In the last three decades, the US ethanol industry has grown from small areas of the midwest to 211 plants operating in 29 states with an annual capacity of 14.8 billion gallons. Over 80 % of this ethanol is produced in the so-called corn belt,

which includes nine states: Iowa, Nebraska, Illinois, Minnesota, South Dakota, Indiana, Ohio, Kansas, and Missouri.

In 2012, in the middle of a severe drought, the industry operated very close to its maximum capacity: It used approximately 90 % of its capacity to produce approximately 13.3 billion gallons of ethanol. A significant increase in ethanol production (approximately 43 %) can be observed in Fig. 8 in this period. Even with the drop in US corn production to 10.8 billion bushels in 2012, the national ethanol production remained stable.

The demand for ethanol remains strong especially because it is mixed with gasoline and used in flex-fuel cars. In the USA, most recently introduced cars run on blends of up to 10 % ethanol, and the local manufacturers are developing vehicles that will be able to run on higher percentages of ethanol blends. Since 2008, almost any type of commercial vehicle that has been available in the market has had the flex-fuel option.

Part of America’s ethanol is produced for export. During 2012, the industry exported 750 million gallons of ethanol, or 6 % of the entire production. The US etha­nol industry is confronting protectionist policies from Brazil and the European Union, which expect to increase their exports. In addition, E10 is available almost every­where in the domestic market, but the industry’s goal is to generally use E15 blends.

An expansion of ethanol production with a strong investment in increasing the capacity of production is expected in the USA based on some existing factors: (1) the replacement of MTBE by ethanol, (2) government policies that incentivize the reduc­tion of the country’s dependence on foreign oil, and (3) the need for fuel production.

After analyzing the biodiesel supply and demand, it is clear that in 2005 the USA had 45 biodiesel plants in operation that produced an average of 6.5 million gallons per year. Currently, there are 193 such plants, and their total capacity is 2,917.72 in millions of gallons. Points of biodiesel sale are located in the middle of the USA, with great concentrations in the states of Minnesota and Missouri,

which are the forerunners of the project. Figure 9 shows the production of biodiesel and soybeans in the USA.

From 2009 until 2012, there was a reduction in the production of soybeans in the USA, but the production of biodiesel continued to increase. Indeed, there was a production increase of 43 % between 2008 and 2012.

The major challenge for the US biodiesel industry is the increasing price of soybeans. This price increment is partly explained by the lower yield (in metric tons per hectare) of soybeans compared to corn (which is necessary for producing ethanol), and partly by the expansion of corn production in the USA. This expan­sion occurs to the detriment of soybean production to meet the surging demand from the emerging ethanol industry (Sawhney 2011).

In 2005, 2.3 % of the overall US soybean production was used for manufac­turing biodiesel. This percentage rose to 19.2 % in 2009. The higher compound annual growth rate (CAGR) for the use of soybeans for biodiesel production rel­ative to the rate of overall soybean production emphasizes the increasing use of soybeans for biodiesel production (Sawhney 2011). Although it has been growing rapidly, in 2009 the total amount of biodiesel produced in the USA was small at approximately 7 % of the total ethanol production (Hoekman 2009).

2 Conclusions

The complexity of the activities that involve the production and trade of biofuels surpasses geopolitical boundaries. The early development of this market was a response to the need for an alternative source of energy to replace fossil fuels.

At the moment, the development of biofuels is not exclusively associated with petroleum replacement. Because it represents a reduction of greenhouse gas emissions, biofuel production is also related to environmental protection.

This chapter presented evidence of a significant increase in the demand for bio­fuels in many countries, which contributes to their energy and environmental secu­rity and adds value to their agriculture.

The incentive programs for biofuels depend on government policies such as changes in taxes, grants of subsidies to producers and consumers, and mandatory quotas with minimum participation rates of biofuels. However, the production of biofuels differs in each studied country. In general, the main drivers are the cli­matic conditions, the availability of raw materials, the structures of the production chains, mastery of the necessary processing technologies, and the availability of (public and private) investment.

The development of biofuels’ chains is recent and depends on the whole structure of the chain and not exclusively on one institutional agent. In this context, the devel­opment of more economically attractive biofuels is challenging and demands both further searches for alternative raw materials with higher efficiency and lower pro­duction costs and the continuous improvement of the relevant industrial processes.

Michael B. Charles and Suman Sen

Abstract Although biofuels have the potential to supplement conventional petroleum fuels in a variety of energy applications, and as transport fuels in particular, their use also poses some problems from an environmental perspective. Concerns exist relating to whether positive net energy (and therefore effective greenhouse gas mitigation) can be derived from biofuels, whether the cultivation of biofuel feedstocks leads to significant environmental degradation and whether their use could hamper the imple­mentation of a more long-term transport energy paradigm. Yet a clear understanding of these issues, together with the more important technical aspects relating to biomass cultivation and biofuel production, has the potential to ensure that biofuels can play a successful role in weaning the planet off its current carbon dependency. In particular, the ability to assess the total life cycle of biofuels from cradle to grave emerges as a particularly important consideration in ensuring that cultivation and production pro­cesses are optimized.

1 Introduction

The environmental impacts of liquid biofuels remain highly controversial. Biofuels, such as bioethanol and biodiesel, are often touted by their proponents as an envi­ronmentally friendly means to address issues relating to energy security and carbon dependency. This is especially the case given that they can largely be distributed via existing networks and distribution channels, such as those used to distribute conven­tional petroleum-based gasoline (also known as petrol) and diesel. They can also be blended relatively easily with petroleum-based fuels in their anhydrous forms. Biofuels therefore fit comfortably within the existing transport energy paradigm and result in fewer adaptation costs in comparison with those associated with other

M. B. Charles (*) • S. Sen

Southern Cross University, Gold Coast, Australia

e-mail: michael. charles@scu. edu. au

A. Domingos Padula et al. (eds.), Liquid Biofuels: Emergence, Development and Prospects, Lecture Notes in Energy 27, DOI: 10.1007/978-1-4471-6482-1_8, © Springer-Verlag London 2014

mobile transportation energy sources, such as electricity or hydrogen. They have also proved popular among a variety of stakeholders on account of their ability to (1) provide new outlets for increasingly uncompetitive agricultural producers in the developed world and (2) open up new revenue-generating opportunities for farmers in the developing world.

Furthermore, perhaps the very fact that biofuels are produced from natural organic material, usually referred to as biomass, has contributed to the popular perception among politicians, interest groups and the broader public that they are more sustainable than conventional petroleum-based liquid energy products. This is compounded by the fact that combustion of biofuels per unit of volume demon­strably produces less greenhouse gas (GHG) emissions in comparison with con­ventional liquid fuels (EPA 2002). A greater reliance on biofuels in the transport industry is thus regarded as a positive step with respect to reducing overall GHG emissions from a sector that is widely criticized on account of its overall environ­mental impacts. Indeed, according to the IPCC (2007), transport is the fourth high­est emitter of GHGs and contributes 13 % of total emissions globally.[14]

Although biofuels have a clear place within the broader array of renewable fuels poised to overcome global carbon dependency, their use nevertheless has significant environmental implications at a global, national, regional and even local level. These problems result not only from the growing of the organic material required for their production, but also in the manufacturing, distribution and use of the resulting fuel. Issues of real concern include (1) whether the overall life cycle of biofuels results in negative net energy and thus the production of more GHGs than it saves; (2) whether the growing of agricultural inputs into the biofuel production process results in a loss of biodiversity and similar environmental impacts through changed land-use and the overzealous application of fertilizers, pesticides and herbicides; and (3) whether an increase in the use of biofuels will hamper the adoption of more truly efficient tech­nology that will have greater potential to reduce the global carbon footprint. Indeed, the unregulated production and use of biofuels, together with a rapidly expanding demand for the crops on which their production relies, could have significantly detri­mental impacts on the environment that could, in time, outweigh the benefits poten­tially available through a more considered exploitation of this energy source. This chapter looks closely at the environmental impact of biofuels and aims to present the current scientific understanding of issues associated with their use in a way that will be accessible to policymakers, industry and other stakeholders.

A large number of individual processes are involved in the overall development of second-generation liquid biofuels via biochemical route. This leads to the possibil­ity of process integration that will lower the capital and operating cost and ensure that optimum production of high-value co-products is achieved. Although process integration has the benefit of cost reduction in most cases, it is not a universal strat­egy and may not be applicable to all the cases. Sometimes, there might involve large number of separate processes that should be linked to produce value-added products, and this increases the overall process cost.

Process integration can be done by several ways; for example, a two-stage fermentation process that can ferment glucose and xylose in separate ferment­ers. This would maximize sugar yields and also produce valuable products from separate fermentation process. Another possible approach to process integration could be application of thermophilic bacteria that can ferment both glucose and xylose (Bai et al. 2013; Ito et al. 2013; MacKenzie and Francis 2013). A single system can be developed that can hydrolyze and ferment sugars at the same time. Although this approach seems quite unrealistic at the moment, it can become true in the coming years by extensive research in the area. The integrated system of lignocellulose processing to liquid biofuels, if developed, can lower the bioethanol cost to 0.15 US$/l (IEA 2008). Therefore, process integration, although is a chal­lenging task, can significantly lower the biofuel cost and can pave the path toward an economical source of fuel for transportation in the coming years.

Production costs associated with biofuels are, in general, very high, with Brazilian bioethanol production being the exception. The gap between high costs of biofuel production and relatively low petroleum prices creates large deadweight costs that may overwhelm any external benefits. de Gorter and Just (2009a, 2010) have shown that policies favouring biofuel production, i. e. tax credits, generate what they term ‘rectangular deadweight costs’ that are much higher than those resulting from a standard analysis that estimates inefficiency costs in the form of deadweight cost tri­angles. Indeed, the deadweight cost triangles are also a component of inefficiency costs of biofuel policies. Gardner (2007), together with de Gorter and Just (2008b; 2009a), all estimated triangular deadweight costs in the United States and found them to be in the USD 300-600 million range. However, de Gorter and Just (2008b; 2009a) also found that rectangular deadweight costs resulted in an additional annual waste of over USD 2 billion. In estimating inefficiency costs in the form of dead­weight costs, we must also add the external costs of added gasoline consumption, oil dependence, increased CO2 emissions and a decline in terms of trade in oil imports. In particular, the annual deadweight costs owing to the combination of the biofuel mandate and tax credit alone are expected to be about USD 11 billion by 2022 (de Gorter and Just 2009b). As a result, biofuel policies may not generate social welfare improvement; rather, they may have adverse impacts on social welfare. They also have the potential to exacerbate negative externalities associated with gasoline con­sumption (de Gorter and Just 2008a, 2009b).

Pro-biofuel policies are generally used in various combinations, but de Gorter and Just (2010) have shown that these policies can be contradictory. At present, a quantity-based biofuel mandate (i. e. biofuel blend mandate) and a price-based consumption subsidy (i. e. biofuel tax credit) are most common (e. g. in the United States, Brazil and the EU). While a quantity-based biofuel mandate is theoreti­cally and empirically superior to a price-based consumption subsidy (Lapan and Moschini 2009; de Gorter and Just 2008b, 2009c), when mandates are used in conjunction with biofuel subsidies, they can have adverse policy interaction effects. Here, the benefits of a market-based policy like mandates can easily be nullified (de Gorter and Just 2009b, c). This is because, when a tax credit is intro­duced alongside the mandate, blenders will compete for the government sub­sidy and increase profits by lowering the retail price. Such behaviour results in an increase in the total amount of fuel consumed, which means that more petro­leum-based fuel will be consumed because of the binding mandates. Therefore, tax credits will unintentionally subsidize gasoline consumption instead. This con­tradicts the oft-stated objectives of reducing dependency on oil, improving the environment and enhancing rural prosperity. Furthermore, higher gasoline prices induced by a biofuel policy magnify the inefficiency of the preexisting wage tax by reducing real wages and thus discouraging work (Searchinger et al. 2008).

Given that pro-biofuel policies exist in a setting of multiple objectives and, at the same time, other policies targeting the same objectives also exist, policy-mak­ers should carefully evaluate the interaction between biofuel polices and other pol­icies to ensure that the stated objectives are achievable at an acceptable cost. The effects of each biofuel policy and their interaction with other policies are clearly very complex owing to the intricate interrelationships between energy and com­modity markets and the varied environmental consequences. The effects of biofuel policies become even more complicated if general equilibrium effects that seek to explain the behaviour of supply, demand and prices in a whole economy with many interacting markets are incorporated in the analysis. At present, given the high cost of biofuel production, together with the competitive pressure of com­paratively cheap oil, taxpayer costs resulting from biofuel and renewable energy policies in general are very high relative to their benefit, all of which can be highly negative owing to adverse policy interaction effects.

In sum, this chapter raises doubts about biofuels in relation to the specific objec­tives for which they have been supported. The production of biofuels that are being promoted to reduce dependence on fossil fuels actually depends on fossil fuels, and users will therefore find it difficult to escape from ongoing oil price volatility. Finally, the positive impact of biofuels on regional development, and employment in the agri­cultural sector in particular, is not immediately obvious. The frequent linking of bio­fuel policy to the goal of enhancing rural economies is questionable since the use of biofuels may result in shifts between sectors rather than the creation of new economic activity. To be precise, problems associated with biofuels have been intensified by the fact that economic issues are intricately related to biofuel policy objectives. Current biofuels in commercial production, except bioethanol produced from sugarcane in Brazil, are not yet competitive with fossil fuels. However, their competitiveness, espe­cially that of advanced biofuels using a lower cost proportion of feedstock not sensi­tive to food prices, will gradually improve as the price of oil increases.

1.1.1 Analysed Biofuels

In our study, we examined first and second generations of bioethanol and bio­diesel, hydrated vegetable oil (HVO) and BTL fuel as specific combinations of raw materials and conversion technologies (Fig. 1).

First-generation bioethanol is produced through fermentation of sugar — and starch-containing organic materials. The most common raw materials are starch — containing plants. In Europe and North America that is wheat or corn; in Brazil, it is sugar cane. While sugar-containing plants can be fermented directly, starch needs to be hydrolysed to sugars through specific enzymes. During fermentation, microorganisms, such as yeast, metabolise sugars to ethanol. Second-generation biofuels are made of the non-edible part of the plant which remains on the field

after the crops have been harvested (e. g. com stover). If this lignocellulosic material could also be utilised, bioethanol production could be increased signifi­cantly. Because the conversion of lignocellulose to ethanol is more complex than that of sugar and starch, to date no large-scale production of second-generation bioethanol exists. However, Kim and Dale (2004) estimate that lignocellulosic bio­mass offers potential for the production of 442 billion litres of bioethanol per year.

Biodiesel is produced from plant oils or animal fats and transesterification with methanol. The most commonly used raw material is rapeseed, which has an oil content of 40-45 %. However, biodiesel has major disadvantages. It has the poten­tial to clog filters inside the tank and to cause leaks, because it acts aggressively against some rubbers and plastic. Thus, rubber parts in the fuel system may cor­rode over time. Explain that most diesel cars have been licensed to use biodiesel blends of up to 5 %. However, the conversion of a conventional diesel engine for pure biodiesel is associated with significant costs. In Germany, for example, com­panies offer a conversion service for roughly Euro 1,500 per engine. In addition, engine oil changes need to be done more often.

Just like biodiesel, HVO can be produced from oil-containing raw materials. Hydrotreating of vegetable oils or animal fats is an alternative process to esteri­fication for producing bio-based diesel fuels (Mikkonen 2008; Hodge 2008). In the HVO production process, hydrogen is used to remove the oxygen from the tri­glyceride (vegetable oil) and integration to an existing oil refinery is preferred for small plants. In 2007, the first HVO plant at commercial levels started operations in Finland. It has the capacity to produce 170,000 tonnes of HVO per year. Today, oil companies and process technology suppliers across the globe are constructing numerous plants with scales of up to 800,000 tonnes per year per unit.

The BTL production process consists of a number of different process steps. A low-temperature gasifier breaks down biomass to coke — and a gas-containing tar. In a gasification reactor, a tar-free synthesis gas is produced and liquefied to fuel through a Fischer-Tropsch reaction thereafter. Depending on the octane number, BTL fuels can be used in conventional petrol — or diesel-powered cars. A modifica­tion of the engine is not necessary. The existing filling station infrastructure can be used without further investments. Fischer-Tropsch plants for the production of BTL fuels from biomass, such as wood and residues, are estimated to reach com­mercial scale in the next decade.

The first step in our analysis is the projection of future production scales for each type of biofuel, as a technology’s maturity has a decisive impact on produc­tion costs and some technologies are not expected to leave pilot or demonstration scale in the near future. We have defined comparable reference scenarios related to biofuel production for the years 2015 (scenario 2015) and 2020 (scenario 2020) based on the maturity of each biofuel technology (Fig. 2). In each scenario, we take the technology’s maturity status (pilot scale, demonstration scale or produc­tion scale) into account. Therefore, we assume that more mature technologies have larger scales than technologies which are in the process of being developed. This in return means that the use of more mature technologies offers significant cost advantages.

Many assessments of the ability of biofuels to displace carbon-intensive fossil fuels do not take into account the effects of land-use change when the cultivation of the biomass replaces the cultivation of other crops that are then grown else­where on land with high carbon stocks, such as in cleared rainforest areas. More importantly, when the demand for the original crop remains the same, the transfer of cropland from edible to non-edible crops will only result in a displacement of carbon from one location to the other. This outcome, as Eisentraut (2010, p. 9) points out, “can also have a severe impact on biodiversity if valuable ecosystems are destroyed to grow the replaced crops”.

With a growing demand for biofuels, areas of natural vegetation, with huge amounts of embedded carbon, both in living tissue and in the soil below, could increasingly be cleared to make way for crops destined to be used in biofuel pro­duction. In fact, available land will be the most significant consideration limiting global penetration of biofuels (Larson 2008). Land-use efficiency is therefore a crucial consideration in selecting the type of feedstock to be cultivated. In most cases, the conversion of areas of native vegetation to biomass plantations would bring about the establishment of vast monocultures that would not sustain dis­placed fauna, particularly given that organisms other than those destined for cul­tivation would be controlled, and indeed destroyed in most cases. These processes could potentially hasten the demise of indigenous species in the area where non­native species have been planted for biomass cultivation (Eisentraut 2010). For example, following the invasive behaviour of Jatropha in Australia, the South African government banned Jatropha cultivation (Gasparatos et al. 2012). Other African nations, however, have not imposed any restriction on this crop, probably on account of its potential to boost economic growth (Arndt et al. 2010). It is well recognized that terrestrial biodiversity is contingent upon the continued existence of requisite amounts of unspoilt land. In more or less untouched environments, a wide variety of life is able to exist. A prime example of the threat posed by mono­cultures is provided by the orangutan, whose existence is being threatened by the growing global demand (particularly in Europe) for palm kernel oil (PPK), an edi­ble oil used for biodiesel production, among a wide variety of commercial uses. Aside from having their natural habitat destroyed, farmers in Southeast Asia also kill these animals because they eat the young shoots of oil palm trees (Brown and Jacobson 2005).

Some authors, such as Moreira and Goldemberg (1999), have argued that bioethanol, and presumably biodiesel by extension, is more effective from a CO2 mitigation and abatement perspective than the preservation of primeval forests. As Charles et al. (2007) have pointed out, this logic is highly mono-dimensional, since widespread deforestation would lead to the loss of innumerable species, many not yet described in the scientific literature, and which could have signifi­cant benefits to humanity. Although increased biofuel use could assist with reduc­ing GHG emissions, this clearly should not compromise the planet’s biodiversity, the preservation of which should be of paramount importance from an ecological perspective. The good news is that second-generation lignocellulosic production processes should be able to cope more effectively with (1) mixed-source timber sourced from forest plantations or (2) residue such as bark and sawdust from timber milling operations that process a variety of species (Stephen et al. 2011). These plantations, though not perfect from a biodiversity perspective, at least offer a more varied environment for other life. Keeney and Nanninga (2008, p. 3) con­tend that a mix of perennial grasses and shrubs, with typically large root systems, is a better choice than a monoculture of biofuel crops, as they “stabilize the soils, sequester carbon, regulate water run-off, attract wildlife and support biodiversity”.

Deforestation for the purposes of making more arable land available for bio­mass cultivation could also result in localized climate change, aside from the release of significant amounts of embedded carbon as a result of burn-offs and grubbing up the soil (Rees et al. 2005). Throughout the world, tropical rainfor­ests have been cleared extensively to make land available for biomass cultiva­tion. In particular, deforestation has been linked to decreasing local rainfall levels (Pimental et al. 2002; Schneider et al. 2000). This could also impact, by way of extension, on the suitability of the area for biomass cultivation, or at least the growing of certain types of crops, thereby doubling the negative effects of the land-use change (Charles et al. 2009). Indeed, these factors, as Firbank (2005) has argued, will make it extremely difficult to plan for future land usage.

Another potential impact of land-use change is erosion. If native vegetation is replaced by annual crops, such as those used for first-generation biofuels, a lack of cover as the plants grow can result in significant soil loss as a result of wind or water erosion, or potentially both (Lubowski et al. 2006). In some cases, this lack of cover enhances the potential of run-off contributing to flooding, with disastrous effect on local communities downstream. Furthermore, the very preparation of the soil itself before planting can expose it to erosion (Huggins and Reganold 2008). It is fortunate that the optimum biomass for second-generation processes, which will hopefully supplant a good deal of first-generation production, are perennial species. Such plants provide greater cover, protection against wind and water ero­sion, and increase the soil’s water-retention capacity (Eisentraut 2010). Their use also has the positive effect of increasing the carbon stock of the soil through the presence of roots and humus (Eisentraut 2010), though the release of existing soil carbon for the planting of these biofuel crops should not be discounted.

In effect, demand for biofuel in the developed world could result in developed nations exporting local environmental degradation to the developing world, more so since these areas may be subject to less stringent environmental management and ecological governance. One needs to bear in mind that roughly 40 % of biofu­els are already being produced in emerging and developing economies (Eisentraut 2010), with that percentage likely to increase markedly. Effective environmental management is probably not regarded as a luxury that some nations can afford, however irrational that logic may be from a long-term sustainability perspective. This environmental degradation could also lead to opportunity costs resulting from a loss of potential eco-tourism income. It follows that, if developing countries focus more on biomass export than biofuel production per se, it is important that the feedstocks exported be as energy dense as possible so as to maximize effi­ciency in light of the potentially negative effects signalled above, more so since the long-distance transport of biomass also has a considerable environmental impact (Eisentraut 2010).

One of the aims for the utilization of biofuels is the climate change mitigation through the reduction of GHG emissions in the transport sector. Measuring the con­sequences of biofuels requires consideration of their full life cycle, from biomass pro­duction and its use of various inputs to the conversion of feedstocks into liquid fuels and the subsequent use of the biofuels in combustion engines (Rasetti et al. 2012).

The potential mitigation varies across types of feedstock, feedstock production process/technology (e. g., usage of nitrogen fertilizer), and fossil fuel consumption in both production of feedstocks and its conversion to biofuels.

Several standard life cycle analyses (LCA) of biofuels in the literature have reported a wide variation on the reduction of GHG emissions; this is mainly due to differences on underlying assumptions on system boundaries, by-product alloca­tion, and energy sources used in the production of agricultural inputs and feedstock conversion to biofuels. Most studies (Sims et al. 2010; Rutz and Janssen 2007) indicate that biofuels show some emission reductions when compared to their fossil fuel counterparts, especially when the emissions from the director indirect land-use changes (LUC/ILUC) due to biofuels feedstock production are excluded.

According to the respondents consulted in this study, the social projects related to PNPB’s palm oil production are considered pilot studies. To date, these have been implemented by a single company. The Agropalma Group operates in agribusi­ness since 1982 and is the largest and most modern agro-industrial palm produc­tion and palm oil processing complex in the country. In order to assess the family farmers’ insertion difficulties, a description of the social organization of palm, the Agropalma unit in the municipality of Tailandia in the interior of Para was visited. This unit is located 343 km from Belem (Fig. 1).

Overall, a total of 185 families have been integrated into the company, all with an average area of 10 ha according to PNPB’s organization models with partner­ship contracts. In the projects presented by Brito (2010), 10-ha lots (indicated by the shaded area in Fig. 2) were distributed to the first 150 families. This enabled to better organize and concentrate the palm oil plantation. These families (former “squatters”) were relocated in the region and received government lots of up to 50 ha for other crops. However, in the plantations within the INCRA settlements, the palm oil plantation is more dispersed, conducted within the boundaries of the property previously distributed by the institute, which occupies somewhat smaller areas (about 6 ha) than the pioneering projects.

According to the representatives, the company provides technical assistance (at a symbolic price), seedlings, and fertilizers (at market prices, i. e., negotiated with other inputs purchased for of the company’s scale operation) to the family farmers. The values are repassed to the farmer and payment remittance is made in 25 years, term agreement of the clusters provided by the farmers to the processing industry. To encourage the fam­ily farmer’s commitment to the production system, the company created a program to pay for the quality of the cluster. In addition, the company pays a surcharge, which can be up to 8 %, according to the quality observed upon delivery of the raw material.

The bank gives a loan related to implement the crop by the farmer and the loan related to the monthly sum paid to the farmer family during the crop formation period. The 3-year period is considered critical to the sum paid to the farmer fam­ily success of the venture

After the first year of production, which is the third year after the crops are planted, 25 % of the cluster production sales are retained, which is destined to repay the debts to the company. Afterward, it deposits the remaining amount into the farm­er’s bank account. The bank, in turn, also retains 25 % to pay for the debt it acquired. In all, 50 % of the family’s income is retained, and these gains vary according to the growth stage of the crop, which is estimated to be of around US$67,300 (Fig. 3).

As for palm oil, there is a high risk involved for a loan around US$3,000,000 to plant 10 ha of oil palm (fostered family farming model area until the present time). By retaining the loan payment by the bank itself, the system imposes the debt repayment. As the company is a type of guarantor, when it invests its own recourses in the arrange­ment, it is then considered a partner in the business, which at this stage is advantageous to the farmer given the difficulties involved in this high investment process.

To encourage the family farmers’ involvement in the production system, the company set up a payment program according to the quality of the fruit bunch. Bonus payment is only done if the production and management controls of the land are up to date with the guidance provided by the technicians.

In general, the consensus is that oil palm has provided a significant income increase to the family farmers involved in the program. Before the project, farm­ers practically lived on the income from cassava flour, which was used as currency to purchase other foods (salt, sugar, and so forth) brought in small vessels and sold by middlemen. According to the farmers interviewed, back then the monthly income varied from US$2,250 to 4,500.

With regard to oil palm, the representatives of the only company that actually has effective arrangements with palm growers claim that they are not favored with the tax benefits of the seal, due to the fact that the projects signed are considered pilot projects and also because of the small volume of biodiesel produced. Thus, for this company, this new venture is still considered peripheral and in the testing phase. However, it is likely that biodiesel companies entering this sector may also face several difficulties, given that in practice, there is a higher cost to implement projects with family farmers in deprived areas with difficult access, especially in regions lacking cooperative and large-scale production tradition—which is the case in the main regions that cultivate oil palm. This survey is deeply exposed at Cesar and Batalha (2013).

Biswarup Sen

Abstract In the past decades, the ‘food versus fuel’ debate has caused a transition of first-generation biofuels to advanced biofuels. Although the later seems quite promising, due to its sustainability and low GHG emissions qualities, it is still far from deployment. The major hurdles to the deployment of advanced biofuels include technical and economic challenges, which must be overcome in the near future. Extensive R&D is in progress to bridge the gap between the current techno­logical status and commercial venture. To overcome the significant challenges that make the commercialization of advanced liquid biofuels unrealistic, at this moment, is of prime importance. One of the most significant challenges is the technological barriers, which will probably require some more years of extensive R&D efforts to minimize the issues and concerns. This chapter deals with the technological challenges that the liquid biofuels industry is currently facing in the biochemical conversion of second- and third-generation feedstocks to advanced liquid biofuels. A general introduction to the topic includes the types of liquid biofuels categorized under ‘advanced biofuels’ and their common routes of production namely biochem­ical and thermochemical. A detailed description of the current technological issues in the biochemical conversion process is presented mainly under the subcategories: improving feedstocks, pretreatment methods, hydrolytic enzymes efficacy and cost, and process integration. The chapter ends with a review of the current status of R&D in biochemical conversion route for advanced liquid biofuels.

B. Sen (*)

Department of Environment Engineering and Science, Feng Chia University,

Taichung 40724, Taiwan

e-mail: bsen@fcu. edu. tw; bisens@yahoo. com

B. Sen

Master Program of Green Energy Science and Technology, Feng Chia University, Taichung 40724, Taiwan

B. Sen

Green Energy Development Center, Feng Chia University, Taichung 40724, Taiwan

A. Domingos Padula et al. (eds.), Liquid Biofuels: Emergence, Development and Prospects, Lecture Notes in Energy 27, DOI: 10.1007/978-1-4471-6482-1_10, © Springer-Verlag London 2014

1 Introduction

Biofuels can be produced from agricultural or industrial wastes and are renewable with a potential to decrease our society’s dependence on petroleum. Focus on bio­fuels has gained global attention both amidst the general mass and scientific com­munity, due to various compelling factors such as increasing oil prices, low carbon emission of biofuels, and less impact on the environment. Among all biofuels, liq­uid biofuels have attracted attention of the scientific community, as it is the most convenient form of fuel for the automobile industry. Liquid biofuels usually include bioethanol, biodiesel, butanol, and oil from algae (Demirbas 2009). Bioethanol is produced by fermentation of sugars (carbohydrates) usually derived from sugar — rich crops like sugarcane or sugar beet and/or from starch-rich crops like corn (first-generation biofuel). Bioethanol is also produced from cellulosic biomass (non-food sources) and from grasses and trees (second generation). Bioethanol is widely used in Brazil and also in the USA.

Biodiesel, on the other hand, is produced by trans-esterification of oils, and its chemical composition consists of fatty acid methyl esters (FAMEs). Feedstocks from which biodiesel is produced usually include animal fats, vegetable oils, palm oil, soy, jatropha, mustard, flax, sunflower, pongamia, and algae. Biodiesel can be used in blends with petrodiesel, the purest form of which is B100; however, B20 and lower blends are suitable for diesel engines. Recently, biobutanol production is being researched extensively owing to its better properties as a fuel than bioethanol and is usually produced under anaerobic fermentation called ABE (acetone, butanol, and ethanol) fermentation. Starch can be fermented by microorganisms like Clostridium to produce ABE in the ratio of 3:6:1. Ralstonia sp. can be used to produce biobu­tanol in electro-bioreactor using carbon dioxide and electricity. Metabolically engi­neered E. coli have also been shown to produce butanol. DuPont and BP have jointly ventured into the large-scale production of butanol (Anton and Dobson 2008).

Worldwide biofuel production has reached 105 billion liters in 2010, up by 17 % from 2009; still biofuels just fulfill 2.7 % of the world’s fuel need for transporta­tion. Brazil and USA are currently top producers, accounting for 90 % of total global production of biofuels, while biodiesel production by the EU accounts for 53 % of total biodiesel production as of 2010. The International Energy Agency (IEA) has a mission for biofuels in meeting the demand for global fuel production at least by a quarter by 2050. Global ethanol production for use as bioethanol tripled between the period 2000 and 2007, which amounts to 52 billion liters. In recent years (2011), its production reached 84.6 billion liters; the USA topped with 52.6 billion lit­ers ethanol production, contributing 62.2 % in global production, whereas Brazil with 21.1 billion liters ranked second. Ethanol-based fuel is largely used in Brazil and in the USA, responsible for 87.1 % global ethanol-based fuel production as of 2011. Most cars in the USA run on blends of up to 10 % ethanol. Brazilian gov­ernment has made it mandatory since 1976 to blend ethanol with gasoline; from 2007 onwards, the legal blend is E25. As of December 2011, Brazil had 14.8 mil­lion automobiles and 1.5 million motorcycles that use only pure ethanol fuel (E100).

The USA uses com as a major source to produce bioethanol. Com in general is an energy-intensive crop, consuming a unit of fossil-based fuel energy to create just 0.9-1.3 energy units of bioethanol. General Motors has initiated production of E85 fuel from cellulose ethanol for a possible projected cost of $1 a gallon.

A directive issued in 2010 by the EU has a targeted goal where all members are required to achieve a 5-10 % biofuel usage by 2020. India and China are vastly exploring the usage of both bioethanol and biodiesel. Currently, India is expanding Jatropha plantations to be used in biodiesel production. India is also setting a target of incorporating at least 5 % bioethanol into its transportation fuel. China that is a major bioethanol producer in Asia has a task plan for 15 % bioethanol incorporation into transport fuels. In the developing countries, biomass like cattle dung, wood, and other agricultural wastes are used extensively as fuel for cooking and heating. IEA claims that biomass energy provides for 30 % of energy supply in developing coun­tries for over 2 billion people. In spite of the many advantages of using biofuels for transportation and energy supply, there exits several technical issues that need to be resolved before biofuels can enter into the market with a cost equivalent to gasoline.

There are some common issues related to the use of liquid biofuels. Higher amount of alcohols in petrodiesel fuel blends is reported to cause corrosion of components in aluminum-based designs; this corrosion can be minimized with the addition of water to the blends; tests based on this concept showed that when water content was up to 1 %, there was no evidence of corrosion; only material discolouration was visualized. Biodiesel under low-temperature conditions showed molecular aggregation and formed crystals. Biodiesel usually contains small quan­tities of water, which arise during trans-esterification attributing to the occurrence of mono — and diglycerides because of incomplete reactions. These molecules act as an emulsifying agent making very small quantity of water miscible. Presence of water reduces fuel efficiency causing more smoke, leads to corrosion of fuel system components. Water presence can also interfere with the production process and may also impact the additives used.

On the other hand, butanol is toxic and its production and usage needs to undergo Tier 1 and Tier 2 health effects testing as per the EPA guidelines. As of 2010 food grade algae cost $5,000/tonne, this is attributed to high capital and operating costs, which may impact its contribution as a second-generation biofuel crop. The US Department of Energy estimates that 15,000 square miles of land will be required for algal cultivation if it has to augment replacement of conventional fuel in the USA. The USA alone consumes nearly 1 million barrels/day of conventional biofuels, and the world consumes about 2 million barrels/day. This number will certainly increase twofold to threefold in the next 20-30 years. However, most conventional biofuels (use first-generation feedstock) are highly government subsidized, which mean they are not economically sustainable, except ethanol from Brazil. Therefore, significant technical challenges must be overcome to ensure that biofuels can become economi­cal and affordable at large scale worldwide. The future of biofuels largely depends on the price of biomass and oil-based fuels, which in turn will increase as the demand for biofuels rises. Therefore, technological breakthroughs in the non-food feedstocks development are the most important challenge that needs to be resolved.

Everton Anger Cavalheiro

Abstract Biofuel has come up as an important alternative to diversifying the global energy matrix, with economic, social, and environmental impact. Currently, Brazil is the main supplier and one of the top consumers of biofuels in the world, and has prioritized the use of soy as a raw material for the biofuel industry, as well as the sugarcane for producing ethanol; both industries use more than 8 million hectares of cropped land and employ over 1 million people every year. Considering the impor­tance of this subject for the energy matrix and Brazilian economy, we sought to ana­lyze the concentration level for each one of these industries, as well as its impact in pricing. The results point to a low concentration of the biodiesel market, where its production is centralized in four Brazilian states: Goias, Mato Grosso, Rio Grande do Sul, and Sao Paulo. This low concentration implies high competitiveness and homogenous average prices in the last couple of years (2011 and 2012), for com­panies holding 80 % of the market, as well as other firms in this industry. On the other hand, the industrial concentration level of the ethanol distribution channels has significantly grown, thus implying a significant and positive correlation between the increase of concentration and the increase of the contribution margin in this industry.

Keywords Biofuel • Biodiesel • Ethanol • Industry concentration

1 Introduction

Biodiesel has come up as an important alternative to diversifying the energy matrix in the world, where nations have tried to decrease their oil and oil derivatives dependence. Furthermore, the use of biodiesel has generated several economic, social, and environmental advantages, since it can generate both employment

E. A. Cavalheiro (H)

Federal University of Pelotas, Pelotas, Brazil e-mail: eacavalheiro@hotmail. com

A. Domingos Padula et al. (eds.), Liquid Biofuels: Emergence, Development and Prospects, Lecture Notes in Energy 27, DOI: 10.1007/978-1-4471-6482-1_4, © Springer-Verlag London 2014

and rent, it can decrease greenhouse gases emission, and it can also increase a country’s currency value in productive countries, both by exporting product and by reducing oil imports.

On the other hand, biodiesel has raised discussion since some evidence points to a causality relationship between biodiesel and agricultural commodities prices (Senauer 2008; Zhang et al. 2009, 2010). No matter what forces are oper­ating this system, it is crucial to understand the concentration level of this new Brazilian industry, while expecting it to become more and more important for both Brazilian and global energy matrix, as stated by MME (2010), which indi­cates that biodiesel will account for about 8 % of the transportation fuel global consumption in 2,035, a significant increase when compared to 3 % in 2009, for example.

Furthermore, despite being recent, the Brazilian biodiesel industry represents billions of dollars per year and is currently responsible for 5 % of the fuel used in Brazilian transportation, which currently demands 17 million biodiesel barrels/ year. If we consider that around 80 % of the raw material comes from soy, we have 12 % of the total soy crops today (around 27.2 million hectares, according to CONAB (2013) destined to supplying this important national industry.

Brazil is the number one user of biofuel when considering the total con­sumed by vehicles in the national freight, and it comes in as number two, con­sidering volume, after the USA. It is also the largest ethanol exporter in the world. This performance reflects the weather conditions and the technology developed by companies and institutions in the country. This segment accounted for, in 2012, the production on 27.78 million cubic meters of ethanol and bio­diesel in Brazil.

For 2012-2013 (from April 2012 to March 2013), the central-southern region alone exported 3.333 billion cubic meters of ethanol, and the main destinations are the USA (21 %), the Caribbean (31 %), and the European Union (31 %), where the sugar-alcohol exports alone generated US$14,601 billion in 2012-2013. These figures are the result of over a million people working in the area. Despite de expressive mark, the sugarcane for the production of ethanol—the main biofuel currently used in Brazil—takes up a relatively small area in Brazil: around 4.85 million hectares of cropped land.

Considering this problem, and considering the hypothesis that the concentra­tion level increases represents a decrease in the industry competitiveness, creat­ing opportunities for firms to price differently, we established the following research problem: what is the Brazilian biofuels industry concentration level like? Additionally, we tried to evaluate the concentration level of this industry for each one of the five Brazilian regions, the installed capacity usage level, as well as the possible effects of the industrial concentration in market prices.

In order to answer the research problem, we initially sought to show the con­cepts related to the market concentration, as well as their impacts for an industry. Subsequently, we discussed the biodiesel industry model and the possible infla­tionary pressures on food. Then, we presented this research’s method, and the results found.