using a fuel in gCO2equivalent/km
subscript b indicates biofuel
subscript f indicates fossil fuel
The kilometric costs for using the fuel are found by dividing the delivered costs of a fuel (€/GJ) by the fuel
efficiency (km/GJ) or the inverse fuel use. The fuel use for cars driving on diesel or biodiesel is assumed to
be 2.08 MJ/km and for gasoline or ethanol 2.59 MJ/km (see section 5.1).
43
The resulting costs of GHG emission avoided is shown for two biodiesel and two bioethanol options in
Figure 6-8. The cost of using RME or ethanol from wheat as an option to avoiding greenhouse gas
emission is about 300 €/tonneCO2equivalent. Note that the feedstock production costs included agricultural
subsidies. The actual costs without any subsidy of these options are more expensive, about 550 and 450
€/ tonneCO2equivalent [41]. Long term costs when driving FT diesel or lignocellulose ethanol could be as low
as 50 – 100 €/tonneCO2equivalent [41].
Cost per tonne GHG emission avoided (€/tonne CO2 equivalent)
600
500
400
300
200
100
0
Biodiesel Rapeseed
Biodiesel RVO
Ethanol Wheat
Ethanol Beet
Figure 6-8. Costs of GHG emission reduction with biodiesel and ethanol. The avoided emission per
km compared to diesel and gasoline use (derived from Figure 5-1) was divided by the excise duty
exemption required.
44
7 Macro-Economic Impacts
7.1
Introduction
The selected fuels are analysed on their macro-economic impacts. This is done by input-output (IO)
analysis. IO analysis is a partial analysis of the economy, concentrating on the production sector. It can be
used to calculate what share of a certain expenditure will end up abroad and what share will end up as
value added to the national economy [2]. The sum of all value added in a country is the Gross Domestic
Product (GDP). By means of input-output analysis, all indirect impacts can be modelled on the basis of
the Input-Output table. This is an overview table of the economy of a country that shows which sector
buys from which sector in order to produce its products. The Irish IO table was delivered by Forfas [64]. In
this study, IO analysis will be used to break the total cost of a biofuel and of its fossil competitor down
into value added for Ireland, and imports. On the basis of these results, estimates can be given as well on
the direct and indirect employment generation from the production of biofuels as compared to the
production of fossil fuels. The same accounts for the impact on the Irish Treasury. A detailed description
of the IO methodology applied in this study, with all steps undertaken, is presented in Annex D.
Limitations of the application of the IO method for the analysis of bioenergy chains are discussed in by
Van den Broek [2].
7.2
Results
Delivered costs
The delivered costs as presented in Figure 6-4 (on GJ basis) have been broken down into import and
value added. The result is shown in Figure 7-1, the two Figures show the same total values, the only
difference is that the breakdown is expressed in another way.
Although we assume that the biofuels are domestically produced on set-aside land, the amount of
import per GJ product decreases only slightly for some of the biodiesel cases compared to fossil diesel.
Implementation of some of the bioethanol cases leads to even a slight increase of import. This is for
almost 50 % caused by the production of the feedstock, where the agricultural machinery requires diesel,
and the machinery itself (or the material it is made of) is probably for a certain part imported. The
feedstock production and conversion, and the distribution of biofuels create much value added in the
form of wages, because they are relatively labour intensive.
45
40
35
(Bio)fuel costs (€/GJ)
30
25
Other Value added
Wages
Taxes less subsidies
Import
20
15
10
5
Ethanol lignocellulose long term
Ethanol Residues
Ethanol Beet
Ethanol Wheat
Gasoline
FT Diesel lignocellulose long term
FT Diesel lignocellulose medium term
Biodiesel 90% RME/10 % RVOME
Biodiesel Tallow
Biodiesel Rapeseed
Diesel
0
Figure 7-1. The fuel delivered costs (€/GJ) broken down in import and value added: taxes less
subsidies, wages, and other value added.
Domestic production and import
We will now present the macro economic impact of a spectrum of options, ranging from additional
indigenous production on set-aside land to direct import of the biofuel. We assume that imported
products have the same price as when they are produced in Ireland. Although in some European
countries bio-oil, biodiesel, wheat or ethanol may be cheaper, the products available to Ireland in a
developed biofuels market may still be more expensive. Note that as the main driver for importing
biofuels, the fact that Ireland cannot produce the required amounts of biofuel domestically is likely to be
more important than slight price differences with other EU countries.
The options included are:
⋅
Biodiesel from rapeseed produced on Irish set-aside land
⋅
Biodiesel from imported bio-oil
⋅
Imported biodiesel
⋅
Ethanol from wheat produced on Irish set-aside land
⋅
Ethanol from imported wheat
⋅
Ethanol imported from the EU
If wheat (or rapeseed) is produced on non set-aside land, it substitutes feed crops. When the demand for
feed crops remains the same, they should be thus additionally imported. In that case it does not matter
significantly whether the wheat is imported for biofuel or feed purposes. This implies that the option of
46
producing ethanol from wheat from non set-aside land, is similar to the option of producing ethanol
from imported wheat.
On the world market, sugar cane ethanol is available in large amounts and much cheaper than ethanol
produced from sugar beet or wheat in Europe. We therefore include also the option:
⋅
Ethanol imported from Brazil
Here, of course, we do include a lower biofuel production cost as compared to indigenously produced
biofuels.
Excise duty exemption to realise an equal GJ price
Figure 7-2 shows the results of the analysis. The total delivered costs for the various biodiesel options is
the same 24 €/GJ, for the reason explained above. In Chapter 6 it was shown that the biofuels need
excise duty exemption to be competitive with fossil derived fuels. We assume for the analysis in this
chapter that an excise duty exemption is granted by the government to biofuels that will lead to equal
product prices per GJ compared to fossil biofuels. Only in this case we can assume that the amount of
money spent on transportation fuels by consumers will remain unchanged. This assumption is necessary
for a reliable input-output analysis, as alternatively a significant change in the consumers’ expenditures
would have other macro-economic effects that are not reflected within the IO table. Note that excise
duty exemption to arrive at similar GJ prices means that litre prices of biofuels will be lower than that of
fossil fuels. Further, note that to arrive at equal GJ prices the amount of excise duty exemption required
in all cases is larger than the current duty on the fossil fuels they replace (Figure 7-2).
30
25
(Bio)fuel costs (€/GJ)
20
15
Excise Duty
Taxes less subsidies
Other Value added
Wages
Import
10
5
Ethanol import Brazil
Ethanol import EU
Ethanol import wheat
Ethanol Wheat
Gasoline
Biodiesel import
Biodiesel import bio-oil
Biodiesel Rapeseed
Diesel
0
Figure 7-2. The breakdown of the GJ price of diesel, biodiesel, gasoline and bio-ethanol into
import and value added (taxes less subsidies, wages, excise duty and other value added). A
same delivered price per GJ is assumed. In the case of ethanol imported from Brazil (last bar)
the item excise duty is actually the sum of excise duty and import tax.
47
If we include the excise duty (which is value added for the economy as well) and assume an excise duty
reduction up to similar prices per GJ, the total value added to the Irish economy follows from addition of
all items except import. This is shown in Figure 7-3, for the case of ethanol. The value added for the
options biodiesel from rapeseed and ethanol from wheat are similar to the value added of the fossil fuels
they replace. This is all under the condition that the crops are produced on set-aside land.
The import of ethanol from Brazil to Ireland is also included in the figure. The value added and wages
that can be earned are the same as when bioethanol is imported from the EU. However, as the ethanol
arrives at the border at a lower cost, the result of excise duty and import tax that can be imposed is
positive.
30
25
(Bio)fuel costs (€/GJ)
20
Value added
Excise Duty
Taxes less subsidies
Other Value added
Wages
Import
15
10
5
0
Gasoline
Ethanol
Wheat
Figure 7-3. Value added of bioethanol from wheat compared to that of gasoline (€/GJ).
Impact on the treasury
For the same cases as presented in Figure 7-2, the impact on the treasury is analysed. It is the result of
incomes to the treasury, such as excise duty and other taxes, and expenditures, such as subsidies and
allowances for job seekers. The excise duty was already shown in Figure 7-2 and calculated before. The
item taxes less subsidies follows directly from the Input-Output analysis. Added value in the form of
wages implies the creation of jobs. This decreases treasury spending on job seekers allowance (JSA). The
most jobs per € wage are created in labour intensive sectors, such as agriculture. It is for this reason that
the domestic production of bioethanol and biodiesel saves a lot on JSA spendings, see Figure 7-4.
Nevertheless the money saved on JSA does not outweigh the loss of income on duty.
When biofuel or feedstock is imported from the EU, the spending on exempting fuel duty is larger than
the saving on JSA and tax income. This means that from a macro-economic viewpoint these biofuels cost
extra money to the treasury.
48
20
10
Savings JSA
Excise Duty
Taxes less subsidies
5
Ethanol import Brazil
Ethanol import EU
Ethanol import wheat
Ethanol Wheat
Gasoline
Biodiesel import
Diesel
-5
Biodiesel import bio-oil
0
Biodiesel Rapeseed
Income for treasury (€/GJ)
15
Figure 7-4. The net result for the treasury of the sum of excise duty income, additional taxes
less subsidies and savings on job seekers payments. All costs are expressed as €/GJ. Equal
selling price per GJ assumed.
Table 7-1 finally shows the amount of jobs created in the different scenarios of domestic production
versus feedstock or biofuel import.
Of course, for the employment it does not make a difference whether a biofuel is imported from the EU
or from elsewhere.
Table 7-1. Employment under different options (thousand man.year).
Diesel
0.3
Biodiesel Rape-seed
10
Bio-oil imported
1.1
RME imported
0.4
Gasoline
0.2
Ethanol Wheat
5.2
Wheat imported
1.3
Ethanol imported
0.4
7.3
Conclusions on the macro-economic results
o
In general it can be concluded that bioethanol production from wheat on set-aside land scores
similar to gasoline on the contribution to the GDP (i.e. value added creation). Job creation,
however, is a factor 25 higher than with gasoline. Ethanol production from imported wheat
creates somewhat less value added, creating 6 times more employment than with the current
gasoline-based system. Imported ethanol from within the EC creates no net value added in
Ireland at all. Employment genereation from imported ethanol (from EU or world) is only slightly
higher than the employment from gasoline.
o
The comparison between biodiesel and fossil diesel is rather similar. The main difference is that
imported bio-oil for biodiesel production also scores significantly less in terms of value added
creation when compared to fossil diesel. In the case of import of biodiesel, the net value added
creation is negative.
49
o
Total government income in the ethanol set-aside scenario is about half of the income that the
government has with gasoline. Approximately 60 % of the total costs of the excise duty
exemption (including the subsidy needed) can be earned back as a result of additional tax
income and savings on unemployment payments. In the case of ethanol from imported wheat
net government income per litre of ethanol sold is about zero (i.e. the income on savings from
job seekers allowances and additional taxes equals the necessary fuel subsidy). In this import
situation only about 15 % of the cost of the full excise duty exemption can here be recouped. In
the case of imported ethanol, the net government income is negative. Only a few percent of the
full excise duty exemption is earned back in this case. Ethanol can be imported from Brazil for
much lower prices. Therefore the sum of import tax and excise duty that can be imposed is
positive.
o
We have argued that the wheat import case is basically similar to using wheat that is currently
produced for feed purposes. The preceding bullet leads to the conclusion that for the GDP of
Ireland it is only slightly more attractive to use currently produced Irish wheat instead of
importing bioethanol from Brazil. For the treasury, however, importing bioethanol from Brazil is
more attractive than importing wheat or using currently produced Irish wheat.
o
When comparing biodiesel with diesel, a similar type of effect is observed in terms of the impact
on the treasury, although exact figures are somewhat different.
o
A maximum of only 1.1 PJ of biofuel (of the 3.5 and 12 PJ targets) can be produced on set-aside
land in Ireland. Therefore, a significant component of the biofuels’ feedstock will have to be
imported. If current crops are used for bioethanol production, additional feed will have to be
imported, which will have an impact comparable to that described above.
50
8 Import of Biomass and Biofuels
In Chapter 3 it was shown that a fair part of the 2005 target and a small part of the 2010 target amount of
biofuels could be produced using Irish feedstock material. To meet both targets, import of either
feedstock material, or biofuels will be necessary. In any case the Irish biofuels market cannot be seen in
isolation from the European market. If biofuels would be more cheaply available elsewhere in Europe,
import may be an attractive option. On the other hand, biofuels would be exported to other countries if
there is a cost advantage.
The UK is one of the main trading partners for Ireland, and the largest exporter of fuel to Ireland (see
Section 4.4). Therefore policy and legislation items in the UK are of high importance to the Irish biofuels
market (Section 8.1). In Section 8.2 we will focus on the possibilities for import of biofuels from the EU.
And in 8.3, the import of biofuels from the rest of the world is analysed.
8.1
UK policy background
National Drivers
There are currently several key policies in the UK that support an active stimulation of the biofuels
market. The UK’s energy white paper [65] is the central document for energy policy and has
recommended that the UK put itself on a path towards a 60% reduction in carbon dioxide emissions
from current levels by 2005. More specifically, the paper highlighted biofuels as a key approach in
reducing transport emissions and made a commitment to assessing the overall energy implications of
the large-scale use of biofuels. Several studies have already been completed as part of this assessment
(E4tech, NCSA/IEEP) and consultations with key stakeholders are ongoing [66].
The EU Biofuels Directive is also important and in May 2004 the UK government published a consultation
document on the UK’s plans for implementing the Biofuels Directive. This document seeks views on the
UK target for biofuels sales in 2005 and 2010, labelling of biofuel blends, and potential policy and
support options for this market. The UK approach to the Biofuels Directive will include Wales and
Scotland, although both of these Devolved Administrations are responsible for aspects of biofuels policy.
The UK intends to inform the European Commission of its 2005 target by July, shortly after the
completion of the consultation process. However, the UK will defer a decision on the 2010 target until
after a long-term policy approach has been chosen. The UK may wait until the EU deadline of July 2007
before publishing its intentions on the latter target.
Biodiesel is currently the only biofuel on sale in the UK, available at over 100 filling stations. Sales of
biodiesel are approximately 2 million litres per month where total diesel sales are roughly 1700 million
l/month. These figures show that biodiesel currently makes up less than 0.1% of the total diesel sales,
and less than 0.05% of total gasoline and diesel sales. Although biofuels sales in the UK are predicted to
grow over the coming years, the EU 2005 reference point of 2% energy content remains a very ambitious
target.
Forecasts of biofuel use and production in the UK predict increased biodiesel production as the main
source of increased biofuels sales in the UK, with large-scale bioethanol production unlikely in the shortterm. The UK government has neither endorsed nor excluded the use of ETBE in the long-term as an
alternative route to achieving increased biofuel penetration.
The estimates used in the UK’s consultation document predict 12 million litres a month of biofuels sales
in 2005. It is suggested that the UK sets this as the target for 2005. This target would represent no more
51
than 0.3% of total gasoline and diesel sales in the UK, without a conversion to energy content as is used
in the Biofuels Directive. However, the UK government maintains that there is not sufficient time to
stimulate the market in a way that will come any closer to the EU reference point and therefore this is
likely to be the target reported to the EU in July.
The majority of biodiesel produced in the UK at the moment uses waste vegetable oil (WVO) as the
biological raw material as it is the cheapest source available. However, in the long-term limited supply
and fuel quality issues could restrict the growth of WVO as a feedstock. Already palm and soya bean oil
are imported, to a certain extent, for biodiesel production because of the lower cost implications. Some
rape is imported from the continent for use in biodiesel production but it is much more costly than
making biodiesel using other sources.
Argent Energy is building a new large-scale biodiesel production plant in Scotland. This facility is likely to
be in operation by 2005 and will be able to produce 50 million litres of biodiesel at full capacity. The
plant will convert tallow and waste oils into biodiesel and will be the first large-scale plant of its kind in
the UK.
Through the assessment of the long-term potential of biofuels that the Department for Transport is
currently carrying out several calculations were made. Assuming a maximum growing area of 4Mha, UK
resources could supply a maximum of approximately 500PJ of biofuels. The total UK energy
consumption by road transport was 1700PJ in 2002, so 2002 resources would have been able to supply
less than 30% of total transport demand.
This calculation does not take into account growth of the road transport sector and more importantly,
competition for biomass with the power generation sector which could reduce the availability of
domestic raw materials for production.
Should biofuels be adopted in the long-term the UK foresees large-scale biofuel production being
sourced from energy crops and using lignocellulosic processes. When domestic production is no longer
cost-effective, or the limit of production has been reached, imports will become necessary.
Policy options
There are already financial incentives in place in the UK for biofuels sales. A 20p/l duty differential has
been in place for biodiesel since July 2002 and in January 2005 this duty will be extended to bioethanol
as well. It is expected that the introduction of the bioethanol duty incentive will stimulate sales of
bioethanol in much the same way that biodiesel sales have grown. The budget in 2004 indicated that
these incentives would remain for at least the next three years.
In terms of future financial policy, the UK government will investigate incentives for existing refineries to
use biological inputs next to their traditional fossil fuels where technically possible (“input taxation”), and
the use of enhanced capital allowances for production facilities.
In determining future policy, the main focus is the increase of sales of biofuels in the medium-term,
however the UK government is also interested in encouraging domestic production over imports where
this is compatible with EU Competition laws. The consultation that is currently in progress asks for
stakeholder views on the extent to which the Government should support the development of the UK
biofuels industry.
The UK consultation paper also includes a cost benefit analysis of meeting the EU reference points in
2005 and 2010 which estimates that the introduction of biofuels could cost 353 £/tonne carbon to meet
the 5.75% reference point in 2010 (using sales as an estimate of energy content.) Although expensive
compared to measures available in other sectors, this is a relatively low cost for carbon abatement in
52
transport. The comparison with other sectors could become a key factor in determining the availability
of raw materials for biofuels production versus the power generation sector.
Future regulatory and support measures being considered by the UK government include:
•
Increased fuel duty incentives;
•
A stepped approach to the fuel duty incentives to limit cost to the Exchequer;
•
Renewable fuels obligation along a similar design to the Renewables Obligation in the electricity
supply sector;
•
Voluntary agreements with the oil industry (not favoured by industry);
•
Regional capital grants for biofuels plants;
•
Enhanced capital allowances for biofuels production processes;
•
Research and development incentives e.g. Fischer-Tropsch biodiesel;
•
Certification for imports.
It is important to bear in mind that UK sales of biofuels is the focus of many of these policy drivers, and
therefore they may not affect the biofuel content of exports from the UK to Ireland. When a clear policy
direction has been chosen it will become clearer whether the UK policy will stimulate a UK biofuel
production industry, or merely encourage imports. The resulting strategy can then be assessed in more
detail for its impact on Ireland.
Although the UK is likely to indicate a target below the EU reference point in 2005, the UK biofuels sector
is confident that, with sufficient support, it could produce enough biofuels to reach the EU reference
point for 2010. Other factors are also important in meeting the 2010 target, including considerations of
engine limitations. The UK will not notify the Commission of its decision on the 2010 target until policy
drivers have been considered, and may leave this decision until the 2007 deadline.
8.2
Biofuels from the EU25
To map the possible import of biofuels from, or export to other European countries, this section
estimates the amounts and costs of biofuels in these countries. The analysis has been limited to the
production of biodiesel from rape-seed and sunflower, and the production of bioethanol from sugar
beet or wheat. The production of biofuels from residue streams has not been accounted for, neither has
the (post 2010) production of biofuels from lignocellulose biomass.
The assessment of European biofuel production costs and potential was carried out by calculating the
amount and costs of biofuels in separate regions (NUTS II*), and ranking the results by increasing
production costs.
Biodiesel
In the period 2000 to 2010 rapeseed prices are expected to rise from 226 to 240 €/tonne and for
sunflower seed from 245 to 271 €/tonne. Feedstock prices and average yields* for rape seed and
*
The Nomenclature of Territorial Units for Statistics (NUTS) was established by Eurostat more than 25 years ago in order to
provide a single uniform breakdown of territorial units for the production of regional statistics for the European Union.
Since this is a hierarchical classification, the NUTS subdivides each Member State into a whole number of NUTS 1
regions, each of which is in turn subdivided into a whole number of NUTS 2 regions and so on. NUTS-2 regions have a
population threshold of minimum 800 thousand and maximum 3 million [67].
53
sunflower were included as input values in this cost assessment. The average feedstock costs per hectare
for rape-seed and sunflower used for 11 Member States was 650 €/ha and for the rest 300 €/ha†. These
figures correspond to the average prices of 230 €/tonne for oilseeds in the EU. The selling price for rape
seed cake was 0.104 €/kg and for glycerin 0.0833 €/kg [68]. However, if the biodiesel industry introduces
large amounts of glycerin into the market, it is expected that this figure will be reduced substantially. In
this respect, the pharmaceutical industry is paying close attention to the developments of the biodiesel
industry and how the global market price of glycerin is affected by increasing the biofuels shares.
A cost assessment‡ has been carried out for all for all EU-15 Members States and their corresponding
NUTS-2 regions in order to generate cost-potential curves (supply curves) and identify countries
potentials as well as export possibilities among various Member States.
Bioethanol
A similar approach was used to evaluate the different cost components for bioethanol production from
wheat and sugar beet.
The wheat yield figures for each Member State and their corresponding NUTS-2 in the period between
1998 until 2001, were obtained from EUROSTAT and DG Agriculture's statistics. The bioethanol
conversion rate from wheat used in this assessment is 350 litres per tonne. In this calculation 900 €/ha
was used for feedstock costs, corresponding to 140 – 180 €/tonne. No revenues for by-products are taken
into account.
The cost assessment for bioethanol production from sugar beet assumes a net sugar beet feedstock
costs of 26 €/tonne. This figure is based on the world sugar beet market prices and the B-quota for sugar
beet. The category called co-product credit corresponds to the value of by-products obtained by the
bioethanol production process. For the case of sugar beet the by-product generated is called sugar beet
pulp and this is valued at 0.03 €/litre ethanol according to Enguidanos, Soria, Kavalov [69].
The conversion and blending costs are related to additional storage and logistics costs, and the costs of
adapting gasoline to avoid excessive vapour pressure [70]. In these calculations it was assumed that
ethanol with high purity (99.9 %) was used in a blend of 5 percent with gasoline. The distribution costs
are those of bringing the fuel from the factory to the end-user, and they are estimated at 0.10 €/litre
according to Van den Broek, et al. [41].
*
Average yields figures for each Member State and their corresponding NUTS 2 regions for the years 1999, 2000 and 2001 were
obtained from EUROSTAT. The same applies to the case of bioethanol.
†
European Commission, Prospects for Agricultural Markets 2002 – 2009, June 2002. 650 €/ha was used for Austria, Belgium,
Germany, Denmark, France, Finland, Ireland, Luxembourg, Holland, Sweden and United Kingdom. For Spain, Greece,
Italy and Portugal 300 €/ha.
‡ Unitary costs and consumption values for water, energy and other inputs were obtained from a detailed study from St. Stephen
University. Input data from yields and other unitary costs figures were obtained from EUROSTAT New Cronos Database
on 15th August 2003. The costs include the conversion from oil to methyl ester. From 1000 kg rape-seed, about 350 kg
oil and 610 kg oil cake is produced. From 1000 kg sunflower seed, 400 kg oil is produced.
54
As a result of these cost assessments, total bioethanol costs from wheat in the EU 15 and new Member
States vary from 0.60 up to 1.18 €/litre with an average figure of 0.74 €/litre (see Table 8-1). In the case of
bioethanol from sugar beet, the average figure for EU-15 is slightly cheaper with 0.60 €/litre. Note that in
this table bioethanol in Ireland costs respectively 31 €/GJ (0.65 €/l) and 27 €/GJ (0.57 €/l) when produced
from wheat and beet. Wheat ethanol is here thus 11 €/GJ more expensive than was calculated in Chapter
6. This can completely be explained by the fact that revenues for the co-produced cake-meal are not
incorporated here.
Cost – Potential Curves
In order to produce cost potential curves or supply curves for the various biofuel possibilities in the
short-term (2010), it is necessary to obtain feasible potential figures for each Member States in the
European Union context. For this purpose, some assumptions regarding land allocations for the
production of feedstock for energy purposes were used based on the Prospects for Agricultural Markets
for the period 2002 – 2009 from DG Agriculture.
The most recent reforms of the Common Agricultural Policy (CAP) stipulate that non-food crops (e.g.
energy crops) can be produced in certain agricultural areas or set-aside land. The set-aside scheme
allows Member States to establish compulsory and voluntary set-aside areas for non-food purposes. This
Table 8-1. Biofuel Costs – EU – 15 + 10 + 2.
Country
AT
BE
DE
DK
ES
FR
FI
GR
IE
IT
LU
NL
PT
SE
UK
EU-15
CR
EST
LAT
LIT
HUN
POL
SLO
SLK
CYP
MAL
CC-10
BU
RO
CC-12
TU
EU-25
Bioethanol Total Costs
Total Costs (Wheat)
Total Costs (Sugarbeet)
Eur/L
Eur/L
0,79
0,62
0,66
0,61
0,73
0,58
0,77
0,63
0,87
0,47
0,71
0,72
1,18
0,68
0,87
0,54
0,65
0,57
0,87
0,61
0,84
0,62
0,66
0,58
0,75
0,60
0,88
0,55
0,75
0,61
0,80
0,6
0,61
0,56
0,76
0,47
0,70
0,50
0,61
0,49
0,60
0,54
0,62
0,53
0,61
0,57
0,59
0,53
n.a.
0,37
n.a.
0,37
0,64
0,52
0,63
0,43
0,64
0,44
0,63
0,50
0,70
0,54
0,690
0,57
55
Biodiesel Total Costs
Total Costs
Eur/L
0,81
0,67
0,58
0,69
0,79
0,69
1,37
0,72
0,71
0,72
0,67
0,56
0,79
0,79
0,7
0,75
0,53
0,60
0,58
0,56
0,58
0,54
0,53
0,55
n.a.
n.a.
0,56
0,8
0,7
0,76
0,54
0,7
scheme remains unchanged in the latest CAP reform of 2003 (see summary of CAP reform in Annex B).
Figure 8-1. Arable Land Allocation– Set Aside Development 1989 – 2009 (mio. ha) [71].
As observed in Figure 8-1, the rate of development of the total area of set-aside land has been quite
irregular during the 1990’s fluctuating between 2 to 10 percent. The CAP reform in 2000 established 10
percent as a compulsory set aside rate, representing an advantage for the stable cultivation of non-food
crops. If such land is used for the production of energy crops, security of supply might be guaranteed,
however, feedstock prices are a decisive factor for production volumes and import/exports trade.
It is important to remark that the uncertainty in the permanence of this compulsory rate lends great
uncertainty to the biofuels industry.
Within this framework the regional and national potential analysis for every member state was calculated
based on the assumption that all crops harvested for the production of biofuels are grown on set- aside
areas. The total area considered to calculate the different set-aside percentages is based on the arable
land values and not on the total land records. An explanation of the way the information was organised
for the purpose of building up the cost potential curves follows.
The maximum potential is defined as the current and future land availability multiplied by the
corresponding yield of the crops for the production of each particular biofuel.
Bioethanol and biodiesel potentials were calculated based on an assumed set-aside rate of 15 percent
which is likely to occur due to voluntary set-aside areas allocations as well as extra agricultural land used
for non-food instead of food purposes. In regard to bioethanol, two potentials were calculated. The first
one is calculated on the assumption that 15 percent set aside rate is used to grow wheat for bioethanol
production. The second one is based on an assumption of 10 percent for wheat and 5 percent for sugar
beet.
Furthermore, in the case of biodiesel, the share of production between biodiesel from rape-seed and
sunflower was calculated based on the harvested areas during the period from 1998 and 2001 obtained
from EUROSTAT. The historical land use showed the regions and countries where either sunflower or
rape-seed or both were grown. From this figure, the percentage of sunflower and rape-seed in each
particular region and Member State was calculated and these results were used to calculate the biodiesel
potential.
For the purpose of obtaining ascending cost potential figures and maximum potentials the input
information was arranged as follows:
56
•
Cost figures were organized from the lowest options (cheapest regions) up to the most
expensive ones.
•
Potential information was calculated for each particular region at the NUTS 2 level. A country’s
maximum potential is defined as the cumulated sum of the potential of all regions.
Figure 8-2 shows the cost-potential curve (supply curve) obtained for biodiesel and bioethanol for the
European Union from the cost assessment and biofuels potential calculations. Three scenarios are
presented:
•
Biodiesel Supply Curve – Potential calculation based on 15 % of arable land.
•
Bioethanol from wheat Supply Curve – Potential based on 15 % of arable land.
•
Bioethanol Supply Curve from wheat and sugar beet – Potential based on 10 % of arable land for
wheat and 5 % set aside land for sugar beet.
The targets of the EU biofuel Directive are included in the graph. The 2005 targets of the EU biofuel
Directive can be met by either biodiesel or bioethanol from wheat (all three scenarios). However, the
2010 Directive targets can only be met by bioethanol using one third of the bioethanol production from
sugar beet (i.e. only scenario 3). The surplus production of biofuels after meeting the targets
requirements is likely to occur at relatively high costs (above 35 €/GJ).
The total potential for bioethanol increases by about 68 % when replacing 1/3 of wheat area with sugar
beet. This corresponds with on average a 2.5 times higher ethanol yield per ha.
The cost results observed in Figure 8-2 will increase moderately in the case where Ireland is importing
biofuels as a consequence of international transportation costs as well as customs and import taxes.
Table 8-2 includes the international transportation costs for both solids and liquids (waterway) from the
various Member States. Observe that on average, the international transport costs from countries with
surplus potential in 2005 (e.g. Germany, France) vary between 0.30 €/GJ and 0.45 €/GJ. Spain has higher
costs of approximately 0.96 €/GJ, not considerably increasing the biofuel costs in Ireland.
International transport of biomass (pellets) will add about 0.5 €/GJ when transported in large ships
(Panamax). For the case of ethanol transported in large amounts, the cost figures are likely to increase by
approximately 0.2 €/GJ [62].
57
140
Biodiesel SC
Bioethanol Wheat (10% AL) - Sugarbeet (5%AL)
Bioethanol SC (Wheat)
2010 Target
120
100
Costs
[EUR/GJ]
80
2005 Target
60
40
20
0
0
100
200
300
400
500
Potential [PJ]
600
700
800
900
1000
Figure 8-2. Cost – Potential Curve (supply curve) for biodiesel and bioethanol. The curves are
mutually exclusive.
Table 8-3 includes information related to Irish customs duties as well as excise duties for alternative fuels
for transportation imported outside the European Union (customs duties from imports inside the EU are
zero). Information was provided by the Irish Customs Branch, Unit 2 Government Offices, Nenagh, Co.
Tipperary.
Table 8-2. International transportation costs € /tonne.
Country
AT
BE
DK
FI
FR
DE
GR
IT
LU
NL
PT
ES
SE
UK
PL
Distance in km from Ireland, Dublin (waterway)
2300
1300
1700
3300
700
1800
5300
4200
1600
1500
1400
2800
3200
240
2600
58
Costs (€/t)
solids
liquids
26,60
12,20
14,20
9,80
17,30
11,20
39,90
27,72
11,90
8,40
18,20
11,90
66,50
46,20
53,20
36,96
16,56
10,43
16,56
10,43
16,56
10,43
37,24
25,87
39,90
29,57
8,40
7,80
33,25
24,02
Table 8-3. Irish import duties and excise rates for biofuels*, in €/litre and %.
Biofuel Type
Import duty
Excise rate
Biodiesel (RME) -Commodity N. 3824 90 9999 2501
6.5 %
0.368 Eur/L
Ethanol - Commodity N.2207 10 00 10 or 2207 10 00 92
0.192 Eur/L
0.368 Eur/L
ETBE
5.5 % (In some cases a preferential trade of 2% applies) 0.368 Eur/L
Figure 8-3 gives an idea about the countries with possible surplus production of biodiesel after covering
the EU Directive target requirements in 2005. However, market forces such as higher biofuel selling
prices or demand in other EU Member States, as well as higher reductions in excise duties are also factors
that will foster trade inside the EU. Potential countries with relatively interesting surplus are France,
Germany and Spain in the case of biodiesel. Observe that the New Member States are projected to have a
strong biodiesel surplus in 2005, especially the Czech Republic, Hungary and Poland. If biodiesel
production takes place at favourable costs, it may be possible for Ireland to import from these countries.
The countries with possible surplus production of bioethanol beyond the EU directive targets in 2005 are
included in Figure 8-4. Market forces such as higher biofuel selling prices or demand in other EU
Member States, as well as higher reductions in excise duties are also factors that will foster trade inside
the EU. In the case of bioethanol from sugar beet and wheat as the main feedstock, the countries with
higher surplus potentials are France, Germany, Spain, Italy and the UK. In regard to New Member States,
Hungary, the Czech Republic and Poland are countries with higher potentials and export possibilities
from these countries are likely to occur.
Figure 8-5 and Figure 8-6 include the surplus potential for both biodiesel and bioethanol in 2010.
Notice that for biodiesel none of the EU15 countries has the capacity to export unless more land is
allocated to the growth of energy crops for biodiesel production. Furthermore, almost all the New
Member States with the exception of Slovenia, can comply with the established targets, due to lower
population densities and lower transport energy demand. Bulgaria and Romania potentially have a small
surplus. Poland, Hungary and the Czech Republic have the largest surplus, and therefore export
possibilities in 2010.
In Figure 8-5 Ireland seems to be able to produce enough bioethanol on set-aside land to meet the 2010
target, where in the resource chapter the potential of biofuels from set-aside land was much smaller. This
is caused by a different assumption of the set-aside rate of 5 % in the resources chapter, compared to 15
% here.
Compliance with the 5.75% target in the European Union could be accomplished without imports only in
the case where ethanol is produced from wheat and sugar beet. However, other estimates, such as the
one from Berg [73], reveal that the European Union is likely to be a net importer of ethanol in the short
term. However, it is important to notice that all New Member States including Romania and Bulgaria
could eventually comply with the proposed targets for 2010 and additionally countries like Poland, the
Czech Republic, Hungary, Lithuania and Romania would be able to offer considerable amounts of
bioethanol for export to other EU countries.
* Ethanol being imported for use as a biofuel will have a liability to Alcohol Products Tax. It will therefore require to be denatured. A
recently issued Revenue Commissioners' Public Notice No. 1887 details the procedure for receipt and use of denatured and
undenatured alcohol products without payment of Alcohol Products Tax [72].
59
120
Biofuel Targets 2005
Difference to target (Surplus)
100
80
60
PJ
40
20
0
-20
AT
BE
DE
DK
ES
FI
FR
GR
IE
IT
LU
NL
PT
SE
UK
CR
ES
HU
LA
LI
PO
SK SLO BU
RO
Figure 8-3. Biofuels Target and Difference to Target EU-15 +10+2 – Biodiesel Scenario
2005.
350
Biofuel Target 2005
Difference to Target (Surplus)
300
250
200
PJ
150
100
50
0
AT
BE
DE
DK
ES
FI
FR
GR
IE
IT
LU
NL
PT
SE
UK
CR
ES
HU
LA
LI
PO
SK
SLO
BU
RO
Figure 8-4. Biofuels Target and Difference to Target EU-15 – Bioethanol (2/3 wheat, 1/3
sugar beet) 2005.
60
200
Difference to target
Biofuel Targets 2010
150
100
PJ
50
0
-50
-100
AT
BE
DE
DK
ES
FI
FR
GR
IE
IT
LU
NL
PT
SE
UK
CR
ES
HU
LA
LI
PO
SK SLO BU
RO
Figure 8-5. Biofuels Target and Difference to Target EU-15 – Biodiesel - 2010.
350
Biofuel Target 2010
Difference to Target
300
250
200
PJ
150
100
50
0
-50
AT
BE
DE
DK
ES
FI
FR GR
IE
IT
LU
NL
PT
SE
UK
CR ES
HU
LA
LI
PO
SK SLO BU
Figure 8-6. Biofuels Target and Difference to Target EU-15 – Bioethanol - 2010.
61
RO
8.3
Biofuels from the world market
The recent trade agreements between the European Union and Mercosur* establishing import quotas of
bioethanol from Brazil are a confirmation of the growing world ethanol market. Various producers'
federations in Europe have expressed their concern in regard to this matter because such trade could
affect the current support activities to promote the European biofuel industry. The import of ethanol at
considerably lower prices from Asia or South America to the EU will have a significant effect on the
competitiveness of the emerging biofuel industry in the short term.
The main exporting countries in the global ethanol market are Brazil, China, Thailand, Saudi Arabia,
South Africa, USA, Australia, India and Argentina. Figure 8-7 includes the trade volumes between the
main importers and exporters worldwide [73]. Brazil and China are the countries that have the highest
potential available for exporting. The world ethanol market prices according to Brazil figures (world’s
biggest producer) varied between 20 and 30 € cent/litre between 2001 and 2004 [74]. Future countries
with relatively high export potential are Peru, Central American countries and Colombia.
Figure 8-7. Trade volumes in 2002 (Million litres) [73].
*
The Mercosur is a trade agreement among Argentina, Brazil, Paraguay, Uruguay, Chile and Bolivia with the goal to
create a common market/customs union.
62
Figure 8-8. World Ethanol Production by Country (million litres) [73]. In 2003 Brazil's Production
was ca. 16.000 million litres, and USA’s was ca. 11.000 million litres.
In 2004, Brazil launched an ‘ethanol futures’ contract in New York with the aim to promote the
development of an international market for green fuel and reduce uncertainty as well as price risks.
Furthermore, a futures contract will establish a price benchmark and boost Brazilian exports in the short
and medium term, according to producers, analysts and traders [75]. This kind of contract will definitely
attract oil companies, refineries and distributors amongst others. These players are expected to be based
mainly in the United States, and other countries like EU Member States, including Ireland, which have set
up biofuel targets in their internal transportation markets. The futures market will therefore establish a
price level for determined contracts that could offer profits and security to both the producer and
consumer.
The short-term prospects are likely to remain the same however, the briefing note on Liquid biofuels
states that ethanol production from sugar beet in Ireland merits special considerations because of its
potential synergy with the existing sugar industry (SEI 2003). The study also specifies that Greencore plc
has indicated an interest in building a plant to produce ethanol from beet and molasses covering
approximately 25 percent of the indicative substitution target in 2005. Most of the necessary
infrastructure is already in place, only the fermentation and distillation plant would need to be added.
Therefore, if Ireland engages into building up the necessary infrastructure for the production of biofuels,
it is likely that some import volumes will include feedstock materials if world market prices for wheat,
rape and sunflower are favourable.
In accordance with the current perspective of the Irish biofuel market, it is very probable that the
expected supply shortage to achieve the indicative substitution markets in 2005 will be met by imports
rather than domestic production. Brazil and some Asian countries already exporting to the UK could be
an attractive option for Irish producers. As an example, British processors obtain soy and palm oil at 50 100 €/tonne less than the UK produced rape-seed methyl ester (Institute of European Environmental
Policy March 2004).
Furthermore, imported Brazilian bioethanol costs after blending and retail margins, can be as much as
0.16 €/litre (10 pence/litre) below UK alternatives made from sugar beet and wheat, according to the
recent East of England Development Agency (EEDA) study [76]. The application of an import duty in
63
Ireland for denatured alcohol coming from Brazil, U.S or any other country outside the European Union
is around 0.192 €/litre according to the Irish Customs Office [72]. This figure would bring costs closer in
line with that of Irish-produced bioethanol.
Another important objection to imports arises from the fuel cost of shipment, particularly from long
distances (e.g. Asia, Latin America). It should not be assumed that imports from the tropics will
necessarily be unsustainable due to an increase in energy costs and balances. In contrast, there might be
certain advantages in growing certain highly productive crops in tropical environments while efficient
long distance transport, at relatively low costs, is not expected to affect the environmental energy
balances considerably.
In addition, it is very likely that other EU Member States with lower customs rates for biofuels will import
higher supplies. It is anticipated that there will be limited international trade transactions in refined
liquid biofuels in the medium term due to scarcity of supply and increasing domestic European and
Asian demands [76]. Major domestic sugar processors in UK are confident that they could compete with
these figures if they receive adequate support.
8.4
Main conclusions
Compared to the targets of the biofuel Directive for 2005 the countries of the EU-15, as well as of the EU25, show large surplus potentials in all three scenarios considered here (all biodiesel, all bioethanol from
wheat, bioethanol from wheat and from sugar beet). In this case the surplus potential from biodiesel is
available at the lowest costs of about 20 €/GJ.
Compared to the targets of the biofuel Directive for 2010 the countries of the EU-15 as well as of the EU25 show surplus potentials only in the scenario with bioethanol from wheat (10% arable land) and from
sugar beet (5 % arable land). The costs will be significantly higher in this case and amount to about 35
€/GJ.
The export potentials from other world regions (in particular from Brazil, China and Thailand) are very
large compared to the size of the Irish market. If demand is likely to increase due to a cut in excise duties,
or other support policies in the Irish market, an increased flow of imports is likely in the short term. In the
long term the availability of imports and their likely price is not so clear, however, a futures contract, as
established by Brazil could reduce price risks and uncertainty significantly.
The import of bioethanol from other EU Member States with potential surplus should include the
international transportation cost figures as included in Table 8. This figure varies between 0.5 €/GJ and 2
€/GJ for bioethanol from Europe.
Where bioethanol is being imported from Latin America, transportation costs in large vessels are
approximately 1 €/GJ additional to the Brazilian market price. Furthermore, import taxes of 9.1 €/GJ
(0.192 €/l) should be added to the before mentioned figure.
64
9 Policy Incentives, and Evaluation
In this chapter we present a qualitative multi criteria analysis of various policy alternatives to stimulate
the introduction of biofuels into the Irish transport sector.
Various implementation strategies have been analysed:
1.
Excise duty exemption
The government will exempt biofuels from excise duty in such a way that their cost at the pump
becomes the same as that for fossil fuels.
2.
Levy / subsidy
A separate levy is introduced on top of the current excise duty. This money will not enter the
government budget, but is used by a separate (government controlled) independent institute
that subsidises biofuel producers per GJ of biofuel produced.
3.
Irish obligation
The Irish government introduces an obligation into the fuel market that each seller of transport
fuels is required to redeem a number of biofuel certificates at the end of each year. Certificates
are obtained by biofuels producers from an independent Issuing Body and can be freely traded
within Ireland. Not fulfilling the obligation will be penalised by sufficiently high penalties (which
will stimulate market players to fulfil the requirement).
4.
EU obligation
As with 3, but here the certification and obligation system will be an EU-wide system, so that
certificates can be bought from producers in countries with lower biofuels costs.
5.
Tender system
This is the equivalent of the Alternative Energy Requirement in the electricity market. The
government can launch tenders for batches of biofuels or the whole 2005 or 2010 directives.
This will be done in competition to potential biofuel-producing companies.
65
The evaluation criteria in this multi-criteria analysis are described below:
a.
Cost limitation for Government:
The extent to which government spending can be minimised in reaching the biofuels targets.
b.
Effectiveness
The extent to which it can be expected that the biofuel targets will really be met.
c.
Value for money for Government
The ratio between a and b.
d.
Implementation speed
The extent to which a given policy measure will stimulate the rapid introduction of biofuels.
e.
In line with other EU countries
The extent in which the policy measure is in line with policy measures that are already in place,
or planned for, in other EU countries.
f.
Potential to stimulate new technology
The extent to which the policy measure can be used to stimulate the development of new
technology (e.g. LC ethanol or FT diesel).
g.
Generates employment
The extent to which the policy measure is expected to generate additional employment within
Ireland.
h.
Generates value added
The extent to which the policy measure is expected to generate additional value added within
Ireland
i.
Cost limitation for users
The extent to which increased fuel costs to consumers are being kept limited.
j.
Market oriented
The extent to which a policy measure can let the market mechanisms work optimally in
reducing overall costs.
66
Table 9-1 shows the overall result of this multi criteria evaluation
Table 9-1. Multi-criteria assessment of implementation strategies.
Qualification
Cost limitation for Government
Effectiveness
Value for money for Government
Implementation speed
In line with other EU countries
Potential to stimulate new technology
Generates employment
Generates value added
Cost limitation for users
Market oriented
Excise duty
exemption
Levy /
Subsidy
Irish
Obligation
EU
Obligation
Tender
+
++
+++
+
+
+++
+
++
+
+
+
++
+
+
+
++
+++
+++
+
++
++
++
+
++
++
++
++
-+
++
++
+
++
++
+
+
+
+
+
+
++
Excise duty exemption
Table 9-1 shows that the main advantage of an (partial) excise duty exemption is the fact that this
system has already been implemented and/or is under consideration in some other EU countries, e.g. the
UK, Germany and France. Further, it is an instrument that can be implemented on a relatively short term.
Finally, it has the advantage that the users will not or hardly note any price difference in the products
that they buy.
However, there are also disadvantages. First of all, it is an expensive measure for the government,
because of the foregone tax income. Further, an excise duty exemption is a fiscal measure that normally
cannot give firm long-term guarantees to market players. It is also likely to be rather inflexible in the
sense that normally an exact definition of a blend (e.g. E5 or E2) will have to be given, which limits
technological choices that can be made by market players, which may lead to sub-optimal cost levels.
Finally, its effectiveness may be limited as well, because it is not sure whether the market players will
indeed introduce the biofuels according to the necessary target as a result of the excise duty exemption.
This is especially the case since this report has shown that with the Irish excise duty levels, in order to
achieve an equal GJ price at the pump, a full excise duty exemption is likely to be insufficient for both
ethanol and biodiesel.
Levy / subsidy
A biofuel subsidy per unit of biofuel produced can in principal be financed by means of an additional
general fuel levy, which remains outside of the government budget and is handled by an independent
government controlled body. This system is currently applied e.g. for renewable electricity in the
Netherlands. This has the advantage that the government can more easily give juridically valid long term
guarantees than would be the case with an excise duty exemption. A political advantage would also be
that it is basically budget neutral for the government. However, of course, the other side of the coin is
that the consumer will be confronted with an additional fuel levy. An instrument like this is normally
more flexible for differentiation (as is e.g. shown in the Dutch example) between various types of fuels.
This could e.g. lead to a government choosing for a higher level of subsidy for fuels with a relatively high
CO2 emission reduction. Since the government still has to define the level of subsidy required, the market
orientation of this instrument is limited. The same accounts for the effectiveness, since no guarantee is
given that the targets will actually be reached. An interesting feature, from a national economic point of
view, is that the EU did allow the Netherlands only to give this subsidy to renewable electricity generated
within the Netherlands.
67
Irish biofuel obligation
It is most likely not allowed to obligate market players to blend a certain percentage of biofuels within
the fossil fuels, since normal gasoline and diesel have to be allowed into the market, because of EU
regulations. However, current practice with electricity in e.g. Italy, Belgium and Sweden has shown that it
is possible to oblige market players to redeem a certain amount of certificates. In this way an Irish biofuel
obligation is likely to be possible if it will be implemented together with an Irish biofuel certification
system. Such a system would give certificates to all producers (and possibly importers) of biofuels. These
certificates could then be freely traded within Ireland, possibly apart from the physical fuel. An obligation
for redemption of certificates would create the necessary demand for certificates, which will give them a
market price. An advantage of this system, if well implemented, is that while the market mechanism will
work optimally, at the same time the government has the guarantee that the targets will be met.
Another advantage of certificates is that they can also eventually provide information regarding the
sustainability and the quality of the biofuels. More details regarding such a certification system have
been given by Van den Broek [41] and are currently under investigation by Ecofys and an environmental
organization in the Netherlands.
Certificates are necessary for the implementation of an obligation. However, they can also be used as a
vehicle for the implementation of other policy measures.
A disadvantage of an obligation on the basis of certificates is that the system may be more complex to
implement. Although technically such a system has been proven to be operational within 6 month,
establishing “the rules of the game” amongst the various actors may take some more time.
EU biofuel obligation
A similar picture as with an Irish biofuel obligation can be drawn for an EU biofuel obligation, based on
an EU biofuel certificate system. Basically it is the same type of system, with the advantage that the
market mechanism will work even better here in the sense that the fuels will be produced in those
countries where the cost is the lowest and that all Member States will benefit from this. A disadvantage is
the time needed to implement such a rather complex system, mainly because of the large amount of
market actors and governments involved. However the current harmonization effort of renewable
electricity certificates shows that also such a development, which is still fully based on initiatives of
market players, can go relatively fast.
Tender
Basically biofuels can also be introduced into the market in a system comparable with the Irish
Alternative Energy Requirement (AER) for renewable electricity. The government could open one or
more tenders for the supply of biofuels to the Irish market and guarantee the cheapest bidder to pay him
for the additional cost as compared to fossil fuels. Market mechanisms can work relatively well with such
a system. Dependent on the type of tenders, even long term guarantees could be given. Its effectiveness
can be good. A disadvantage can be the lack of steering such a tender towards the long term
development of more efficient biofuel technology. Another disadvantage is that the government is still
the actor to pay for the additional cost. However, this cost is likely to be lower than in the case of an
excise duty exemption., because of the competition effect.
68
10 Conclusions
Irish fuel context
•
Fuel consumption in the Irish transportation sector is expected to rise towards about 175 PJ in
2005 and 200 PJ in 2010. This means that the reference percentages from the EC biofuels
directive equate to a 2005 target of about 3.5 PJ and a 2010 target of about 12 PJ.
•
There is a lack of data to draw firm conclusions on the question of whether niche markets exist
in Ireland that can fulfil the full Irish biofuel directive target. However, we expect that it is not
very likely that a sufficiently large homogeneous niche market will be found, since the largest
niche market found, the national bus companies, are insufficient to fill in even the full 2005
target.
Availability of biofuel resources in Ireland
•
Technically, Ireland is capable of fulfilling the full biofuel directive targets with indigenously
produced biomass. However, this would mean that part of agricultural productive land that is
currently used for feed, is to be diverted to biofuel production. This will, in turn, induce
additional feed imports.
•
The amount of biofuels that can be produced from Irish residues is about half of the 2005 target.
If, on top of this, currently unproductive set-aside land were used for biofuel production, about
79% of the 2005 and 23% of the 2010 target could be fulfilled with indigenous Irish biomass.
•
In order to produce biodiesel and bioethanol that can compete with biodiesel and bioethanol
production from other EU15 countries, it is most likely necessary to work with relatively largescale plants. Implementation of such large-scale plants could be possible, if they relied not only
on Irish feedstock, but partly on imported feedstock as well.
Technical issues relevant for biofuel chains
•
Biodiesel can technically be blended in any ratio into conventional diesel fuel. However,
biodiesel is more aggressive to certain coatings and elastomers than conventional diesel, so fuel
systems need to be adapted for the use of pure biodiesel and for high percentage biodiesel
blends. The relatively low biodiesel percentages in conventional diesel that are needed to meet
2005 Reference Percentages (RP) of the European Directive 2003/30/EC do not require vehicle
modifications. The new diesel standard EN590:2003 will maximise the volumetric content of
FAME in diesel to 5%. This corresponds with an energy share of about 4.6%, which is lower than
the 2010 biofuel target.
•
Biodiesel can also be produced from RVO or tallow. Low temperature behaviour of these fuels
make it unlikely that they can meet the FAME specs as mentioned above. In order to achieve
this, they will have to be blended with RME. Experts state the RVO part of such a blend should be
limited to about 15-20%. For tallow this figure is expected to be lower, since its low temperature
behaviour is worse than that of RVO biodiesel.
•
In Europe, at present a maximum of 5 vol % ethanol is allowed in gasoline by European Directive
98/70/EC. This corresponds with an energy share of 3.4%. This is higher than the 2005 biofuel
target, but lower than the 2010 target. Vapour pressure is a gasoline characteristic that is limited
69
to a maximum of 60 kPa by European Directive 98/70/EC. For ethanol percentages between 0%
and 10 vol-% in gasoline, the vapour pressure shows a peak above this value. Changing the base
gasoline properties (for instance by reducing the butane content) can remedy this issue, but it
requires modification of the refineries product output, which incurs a cost.
•
In spite of the 32% lower heating value of ethanol as compared to gasoline, some literature
tends to an equal volumetric efficiency of gasoline and ethanol blends (with less than 10%
ethanol) as compared to pure gasoline. On the other hand, there are indications that the
circumstances in which this equality is true are limited as well. Because of the uncertainty on this
point, this report has used the estimate that 1 MJ of ethanol replaces 1 MJ of gasoline (i.e. 1 liter
of ethanol replaces 0.68 litre of gasoline).
•
Meeting the 2005 Reference Percentage is possible under current fuel standards and directives
with all biofuels considered. However, these standards and directives do not give sufficient
space for meeting the 2010 Reference Percentage of the biofuel directive 2003/30/EC. One can
only meet this directive by:
•
•
(Partly) using biofuels or biofuel/fossil fuel blends that do not meet the current fuel
directive (98/70/EC) regarding ethanol or the current diesel standard (EN 590:2003)
regarding FAME. This will imply that part of the current vehicle fleet will be unable, in
its current state, to use those fuels.
•
Adapting the maximum ethanol percentage allowed in European Directive 98/70/EC
and/or the maximum FAME percentage allowed in standard EN590:2003, before 2010.
However, this will have to be agreed upon by the most important stakeholders, such
as the car manufacturers and the oil industry.
•
Introducing new biofuels (other than ethanol and FAME) that do meet the current
gasoline and diesel directives and standards.
Transportation of the biofuels under consideration in general can be either by ship, rail, road or
pipeline. In the case of biodiesel and ethanol/gasoline blends, it is particularly important that
the ingress of moisture during transportation is limited as much as possible, to avoid fuel quality
degradation. For this reason, ethanol/gasoline blends are not transported by pipeline in
practice. During storage of biofuels, water ingress must also be avoided. Biodiesel and
ethanol/gasoline blends should not be stored longer than a few months. It is recommended to
store ethanol/gasoline blends in tanks with floating covers.
Environmental impacts
•
The best estimate of GHG emission for biodiesel from rape-seed is about 50 % of that of
conventional diesel. The majority the estimates lie between 30 and 50 %.
•
The only study that analysed bio-methyl ester from RVO estimated a WTW GHG emission of 16%
of the diesel emission within a small range (14-19 %).
•
The best estimate of well-to-wheel GHG emission for bioethanol from sugarbeet was about 45 %
as compared to its fossil alternative. Most estimates ranged between about 40 and 60 % of fossil
fuel emissions.
•
The best estimate of well-to-wheel GHG emission for bioethanol from wheat was at about 1/3 of
the gasoline emission. Most estimates ranged between 30 and 60%.
70
•
From the breakdown of the biofuel GHG emissions, we learned that with bioethanol from
sugarbeet about 25% of the GHG emissions take place in the field. With bioethanol from wheat
this is about 35% and with biodiesel this is about 60%.
•
Biomass-based Fischer Tropsch diesel WTW GHG emissions are very low. It is estimated at about
15% of the diesel WTW chain. The overall range goes from – 9% to +34% of diesel emissions.
•
A wide range was found for WTW GHG emissions of ethanol from ligno-cellulosic biomass. It is
estimated that these emissions are about 18% of the gasoline emissions as used in this study. All
estimates found (for the conservative estimate) ranged between –18% and 81%.
•
Much less literature was found on well-to-wheel acidifying and toxic emissions than on GHG
emissions. Reliability and representativeness is considered to be less than with the analysis of
GHG emissions:
•
Well-to-wheel emissions on SOx are found to be significantly lower for biodiesel.
•
NOx emissions over the whole biodiesel chain are found to be about 30% higher. This
higher NOx emission is almost completely caused by tractor use during rape-seed
production. It seems, however, to be based on relatively old emissions data. Future
more stringent NOx emission standards for tractors would reduce the indirect NOx
emissions in the RME chain. If the rapeseed or biodiesel is imported, the NOx emission
by tractor use is generated outside Ireland.
•
VOC emissions of biodiesel are found to be about half those of fossil diesel, but CO is
found to be slightly higher.
•
Well-to-wheel PM emissions are found to be slightly higher with biodiesel.
•
Regarding bioethanol, the data suggest higher NOx emissions, although ranges
reported in both the bioethanol and the gasoline based NOx emissions are very large.
Reliability of the data seems to be relatively low.
•
CO and HC emissions appear lower on average with bioethanol.
Costs
•
Because of different heating values, costs of biofuels and fossil fuels are best compared on the
basis of their energy content. All costs presented below are at the refilling station and they
include costs for blending and costs and margin for fuel distribution and retail but exclude
excise duty and VAT. Feedstock costs are based on Irish data and conversion and distribution
costs on international literature.
•
Fossil diesel costs are about 10 €/GJ (0.34 €/l). Costs for RME are about 2.5 times higher. For
biodiesel production from tallow and/or RVO this differences is less than a factor of 2. In the long
term, Fischer Tropsch diesel is expected to be produced for a cost that is roughly 30% higher
than fossil diesel.
•
The difference between gasoline and ethanol is found to be slightly higher. Cost of gasoline at
the refilling station is about 11 €/GJ (0.33 €/l). Ethanol (from wheat) can be produced for about
27 €/GJ (0.58 €/l). Long-term estimates for ligno-cellulosic biomass indicate cost levels of about
16 €/GJ (0.33 €/l).
•
In order to get equal litre prices for the consumer at the pump for RME an excise duty
exemption is required of about 47 ct/l (being higher than the actual excise, 37 ct/l). In the case of
71
RVO based biodiesel the required excise would be about 22 ct/l. In the case of ethanol from
wheat, the excise duty exemption needed would be about 25 ct/l (as compared to an excise of
44 ct/l).
•
The cost per tonne of CO2-eq. avoided in the case of biodiesel is about 340 €/tonne. With RVO
based biodiesel this is about 100 €/tonne. In the case of bioethanol, this is 300 - 450 €/tonne.
Macro-economic impacts
•
In general it can be concluded that bioethanol production from wheat on set-aside land scores
similar to gasoline on the contribution to the GDP (i.e. value added creation). Job creation,
however, is a factor 25 higher than with gasoline. Ethanol production from imported wheat
creates somewhat less value added, creating 6 times more employment than with the current
gasoline-based system. Imported ethanol from within the EC creates no net value added in
Ireland at all. Employment generation from imported ethanol (from EU or world) is only slightly
higher than the employment from gasoline.
•
The comparison between biodiesel and fossil diesel is rather similar. The main difference is that
imported bio-oil for biodiesel production also scores significantly less in terms of value added
creation when compared to fossil diesel. In the case of import of biodiesel, the net value added
creation is negative.
•
Total government income in the ethanol set-aside scenario is about half of the income that the
government has with gasoline. Approximately 60 % of the total costs of the excise duty
exemption (including the subsidy needed) can be earned back as a result of additional tax
income and savings on unemployment payments. In the case of ethanol from imported wheat
net government income per litre of ethanol sold is about zero (i.e. the income on savings from
job seekers allowances and additional taxes equals the necessary fuel subsidy). In this import
situation only about 15 % of the cost of the full excise duty exemption can here be recouped. In
the case of imported ethanol, the net government income is negative. Only a few percent of the
full excise duty exemption is earned back in this case. Ethanol can be imported from Brazil
against much lower prices. Therefore the sum of import tax and excise duty that can be imposed
is positive.
•
We have argued that the wheat import case is basically similar to using wheat that is currently
produced for feed purposes. The preceding bullet leads to the conclusion that for the GDP of
Ireland it is only slightly more attractive to use currently produced Irish wheat instead of
importing bioethanol from Brazil. For the treasury, however, importing bioethanol from Brazil is
more attractive than importing wheat or using currently produced Irish wheat.
•
When comparing biodiesel with diesel, a similar type of effect is observed in terms of the impact
on the treasury, although exact figures are somewhat different.
•
A maximum of only 1.1 PJ of biofuel (of the 3.5 and 12 PJ targets) can be produced on set-aside
land in Ireland. Therefore, a significant component of biofuels feedstock will have to be
imported. If current crops are used for bioethanol production, additional feed will have to be
imported, which will have an impact comparable to that described above.
Import of biofuels
•
Compared to the targets of the biofuel Directive for 2005 the countries of the EU-15, as well as
the EU-25, show large surplus potentials in all three scenarios (as derived from the FORRES
72
project: all biodiesel, all bioethanol from wheat, bioethanol from wheat and from sugar beet). In
this case the surplus potential from biodiesel is available at the lowest costs of about 20 €/GJ (66
ct/l).
•
Compared to the targets of the biofuels Directive for 2010, the countries of the EU-15, as well as
the EU-25, show surplus potentials only in the scenario with bioethanol from wheat (10% arable
land) and from sugar beet (5% arable land). The costs will be significantly higher in this case and
amount to about 35 €/GJ (74 ct/l).
•
The surpluses and price at which they actually become available for sale will be determined by
the strategies chosen by most countries and the extent to which this leads to a level playing
field between the EU countries
•
The export potentials from other world regions (in particular from Brazil, China and Thailand) are
very large compared to the size of the Irish (and EU) market.
Policy incentives
•
Most EU countries currently choose excise duty exemption as the central policy instrument for
the implementation of the biofuel directive. It is relatively easy to implement and has shown
that it can work in Germany, Spain and France. However, disadvantages to this instrument are
the fact that it gives no long-term guarantee, which is a disincentive for investments and
innovation. Another disadvantage is that the cost to government is relatively high.
•
An alternative is an obligation in combination with a certificate system. The sellers of transport
fuel are then obliged to redeem a certain amount of biofuel certificates at the end of the year.
An advantage of this system is that one has the guarantee that the target will be obtained using
the market mechanism as a driver. Furthermore, it is a flexible system, which could incorporate
other elements, such as information about the sustainability of (imported) biofuels, in the longer
term. A disadvantage is that this policy may require more time than an excise duty to
implement. Ideally, such an obligation should be implemented EU wide.
•
Other alternatives are a system with a levy (outside of the government budget) on
transportation fuels, from which one pays a subsidy to biofuels producers.
•
Finally, the Irish government could organise tenders in order to procure the desired quantity of
biofuels in the market (as was done with renewable electricity in Ireland).
73
11 Policy Recommendations
•
The majority of the EU countries that communicated on their biofuel policy are currently
working with or considering an excise duty exemption system. It is recommended, however,
also to evaluate in more detail advantages and disadvantages of various alternative incentive
systems. A first start for this has been made in Section 7.2 of this report, with the analysis of
excise duty exemption.
•
Value added for Ireland will be created when residues with little other uses will be used to the
maximum for biofuel purposes and when set-aside land will become productive to a maximum
extent. This could be considered in any policy definition.
•
In a similar way value added is created when investments are attracted to Ireland. For this
purpose, it will be necessary that any policy gives as much as possible a long-term incentive
guarantee, preferably for periods of more than 10 years.
•
Since it is likely that the full EC biofuel objectives can only be met by Ireland in the presence of
direct or indirect imports, it can be recommended to assess in detail which way of importing
biofuels may still give the maximum value added to the country. A first start for this has been
given in this report. Here one could for instance compare in more detail (and based on concrete
offers) import of slightly cheaper biofuels from other EU countries (e.g. the new Member States)
versus import of significantly cheaper biofuels from outside of the EU (e.g. Brazil).
•
Since there is a relatively large difference in performance between the short term biofuels and
the second generation longer term biofuels, it is recommended to develop policies that
stimulate the development of the latter types of fuels. One option to do this is to stimulate
(international) R&D programmes on this subject. Information on the sustainability, carried on
biofuel certificates, could also facilitate incentive differentiation between various environmental
performance levels of biofuels.
•
For a cost effective policy it is recommended that the government focuses at making a
minimum of technological choices itself. Instead it could stimulate the market players to do this
and create the economic and regulatory environment (e.g. with specific demands regarding
sustainability) in which this can be done. A biofuel certification system could be a good vehicle
for such a policy line, because of the tradability of the certificates.
•
As a result, it is recommended to further investigate the possibility of a biofuel certification
system, which can be introduced in Ireland or with other Member States that are open to this.
This could facilitate policy incentives (especially in the case of a biofuel obligation), and open
the possibility to provide information regarding the sustainability and quality of the biofuel
supplied to the market.
•
It is advised to the Irish government to make an explicit choice whether the target should be
achieved mainly in the mainstream market (e.g. with low blends of bioethanol and biodiesel) or
mainly in niche markets (e.g. with PPO or biodiesel that does not meet the FAME specs), since
these markets may require different policy measures. Of course a combination of both is
possible, but dedicated policy to both market segments will be more complex in that case.
74
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78
79
Annex A Directive 2003/30/EC
80
81
82
83
84
Annex B Summary CAP Reform 2003
Issue
CAP reform 2003 – Subsidies for Energy Crops
Operational period
By 31st December 2006, the Commission shall submit a report to the Council on the
implementation of the scheme, accompanied, where appropriate, by proposals taking
into account the implementation of the EU biofuels initiative.
Specification
An aid of 45 € per hectare per year shall be granted for areas sown under energy crops
(this do not apply to regular set aside entitlements and payments, though certain energy
crops-short rotation coppice-on set aside land will be eligible for set aside payment).
Energy crops shall mean crops supplied essentially for the production of the following
energy products:
•
Products considered biofuels listed in Article 2, point 2 of Directive
2003/30/EC of the European Parliament and of the Council of 8 May 2003 on the
promotion of the use of biofuels or other renewable fuels for transport.
•
Electric and thermal energy produced from biomass.
Major Issues
The CAP Reform proposals mention a series of national or Community ceilings, quotas
and maximum guaranteed quantities.
•
For Energy crops (maximum guaranteed area - MGA)
A MGA of 1 500 000 ha was established by the CAP reform. Originally the purpose
of this aid was to compensate for the abolition of non-food set-aside. However, as
the non-food set-aside has been re-introduced in the final CAP reform texts, the
attractiveness of this scheme decreases and an overshooting of the MGA becomes
unlikely.
•
Non-food set-aside (forecast quantities covered by contracts)
A limit of 1 million metric tons expressed in Soya bean meal equivalents has been
set for quantities of by-products for feed or food uses as a result of the cultivation
of oilseeds on land set-aside. This limit is subject to the Blair House agreement,
meaning that any change would need to be negotiated with the US. For this reason
the agreed limit is maintained in the proposals rather than adjusted.
85
Annex C Arable Aid Applications
86
87
88
89
Annex D Maximum Guaranteed Area for Oilseeds
90
91
Annex E Basic Methodology of Input-Output Analysis
E.1
Macro-economic modelling
The basic principles of the economic modelling methodology are as follows:
E.2
•
Assessment of the “with and without” cases. The macro-economic analysis of the introduction
of a new product (the biofuel) and the related industry is best based on a with/without basis.
The economic impact of implementing the change (eg by certain government measures) needs
to be compared with the economic impact of not implementing this change. Often such an
analysis is done on a before/after basis (comparing of the present situation with a certain future
situation). This does however not fully reflect the fact that the business as usual scenario (in this
case using 100% gasoline derived from fossil fuels) may also change in the future, because
measures regarding energy efficiency improvement that will be undertaken anyway in the
transport sector.
•
Combining efficiency with accuracy. Full scale dynamic macro-economic modelling (eg by
general equilibrium models) will require the use of rather complex and expensive models,
although their results will generally model reality relatively accurately. Simple Input-Output
models, combined with micro economic analysis of the product chain under consideration, are
relatively time efficient to undertake. Although they are less reliable in terms of results, they can
still provide a first order estimate of the macro-economic impacts.
The impact of an individual project (or product) on the Gross Domestic
Product (GDP) and employment
The total cost (c) of a product can be split into three segments:
1)
value added,
2)
intermediate expenditures in the productive sector of the economy and
3)
imports (see “round 0" in Figure E-1).
Value added consists of all types of income for the various economic actors in society, such as salaries
(income from labour), interest (income from capital), land rent, profit (income from entrepreneurship)
and taxes minus subsidies (government income). The total gross value added in an economy (which
includes depreciation) adds up to the GDP. Therefore a project's contribution to the GDP can be
represented by the amount of value added in its cost.
In turn, the intermediate expenditures can be subdivided into the same three components, and so on
(see “round 1" and further in Figure E-1). Finally, the cost can be divided into imports (direct and indirect)
and value added (direct and indirect).
The split into segments in round 0 in Figure E-1 can be derived directly from the calculation of the cost.
Using the standard input-output method it is possible to come directly from the cost breakdown of
round 0 to that of round n. In the section below, this standard IO method is discussed in more detail,
after presenting the normal structure of the standard input-output table.
Employment creation can be included as a non-monetary variable that is important in view of the macroeconomic objectives.
92
Figure E-1 shows the division of the cost into the segments of import, intermediate expenditures and
value added. (In the figure Int. exp. means intermediate expenditure, v.a. means value added and imp.
means import).
Round 0
Rounds 0 to n
Selling price of product
value added
direct v.a.
Round 1
value added
Round 2
indirect v.a.
Round 3
value added
int. exp.
int. exp.
int. exp.
imports
indirect imp.
imports
imports
direct imp.
Figure E-1. Product Cost Segmentation.
E.3
The standard input-output table
The starting point for the standard input-output method is the input-output transaction table (Equation
4), which is available as standard statistical information for most countries in the world.* For this study,
the Irish Input-Output table was supplied by Forfas [64].
The elements zij form the intermediate (inter-industry) section (Z matrix), representing the demand of
sector j for products from sector i.
The final demand for products of sector i is represented by yi, mi indicates the imports by sector i and xi is
its total production. The production factors (wi) consist of wages (for the production factor labour), rent
(for land), interest payment (for capital) and profit (for entrepreneurship). Government income is
represented by gi, representing taxes minus subsidies.
Because demand has to equal supply, IO must meet:
n
n
j=1
j=1
∀ i : xi = ∑ z ij + y i = ∑ z ji + wi + g i + mi
(1)
The value added created by sector i can be calculated as:
vi = wi + g i
(2)
This value added is called the gross value added if depreciation is included in the profit (gross profit) and
is the net value added if the profit is a net profit (without depreciation). The sum of the gross value
added of all n sectors in the economy gives the gross domestic product of a country:
n
GDP = ∑( wi + g i )
(3)
i=1
*In this description, capital letters represent matrices (including vectors) and lower case letters are
scalars.
93
IO =
z11
z12
z13
...
z1n
y1
x1
z21
z22
z23
...
z2n
y2
x2
z31
z32
z33
...
z3n
y3
x3
M
M
M
...
M
M
M
zn1
zn2
zn3
...
znn
yn
xn
w1
w2
w3
...
wn
g1
g2
g3
...
gn
m1
m2
m3
...
mn
x1
x2
x3
...
xn
94
(4)
E.4
The standard input-output method
The aim of the standard input-output method in the application under consideration is to split the cost
of a product (or project) into (direct and indirect) value added and (direct and indirect) imports, or in
other words: to come from round 0 to round n of Figure E-1. The assumption is made that the elements
zij in the intermediate part of the IO matrix are linear with the total production of commodity j:
z ij = aij x j
(5)
In this way it is possible to define a normalised A matrix, called the technological matrix, with the
element aij
∀i, j : aij =
z ij
xj
(6)
In the same way it is possible to normalise (subscript “nr”) the value added and import parts of the IO
matrix.
∀i : wnr,i =
g
m
wi
; g nr,i = i ; mnr,i = i
xi
xi
xi
(7)
Figure E-2 shows the structure of this normalised matrix and is a schematic representation of the
economic system analysed (a, left-hand side) and the technological matrix and its normalised value
added and import vectors (b, right-hand side). The arrows represent the flow of products.
The first part of Equation 1 can now be rewritten in matrix terms:
Mdir Vdir
New product with
selling price sp
Production
process
considered
Original
intermediate
sectors
Y
Mind
Vind
X
Figure E-2. Schematic of the economic SYSTEM.
X = AX + Y
(8)
(I - A) X = Y
(9)
or
where I is the unit matrix. Assuming the inverse of (I-A) exists, multiply both sides by it:
(I - A )-1 (I - A) X = (I - A )-1 Y
(10)
leading to:
X = (I - A )-1 Y
95
(11)
The term (I-A)-1 is called the Leontief inverse. Under the assumption that the average values of the A
matrix are also representative for the marginal variation of vector X as a result of a marginal variation in
vector Y, then:
∆X = (I - A )-1 ∆Y (12)
In turn, the marginal variation in X has repercussions on the value added and the imports in the
economy. The marginal (indirect) variation in imports and value added can now be calculated as:
∆ mind = M nr ∆X
∆ vind = ∆W + ∆G = ( W nr + G nr ) ∆X
E.5
(13)
Application of the standard IO method to new products
In the application of the standard IO method it is assumed that there is an additional demand for the
product (e.g. additional demand for bioethanol) whose macro-economic impact needs to be assessed.
Therefore, the production process for this product (e.g. production of bioethanol from biomass) is not
yet included in the standard IO table and the direct (round 0) demand for inputs from the existing
intermediate sectors (e.g. fertilisers, tractors or diesel) can thus be considered to be exogenous.
Therefore, this direct demand of the new production process can be represented as an additional final
demand vector ∆Y, which will cause an additional production ∆X of the existing productive sectors.
In order to calculate the impact of a certain project or product on the gross domestic product, the cost (c)
has to be broken down into direct value added, vdir (=wdir+gdir), direct import, mdir, and direct intermediate
expenditures, inedir (round 0 of Figure E-1). These direct intermediate inputs have to be converted into a
(n x 1) ∆Y vector, which means that for each separate cost item it has to be decided in what sector of the
national economy it is produced (Equation 14).
n
c = v dir + mdir + inedir = v dir + mdir + ∑∆ yi
(14)
i=1
With this ∆Y vector, representing the first order (round) of the demand for intermediate products for the
project under consideration, the total resulting additional production ∆X in all sectors in the economy
can be derived from Equation 12 and the indirect marginal induced imports and value added (∆mind and
∆vind) from Equation 13. The total value added and import part of the cost can than be calculated as:
v = v dir + ∆ vind = v dir + ( W nr + G nr ) ∆X
m = mdir + ∆ mind = mdir + M nr ∆X
(15)
By definition, the sum of these two items equals the cost (c) of the product considered:
c= v+m
(16)
With data on the employment per sector (ei) and the direct employment creation of the project under
consideration (edir) it is now also possible to calculate the total employment created by the project.
Therefore, it is again necessary first to normalise the employment figures:
∀i : enr,i =
ei
xi
(17)
after which the total employment creation can be calculated in a similar way as in Equation 15 :
96
e = edir + ∆ eind = edir + E nr ∆X
(18)
Employment per sector could be split into different types of employment, such as low, medium and high
cost employment. In this case, each type of employment gives one input vector ei and one resulting
vector e.
97