EU Aviation Standards: Algae Oil’s Threshold Market
November 14, 2011
his New Year, the rubber of the Kyoto Protocol hits the hard tarmac of the European Union’s airport runways. More than half the cost of the multi-billion dollar airline industry is fuel. And that cost is about to be heavily affected by European regulations.
This will have a profound effect on the immediate future of biofuels, and of algae-based fuel in particular.
Cap and Trade Emerges as a Huge Cost Factor
Starting January 1st, carriers flying into European airports that fail to meet aviation emissions standards will pay stiff penalties in the European Union’s (EU’s) emissions trading market, also known as cap-and-trade. The goal is first to recognize, then stabilize, and finally reduce the carbon dioxide (CO2) and other greenhouse gases causing global warming and climate change.
Almost a decade after the start of Kyoto deliberations, Europe will become the first major power to enforce emissions standards for aviation. Emissions trading emerged as the EU’s strategy after five years’ review of two alternatives: fuel taxes and fuel efficiency regulation. Fuel taxes violated international law, which prohibits taxing foreign nations on grounds of both sovereignty and free trade. Regulation was unenforceable, given wide variation among global airline manufacturers and national standards.
Emissions trading, by contrast, neither taxes foreign nations, nor regulates manufacture. Airplanes that meet EU emissions standards get a free ride. Excess polluters pay penalties. Those that that emit less than the standards can sell excess capacity to polluters.
The EU argues that the penalties are not taxes, because they go to compliant, greener carriers; not to the EU or its member nations. It imposes nothing on manufacturers or operators; it simply charges for the costs they impose on the populations of the EU and the world.
It’s a system that has worked well in Canada and the USA to reduce North American acid rain. Coal-fired electrical, cement, and other carbon-intensive plants used to kill fish and poison farmlands by emitting dangerous levels of sulphur dioxide, carbon dioxide and nitrogen oxide dioxide.
Beginning with the Clean Air Act of 1990, market-based emissions trading forced electricity, cement, and other coal-fired plants to buy cleaner coal, burn it more efficiently, filter fireplaces and install smokestack scrubbers; all of which became industry standards. Ground pollution stopped. Waters never recovered, but they’re cleaner and healthier than they were in 1970. Emissions trading shifts costs back from farming, fishing and health care to the industries that pollute.
The Biofuels Advantage
Foreign nations and their airlines are already calculating strategy tradeoffs. Twenty-five nations, including America, China, Russia and India, and the International Civil Aviation Organization (ICAO), the United Nation’s entity responsible for governing global airline transportation, challenged the EU’s announced standards.
But in September, EU Advocate General Juliane Kokott ruled that emissions trading neither violates national sovereignty, nor international commercial law. Protesting nations objected that the appropriate forum is the Kyoto-authorized International Civil Aviation Organization (ICAO). The fight is not over; but it’s fair to say that emissions regulation is coming to airlines serving Europe.
This is a vast new market for bioenergy. Polluters now have four choices: boycott Europe, reduce flights, burn less, or burn cleaner. Since 36% of international flights originate or land in EU airports, with flights projected to increase 10% annually, boycotting is hardly an option. Reducing flights surrenders market share to competitors. Airplane manufacture and operation technology is improving, driven by the rising price of fuel, but by itself it is not enough.
That leaves cleaner fuel as the best way forward, with biofuels the cleanest, most sustainable option.
Evolving Generations of Biofuels
For decades, biofuel has meant ethanol, the most widely available and generally the cheapest alternative transportation fuel. First-generation biofuels relied on food crops: corn, soy, sunflower, and even cereals such as wheat. In recent decades, however, biofuels have evolved dramatically.
Recurring food supply crises have called into question the idea of trading food for fuel, and the subsidies on which ethanol has depended. In the global food picture, food for fuel no longer makes sense. More fundamentally, the world has awakened to ethanol’s net energy equation. Ethanol requires more petroleum, and emits more CO2 to prepare cropland, fertilize crops, plant and harvest, transport crops to refineries, refine, and distribute from refineries to distribution points to retail outlets — than it saves in reduced carbon fuel use.
A second generation of biofuels is now made from non-food feedstocks. Oil-rich non-foods such as jatropha and camelina produced biofuels that, unlike ethanol, can be used interchangeably with petroleum oil, without ethanol’s specialized blending requirements.
But non-food fuel feedstocks still require land and fresh water, which displaces food production less directly, but just as surely. Now, Waste to Liquid Fuels (WTLF) makes drop-in fuels possible from the conversion of wood chips, waste grease, sewage, and cellulose crop residue, such as corn stalk or soy stems and leaves. Meanwhile, third generation feedstocks such as algae can make sustainable feedstocks without affecting potential cropland, fresh water, or food supplies.
But ramping up these new alternatives will take years, and airlines need biojet fuel today. We need to use what we have, and make inline improvements.
That’s why I advocate integrating waste and advanced biofuels with the large monocultures (corn in the US, wheat in Australia, sugar in Brazil, soy in Argentina to name a few). A new multi-feedstock paradigm will make that possible.
Driven by a key Department of Energy initiative, American energy policy is moving to a market-neutral distribution system that facilitates biofuel and feedstock diversity. Geographically dispersed refineries will synthesize all different feedstocks into a blendable feedstock standard. Biofuels from diverse feedstocks will flow from refiners to distribution centers and retail outlets, for ethanol, kerosene, diesel or jet fuel.
In this scheme, algae plays a key role as a BTU-booster. Algae is so energy-rich that it can be used to pump up the calorific values of low-grade feedstocks like forestry waste. This is a great role for algae at its current scale, while production volumes are still being ramped up.
Over time, algae’s share of the blended biofuels market will grow rapidly, because it is the only feedstock that does not depend on potential cropland, displaces no food and can use any water – whether fresh, brackish, saline or waste. Technology breakthroughs now in field testing will greatly reduce the energy required to make algae-based fuel and chemicals to reach a point of high sustainability.
Add algae’s vast capacity to absorb CO2, and drop-in fuel using algae becomes aviation’s most attractive fuel option. Airplane manufacturers and operators are already positioning themselves to drive the biofuels market. Numerous milestones have taken place, most recently on Monday, November 7, when Continental Airlines flight #1403 flew from Houston to Chicago O’Hare on a “green jet fuel” derived partially from algae.
In these tough new EU aviation emissions standards, algae-based fuel has finally found its first large-scale market opportunity. It won’t be the last.