The first mass-produced car in the world was the Ford Model T (“T-Ford”). The production of the Model T began in the autumn of 1908. The engine was capable of running on gasoline, kerosene, or ethanol, although the decreasing cost ofgasoline and the later introduction of Prohibition made ethanol an impractical fuel.

By 1918, half of all cars in the United States were Model Ts. Ford was very cost conscious and he wanted to save money on the paint of the car. His famous saying is: “Any customer can have a car painted any color that he wants so long as it is black.”

In total, more than 15 million Model Ts were manufactured, reaching a pro­duction rate of 9000-10 000 cars a day in 1925, or over 2 million annually, more than any other model of its day, at a price of just $240. For the past 100 years the basic principles of the motor car have remained the same: four wheels, a steering wheel, and a combustion engine, running either on gasoline, diesel, or lately electricity. Since the price of oil is climbing higher and higher we are rediscovering biofuels as a source of energy for cars. Electric and hybrid cars are now being introduced, but batteries do not store enough electricity yet to drive 500 km without reloading.

Biofuels Feedstock: jatropha curcas

Twenty years ago, we did not have the Internet or mobile phones. But now we cannot live without it. It changed our way of life. Renewable energies will have the same importance.

Al Gore — Speech at the Paul Scherrer Institute, Switzerland, 21 June 2010.

3.1

Characteristics

3.1.1

Plants in Marginal Crowing Conditions

The majority of the global food supply relies on only a very few staple crops like rice, wheat, soybeans, rapeseed, sugar, palm oil, and corn produce. However, the importance of many minor species should not be underestimated. Up until a few years ago agricultural research was focused on the commodity crops we all know so well and those minor crops generally failed to attract significant research funding. Nowadays, however, more and more investment money and research is put to work in smaller, underutilized, or neglected crops, particularly by scientists in developed countries.

Many of these neglected species are well adapted to growing conditions on marginal land, not suitable for agriculture, such as in erosion-affected areas of Sichuan and Yunnan (China), the Andean and Himalayan highlands, in arid areas, in salt — and erosion-affected soils, and so on.

Many crops considered inferior and neglected are very important staples at a national or regional level. Often they contribute considerably to the food supply in certain regions. For instance, during one of my visits in the second most poorest island of Indonesia, West Timor, it became clear that the cultivation of a single crop like cassava was the one and only crop for daily nutrition. The locals do not have the knowledge or money to plant a variety of food crops to obtain a well — balanced diet.

Second Generation Biofuels and Biomass: Essential Guide for Investors, Scientists and Decision Makers, First Edition. Roland A. Jansen. r 2013 Wiley-VCH Verlag GmbH & Co. KGaA.

Published 2013 by Wiley-VCH Verlag GmbH & Co. KGaA.

The limited information on neglected and underutilized crops hinders their development, quality improvement, and sustainable conservation. Very often agronomic research is hindered by the fact that information available on the plant germplasm is scattered and not centrally accessible.

In most cases central germplasm banks are not even available at all. Fortunately, this is changing in Jatropha. The San Diego-based company SG Biofuels (www. sgfuel. com) has made available a germplasm bank of 200 species. However, we still witness frequently uncoordinated research efforts for most neglected crops and scientists meet each other at conferences, exchange some ideas, but are extremely careful in exchanging knowledge, which might be worth a lot of money.

3.1.2

A report by the UN Food and Agricultural Organization (FAO) and International Fund for Agricultural Development (IFAD) found that in 2008 Jatropha was planted on about 900 000 hectares globally, the bulk — 760 000 hectares — in Asia, along with 120 000 hectares in Africa and 20 000 in Latin America (www. fao. org/ docrep/012/i1219e/i1219e02.pdf). However, the report estimates that by 2015 Jatropha planting will have risen more than 10 times to 12.8 million hectares worldwide. The main finding of the "Reality Check” is that Jatropha is not eco­nomically viable when grown by smallholders (e. g., in Kenya), either in a monoculture or intercrop plantation model. This is due to low yields and high production costs, and a lack ofguidelines for applying agronomic and silvicultural best practices. Hundreds of farmers interviewed for the study spoke of extremely low yields and uneconomical production costs. Many had paid as much as $12-20/kg for seeds, but received little or no advice on crop management and were unable to access markets for the small number of seeds harvested. They chose to abandon the Jatropha they had planted. The reality is that Jatropha is still essentially a semiwild plant, and as such its seed yields, oil quality, and oil content are all highly variable. Considerable research is needed into the agronomy of Jatropha and crop improvement. The FAO/IFAD report recommends short-term research focused on producing superior clonal plants, with longer-term work on developing improved varieties with reliable trait expression, and a seed production system that ensures farmers have access to productive and reliable planting materials.

The highly respected company GEXSI published a study with its view on all of the Jatropha projects developing between 2008 and 2015 (www. jatropha-platform .org). The major share of plantings around the equator will be in Asia with 104 projects covering 9.2 million hectares (Figure 3.3).

3.3.5

In Washington, the Navy celebrated Earth Day on 22 April 2010 by showcasing a flight test of the "Green Hornet” — a F/A-18 Super Hornet multirole fighter jet

powered by a 50/50 blend of conventional jet fuel and Camdina aviation biofuel (www. biofuelsdigest. com). The test was conducted at the Naval Air Station Patuxent River, Maryland. The exploration and adoption of alternative fuels is a priority for the Navy and Marine Corps.

In 2014, 100 million gallons of Camelina-based jet fuel is expected to be deliv­ered to 15 airlines by Sustainable Oils and AltAir.

There are a number of commercial hydroprocesing plants being built, most notably by Neste Oil and ConocoPhilips.

In the United States, given the strategic importance for the military to obtain copious amounts of domestically sourced energy and the blank check the Department of Defense receives, it is clear that aviation biofuels are coming.

On 20 June 2011 Boeing flew in its new 747-8 freighter from the United States to the Paris Air Show at Le Bourget Airport. All four engines were powered by a biofuel blend of ordinary Jet-A kerosene and 15% Camelina biokerosene. This was the first transatlantic crossing of a commercial airliner using a sustainable biofuel. The airplane completed a trip of 4335 nautical miles (8029 km). The Camelina was sourced from Montana, where it is grown as a rotation crop with wheat, and was processed by Honeywell UOP. According to Boeing, the 747-8 freighter required no modifications to the airplane, engines, or operating proce­dures to accommodate the biofuel blend.

Finally, two Camelina anecdotes. Among those with high hopes for Camelina is Montana Governor Brian Schweitzer, who is also an agronomist. Although he cannot put his arm around her, Brian Schweitzer raves about "my new girlfriend Camelina.” In my native tongue, which is Dutch, Camelina is called by the romantic name “Huttentut.” So Brian and Huttentut are a happy couple!

4.5

Miscanthus is a tall perennial woody grass of East Asian origin that has a high biomass yield. After 3-4 years Miscanthus can be harvested in early spring yielding

approximately 15 tonnes dry matter per hectare. The crop has a useful life of 15-20 years and requires low inputs once established. Agri-Miscanthus pellets are 8 mm in diameter and have very similar characteristics to agri-wheat or straw pellets, whilst complying with all emissions regulations.

8.4.5

The Chinese government has since embraced additional biofuel expansion plans. On 7 February 2010, a State Forestry Administration spokesman told the press that the country was ready to devote more than 13 million hectares of marginal lands to biofuels production and several local governments have embarked on or

are planning ambitious long-term oilseed plantation projects. According to blue­prints from the Yunnan Provincial Forestry Department, the province will con­struct 1.27 million hectares of biofuel plantations and aims to become China’s biggest biofuel base by 2015, achieving an annual production capacity of 4 million tonnes of ethanol and 600 000 tonnes of biodiesel. Forty counties in the province have begun to develop biofuel plantations.

The development of the new biofuel plantations will be funded by PetroChina and carried out by forestry authorities at various levels. The biofuel plantations will allegedly be built on marginal lands, including degraded forestlands and croplands, of which Yunnan province alone has more than 4 million hectares, according to a local official.

Next to the development of 13.3 million hectares of biofuel plantations the Chinese government is actively promoting the development of biodiesel facilities and 20 million tonnes biodiesel capacities, which will create enough renewable energy from plant sources to replace 40% of fossil-derived jet fuel of the world. Jatropha has been proven to be one of the viable petro jet fuel replacements.

Jatropha plants have over 300 years of history in China, and are widely grown in the Guangdong, Fujian, Hainan, Sichuan, and Yunan provinces. In these provinces, Jatropha grows in valleys and terrains not suitable for food crops on altitudes between 300 and 1600 meters. Statistically, these provinces have an annual rainfall of 480­2380 mm, which means mountainous terrain, and the average temperature is 18- 28°C. Jatropha plants are a major force in forestation in China.

Over the past decade China has quietly emerged as the world’s third largest biofuel producer. Concerned over rising food prices, China’s central government banned the use of grain-based feedstocks for biofuel production in June 2007. China is the world’s largest producer of rapeseed along the Yang-Tse River and the gov­ernment banned rapeseed as a feedstock for biodiesel. It is reorientating the country’s bioenergy plans toward perennial crops grown on marginal land.

Biofuels have rapidly entered China’s energy policy discourse. Once peripheral to policy, energy crops are now at the center of a broad debate in China that covers energy security, food security, climate change mitigation, international biofuel development, rural development, and ecological restoration. As in many other countries, conflicts between food and energy are at the center of this debate.

12.10.3

The target of using 10% biofuel in the form of Federal Aviation Administration-certified J50 blend fuel — 50% hydrocarbon kerosene and 50% Bio-SPK — will require 17.5 billion liters of biokerosene. This will need 45 million tonnes ofJatropha oil seed in production by 2017, covering a landmass of 10 million hectares. IATA’s other preferred biomass sources (algae and Camelina) will augment supplies, but not by enough. Clearly, then, if the aviation industry is to meet its own targets, production of bio-feed­stocks must be ramped up on a colossal scale.

Federal and EU regulators will continue to put financial pressure on carbon dioxide emissions. Industry bodies have set themselves ambitious targets to cut greenhouse gas emissions. Biofuels have proven themselves in performance as technically sound, drop-in fuels for aircraft. They reduce immensely the carbon output of flying by better fuel performance and much lower carbon dioxide emissions.

The European Union targets to raise the share of biofuels in transport to 10% by 2020 — this includes energy from biofuels, hydrogen, and green electricity. The airline industry would like to meet these targets already in 2017. Test flights with several kinds of biofuels like waste, animal fat, Camelina, and Jatropha have already proven that biofuels are a viable alternative to kerosene.

The European Union has made it clear that only biofuels that meet strict sus­tainability criteria qualify for true biofuels. Fuels that cause mass deforestation and food shortages do not fall into the biofuel category. The EU Renewable Energy Directive stipulates that biofuels must offer at least 35% carbon emission savings compared to fossil fuels. The figure rises to 50% as of 2017 and 60% as of 2018.

The problem is that truly “green” biofuels are not available in large quantities in mid-2012 and are not expected to hit the market on a sufficiently large commercial scale before 2015 at best.

The “food-or-fuel” and “indirect land change” discussions are intensive on a political level, and they have dissuaded the European Commission from making any forward-looking statements about the potential contribution of biofuels to the renewable energy targets of the European Union.

17

Biokerosene

17.1

Many commodities are still cheaply priced. Prices are often well below the all-time highs, especially when we take inflation into consideration. Traditionally, com­modities are priced in US dollars — a currency that gets cheaper versus most other currencies all the time.

When Bunker Hunt was trying to force a silver squeeze in 1979, he was holding 100 million ounces of the white metal, which skyrocketed to over $50 an ounce. So silver prices at $29 an ounce in August 2012 are still cheap (Figure 1.3).

The picture looks even more extreme when we take inflation into consideration. If we compare the price of silver in 1980 at $48, today’s silver price is insignificant. On 21 January 1980 at its all-time high, $48 silver translates into $135 in today’s dollars. In other words, it would take $135 today to equal the purchasing power of $48 three decades ago. Looking at the Consumer Price Index (CPI), it takes $2.81 now to buy what a single dollar bought then. Let us thank the Federal Reserve for this enormous stealth tax that has eroded all the capital we have saved ever since.

Even crude oil, trading at all-time highs in 2008 at $149 a barrel, looks cheap today, especially as it is priced in cheap dollars as well (Figure 1.4).

Is it wise to invest in commodities? Selectively — absolutely. I think it is best to invest in the complete value chain of commodities that are growing independently from stock market moves. This means you should buy land, start plantations of sugarcane, teak wood, eucalyptus, or Jatropha, get a crop every year, get an income out of your crop, convert the agricultural or wood waste into agripellets and woodpellets, and sell these energy products at a high price for additional income.

Since we are relatively still in the early years of the new commodity boom, there is plenty of room for rising commodity prices and it is not too late to invest in commodities this way. With the exception of specialized newswires like CNN, Bloomberg, CNBC, or NTV in Germany, commodities are not well covered in the media. Seldom do magazines like Time Magazine, Newsweek, Fortune, or Forbes publish a good analysis on coffee, copper, rubber, or biofuel trends. There are not many good documentaries on commodities on television. I give speeches around

the world and it amazes me how poorly people are informed about this new liquid commodity group or feedstock called biofuels. Even the largest commodity trading firms are not yet dealing in biofuels or biomass. Likewise, the general public is not yet aware of investment possibilities in the complete value chain of renewable biofuels. Thus, if you invest now, you are way ahead of the curve and that is where the biggest profits are made! I think in a few years the supply of biofuels and biomass will increase, and most probably one or two biofuels will become traded commodities in liquid cash and futures markets. Simultaneously, more and more biomass will be recycled into renewable energy commodities.

In 2008, we witnessed a gigantic melt down of all assets, caused by the mortgage crisis in the United States. A global “deleveraging” unfolded and investors came down to earth. The stock of Citigroup was selling at $500 a share in 2007. In August 2012 you can buy the stock around $29 a share. The prestigious Swiss bank UBS was selling 5 years ago at CHF 40 a share. At the end of 2011 you could buy UBS at CHF 11 a share. Brazilian agricultural land was selling at $100 a hectare 5 years ago. You are lucky if you can get it today for $500 per hectare. That is the difference in investment style!

One of the big retail global banks, with over 500 derivative products like ETFs and baskets of stocks, informed me that in 2008 they had sold €2.5 billion in commodity products. Although commodity markets boomed in 2010, they did not sell more than €700 million in derivatives — less than one-third of their 2008 levels!

In 2011, several banks started to shrink their investment bank departments. So do not think financial bank products — think hard asset investments.

1.4

Carbon dioxide is absorbed by Jatropha from the atmosphere as the plant grows on the plantations and the carbon dioxide is released later when Jatropha oil is burned. Thus, Jatropha oil is a carbon-neutral fuel that does not contribute to the accumulation of atmospheric carbon dioxide.

Jatropha is a succulent plant. This means Jatropha is a fat plant. Succulents are water-retaining plants, adapted to arid climates or soil conditions. That is why it is best adapted to arid and semiarid conditions.

The current breeding grounds of Jatropha show that plantings have been most successful in drier regions of the tropics with an average annual rainfall of between 600 and 2400 mm. Good examples are the Philippines, Mali, Ghana, Indonesia, South China, Cambodia, and Laos. It has been reported that Jatropha has even withstood years without rainfall in Cape Verde. However, the less rain water the plant receives, the lower the oil yield (although the opposite is true as well). Unfortunately, during monsoon periods Jatropha receives sometimes too much water, which reduces the yields as well. This happens frequently in India. I have seen Jatropha plantations on flat land along rivers as well as in very mountainous areas in China in Yunnan and Sichuan, where Jatropha was in fact planted to combat erosion.

Jatropha withstands slight frost, but not longer than 2-3 days. It is not sensitive to day length.

It grows on well-drained soils with good aeration and is well adapted to marginal soils with low nutrient content. In heavy soils, the root formation is reduced. Roots penetrate even in soils affected by erosion and can even refertilize the soil. Jatropha is a highly adaptable species, but its strength as a crop comes from its ability to grow on poor, dry sites. One hectare of a Jatropha plantation can absorb 40 tonnes of carbon dioxide and can qualify for carbon credits under the Kyoto Protocol, under the condition that the qualifying process starts with the seeding of the plantation — not later.

The UN FAO advocates the use of Jatropha for producing biodiesel and has stated that the crop can help farmers improve their financial condition in dry areas. "Using the energy crop Jatropha for biodiesel production could benefit poor farmers, particularly in semiarid and remote areas of developing countries,” said a report published by the UN FAO and IFAD (http://www. fao. org/news/story/en/ item/44142/icode/). J. curcas grows reasonably well in dry areas and also on degraded soils that are marginally suited for agriculture, the report said. It also said that Jatropha seeds can be processed into biodiesel, which is less polluting than fossil diesel, and can be used for lighting lamps and as cooking fuel by the poor. "Particularly small-holder farmers, oil mill out-growers and members of community plantation schemes or workers on private-enterprise can earn an income from Jatropha production,” it added. The report indicated that cultivation of Jatropha would be beneficial to women as cooking stoves that run on Jatropha oil is healthier and creates less pollution than stoves that run on traditional biomass fuel. In addition, it would also save women the need to gather fuel wood. "The lower use of fuel wood also relieve pressure on forest resources,” it added. How­ever, the report pointed out that Jatropha is still essentially a wild plant and it required investments for developing into a commercial crop. "Jatropha could eventually evolve into a high-yielding crop and may well be productive on degraded and saline soils in low rainfall areas.”

3.8

6.1

Principles

Contrary to charity, where money is given away to promote a good cause, socially responsible investing is a combination of commercial business investments, seeking a satisfactory rate of return with a substantial “social” component, whereby ideally:

• Large-scale employment is created.

• Rural economic development is promoted: the poor rural community is improved and quality of life is vastly improved by the creation of new companies and new jobs — a general increase in economic activity.

• Increased incomes alleviate the community from poverty.

• Local communities are empowered.

• Education of the farmers, wives, and children plays a central role.

• Women will able to earn their own income and get access to education.

• Local communities keep their land and investors are not engaged in “land grabbing.”

By investing directly in a community development an investor is able to create a greater social impact: money invested in a community institution is put to work directly. For example, money invested in a community development may be used to alleviate poverty or inequality, spread access to capital to underserved communities, support economic development or green business, and create access to education.

6.2