Posts Tagged ‘Greenhouse Gas Emissions’

As the folks who are making the next generation of ethanol made their pitch to Congress (see Cindy’s post from earlier), the people who are producing biodiesel from what could be the next great feedstock, algae, reminded members of the U.S. House Agriculture Committee’s Subcommittee on Conservation, Credit, Energy, and Research not to forget about their truly green fuel.

Mary Rosenthal with the Algal Biomass Association told the representatives that despite some good progress for the algae biodiesel industry in recent years (not to mention the potential it holds), many of today’s federal biofuel policies simply ignore the role algae could play, limiting opportunities for funding and regulatory acceptance. She says she just wants a fair shake from the government:

Key to algae’s success in the fuels market will be ensuring:

1. Financial parity – Algae must receive the same tax incentives, subsidies and other financial benefits allowed to other first and second generation renewable fuels such as biodiesel and cellulosic ethanol.
2. Market parity – The federal renewable fuel standard will, for the foreseeable future, drive the U.S. market for renewable fuels. The current law focuses on corn ethanol in the near term and cellulosic ethanol over the long term. Algae based biofuels should be treated the same as cellulosic biofuels.
3. Regulatory parity – Algae must be recognized under the same regulations governing other traditional feedstocks, as an effective carbon reduction strategy and as safe for commercial production.
4. Appropriate treatment under federal climate change regulation – Algae production facilities can use CO2 from power plants and other emission sources to grow algae. This process can play an important role in reducing greenhouse gas emissions. Put a price on carbon that will send the right signals to the finacial sector, green energy companies and others to support the commercialization of the algae industry.
5. Provide support for government incentives in R&D and commercialization. Support for the funding that has been made available through the stimulus and Renewable Fuel Standard are types of program that helps develop the market for advanced biofuels.

Rosenthal urged Congress not to miss the opportunity of developing a truly renewable, sustainable fuel that will create jobs, reduce pollution and increase national energy independence.

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Carbon trading has become mumbo jumbo for the “cap-and-trade system for reducing greenhouse gas emissions.”

There are several concepts included here that we further explain.

First, “greenhouse gases” refers to several gases recognized by scientists as enhancing the greenhouse effect. The most important of these in terms of their global contribution to climate change are carbon dioxide and methane.

“Cap” means the quantitative limit of emissions that is imposed by a regulator on a region, a country, a set of sectors, or a group of installations. The cap is usually expressed in terms of a certain amount of greenhouse gas emissions permitted to be emitted in one year.

The cap is then broken down into allowances (also sometimes called permits) and then those allowances distributed to each of the entities that has the legal obligation to comply with the cap. Each allowance corresponds to one unit of emissions (e.g. one tonne of carbon dioxide equivalent).

The regulator’s objective is to set the cap so that there is a shortage of allowances relative to what the companies’ business-as-usual emissions will be.

It is this scarcity of allowances that sets the price of emissions in the marketplace and can allow a derivatives market (futures and options) to emerge. The economic benefit from carbon trading comes in the “trade” part.

At the end of the emission accounting period (usually year-end) each entity with a compliance obligation will need to hold allowances that are at least the same in number as its actual emissions for the period.

Entities now face a critical choice with every unit of emissions they produce. Should they purchase emissions allowances from other participants in the market or should they find ways to reduce emissions by implementing changes in their operations?

The virtues of the carbon trading approach are many. The principal one is that, when considering all of the participants’ overall costs of reducing emissions, economic theory and now business practice teaches us that a carbon trading approach is the least cost way of meeting the green objective.

Another key benefit of trading is each of the participants under a cap has complete flexibility in how they reduce emissions.

The price of carbon thus acts as both a motivator for action and a catalyst for technological innovation. Furthermore, it rewards companies who over-reduce their emissions since they can earn revenue from selling their allowances to those who find it less easy to reduce emissions.

Algae Biofuel projects may seek competitive advantages through Cap N Trade…. more to come.

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It seems that algae biofuel producers are at disadvantage, because they are not recognized in the tax code as advanced biofuels makers. So the Biotechnology Industry Organization (BIO) decided to take action and urged Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Charles Grassley (R-Iowa) to extend tax code parity to algae-based biofuels as soon as possible.
“Algae-based biofuel technology is advancing rapidly and is ready for commercialization. Production of algae-based biofuels can generate thousands of domestic green jobs in facility construction and operation and have the potential to greatly enhance our country’s energy and environmental security,” Brent Erickson, executive vice president for BIO’s Industrial and Environmental Section, stated.
“The Environmental Protection Agency’s recently released rules for the Renewable Fuel Standard recognize that algae-based biofuels can qualify as advanced biofuels and significantly reduce greenhouse gas emissions compared to gasoline. Unfortunately, though, algae-based biofuel developers do not qualify for existing tax incentives for advanced biofuel development.”
“It is extremely challenging for algae-based biofuel start-up companies to attract the capital required for facility construction, due to this disparate treatment under the tax code. Fixing this discrepancy and granting algae-based biofuels tax treatment similar to other advanced biofuels can open the way to greater job creation and economic growth,” Erickson concluded.

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