Researchers successfully simulate and boost photosynthesis

In a major breakthrough in plant biology, scientists have succeeded in boosting the photosynthetic efficiency of plants. With new insights, researchers from the University of Illinois built a better plant, one that produces more leaves and fruit without needing extra fertilizer. They accomplished the feat using a computer model that mimics the process of evolution. It is the first model ever to simulate every single step of the photosynthetic process.

The research findings appear in an open access article in Plant Physiology, and will be presented today at the BIO-Asia 2007 Conference in Bangkok, Thailand. The leading researcher, Steve Long, is the deputy director of the Energy Biosciences Institute (EBI) and an affiliate of the Institute for Genomic Biology and the National Center for Supercomputing Applications (NCSA). The EBI is a bioenergy and biofuels research consortium of universities, which recently won $500 million in funding from BP.

The breakthrough has obvious consequences for the future of bioenergy. In a study on the global potential for biomass exports, IEA Bioenergy Task 40 researchers found that the planet can sustain a production of maximum 1300 Exajoules worth of bioenergy by 2050 in an explicitly sustainable way. That is, after meeting all the food, fiber and fodder needs of growing populations and without further deforestation. However, they purposely left advances in plant science out of the equation because they cannot be predicted. The authors referred to the unparalleled possibilities of biotechnology to improve energy crops further: the photosynthetic efficiency of most crops presently is only 0.4%, while the theoretical efficiency is 4.5%. Room for higher productivity is enormous, they state, and the bioenergy potential could thus be substantially higher in the future. It is within this context that the new findings make sense.

Photosynthesis converts light energy into chemical energy in plants, algae, phytoplankton and some species of bacteria and archaea. Photosynthesis in plants involves an elaborate array of chemical reactions requiring dozens of protein enzymes and other chemical components. Most photosynthesis occurs in a plant’s leaves.

Principal investigator Long, who is also a professor of plant biology and crop sciences at the University of Illinois, and collegues asked the following question:

The distribution of resources between enzymes of photosynthetic carbon metabolism might be assumed to have been optimized by natural selection. However, natural selection for survival and fecundity does not necessarily select for maximal photosynthetic productivity. Further, the concentration of a key substrate, atmospheric CO2, has changed more over the past 100 years than the past 25 million years, with the likelihood that natural selection has had inadequate time to reoptimize resource partitioning for this change. Could photosynthetic rate be increased by altered partitioning of resources among the enzymes of carbon metabolism?

It wasn’t feasible to tackle this question with experiments on actual plants. With more than 100 proteins involved in photosynthesis, testing one protein at a time would require an enormous investment of time and money. Therefor they started simulating, and now that they have the photosynthetic process ‘in silico,’ they can test all possible permutations on the supercomputer.

The researchers first had to build a reliable model of photosynthesis, one that would accurately mimic the photosynthetic response to changes in the environment. This formidable task relied on the computational resources available at the NCSA.

Xin-Guang Zhu, a research scientist at the center and in plant biology, worked with Long and Eric de Sturler, formerly a specialist in computational mathematics in computer sciences at Illinois, to realize this model.

After determining the relative abundance of each of the proteins involved in photosynthesis, the researchers created a series of linked differential equations, each mimicking a single photosynthetic step. The team tested and adjusted the model until it successfully predicted the outcome of experiments conducted on real leaves, including their dynamic response to environmental variation. The researchers then programmed the model to randomly alter levels of individual enzymes in the photosynthetic process:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: plant biology :: photosynthesis :: efficiency :: metabolism :: energy crops :: carbon dioxide :: biotechnology ::

Before a crop plant, like wheat, produces grain, most of the nitrogen it takes in goes into the photosynthetic proteins of its leaves. Knowing that it was undesirable to add more nitrogen to the plants the researchers asked a simple question: can we do a better job than the plant in the way this fixed amount of nitrogen is invested in the different photosynthetic proteins?

Using 'evolutionary algorithms', which mimic evolution by selecting for desirable traits, the model hunted for enzymes that – if increased – would enhance plant productivity. If higher concentrations of an enzyme relative to others improved photosynthetic efficiency, the model used the results of that experiment as a parent for the next generation of tests.

This process identified several proteins that could, if present in higher concentrations relative to others, greatly enhance the productivity of the plant. The new findings are consistent with results from other researchers, who found that increases in one of these proteins in transgenic plants increased productivity.

By rearranging the investment of nitrogen, they could almost double efficiency.

An obvious question that stems from the research is why plant productivity can be increased so much. Why haven’t plants already evolved to be as efficient as possible?

According to Long, the answer may lie in the fact that evolution selects for survival and fecundity, while the scientists were selecting for increased productivity. The changes suggested in the model might undermine the survival of a plant living in the wild, but the researchers' analyses suggest they will be viable in the farmer’s field.


The research was sponsored by the National Science Foundation.

The Energy Biosciences Institute (EBI) is a new research and development organization that will bring advanced knowledge in biology, physical sciences, engineering, and environmental and social sciences to bear on problems related to global energy production, particularly the development of next-generation, carbon-neutral transportation fuels.

EBI represents a collaboration between the University of California, Berkeley, Lawrence Berkeley National Laboratory, the University of Illinois at Urbana-Champaign, and BP, which will support the Institute with a 10-year $500 million grant. EBI's multidisciplinary teams will collectively explore total-system approaches to problems that include the sustainable production of cellulosic biofuels, enhanced biological carbon sequestration, bioprocessing of fossil fuels and biologically-enhanced petroleum recovery.

EBI will educate a new generation of students in all areas of bioenergy, and will serve as a model for large-scale academic-industry collaborations. By partnering with a major energy company, EBI will facilitate and accelerate the translation of basic science and engineering research to improved products and processes for meeting the world's energy needs in the 21st century.

The Institute for Genomic Biology at the University of Illinois at Urbana-Champaign was established in 2003 to advance life science research and stimulate bio-economic development in the state of Illinois. It houses up to 400 researchers in three broad Program Areas: Systems Biology, Cellular and Metabolic Engineering and Genome Technology.

Picture (click to enlarge): In a computer model, researchers at Illinois were able to simulate the photosynthetic behavior of actual leaves. Here, a gas exchange system measures the rate of carbon dioxide and electron transport in intact leaves. Credit: Don Hamerman.

References:
Xin-Guang Zhu, Eric de Sturler and Stephen P. Long, "Optimizing the Distribution of Resources between Enzymes of Carbon Metabolism Can Dramatically Increase Photosynthetic Rate: A Numerical Simulation Using an Evolutionary Algorithm", Plant Physiology, 145:513-526 (2007).

University of Illinois at Urbana-Champaign: "Researchers successfully simulate photosynthesis and design a better leaf" - November 9, 2007.

IEA Bioenerggy Task 40: Edward Smeets, André Faaij,Iris Lewandowski, "A quickscan of global bio-energy potentials to 2050 An analysis of the regional availability of biomass resources for export in relation to the underlying factors" [*.pdf], Copernicus Institute - Department of Science, Technology and Society, Utrecht University, March 2004.

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International maritime body rejects risky ocean geoengineering

In a shot across the bows of ocean geoengineering companies, the London Convention - the International Maritime Organization (IMO) body that oversees dumping of wastes at sea - today unanimously endorsed a scientific statement of concern on ocean fertilisation and declared its intention to develop international regulations to oversee the controversial activities. It further advised states that such large-scale schemes are "currently not justified".

We applaud the London Convention for addressing a major gap in global governance. The Parties meeting here this week confirmed that large-scale ocean fertilization schemes are not scientifically justified and they urged governments to exercise utmost caution when considering such proposals. - David Santillo, Greenpeace International’s Science Unit

Geoengineering refers to intentional large-scale manipulation of land, ocean or atmosphere in an attempt to ‘fix’ climate change. The governments meeting at the London Convention were confronted with a rash of private ‘carbon trading’ schemes that claim to sequester greenhouse gases by dumping large quantities of iron, urea or other additives into the sea. These techniques, known collectively as 'ocean fertilisation', claim to draw climate change gases out of the atmosphere by prompting growth of plankton. The geoengineers seek to win ‘carbon credits’ as a financial reward for these activities – despite the fact that international scientific bodies have warned of potentially devastating ecological consequences for marine ecoystems (previous post).

Moreover, recently a 47 strong research team of leading oceanographers and biogeochemists from the international oceanographic mission KEOPS confirmed earlier doubts on the scientific merits of the technique, and warned for potentially negative effects. What is more, they even concluded that ocean fertilization as currently proposed won't work (here).

Other geoengineering proposals include emulating volcanoes' cooling effects by pumping sulphur into the atmosphere (debunked as dangerous - earlier post), creating a giant space mirror (which would be prohibitively costly), or generating highly reflective clouds (more here). Some of these proposals have been simulated and shown to be very risky (previous post).

In its Fourth Assessment Report, Working Group III of the International Panel on Climate Change (IPCC) discussed global warming mitigation strategies and said about geo-engineering:

Geo-engineering options, such as ocean fertilization to remove CO2 directly from the atmosphere, or blocking sunlight by bringing material into the upper atmosphere, remain largely speculative and unproven, and with the risk of unknown side-effects. Reliable cost estimates for these options have not been published. - IPCC, Fourth Assessment Report, Working Group III: Mitigation

The only technique seen as low risk, highly feasible and mentioned by the IPCC as one that could effectively help mitigate climate change, consists of the production of carbon-negative bioenergy (so-called 'bio-energy with carbon storage' or BECS systems). BECS is described as a geoengineering technique because it implies the creation of biomass plantations located at strategic places on the planet.

Ocean fertilization remains highly controversial, and the historic decision of the international body meeting in London this week came just as one company, Planktos, Inc., announced it had set sail from Florida, USA to dump iron in the ocean at an undisclosed location, possibly west of the Galapagos islands, known for their unique ecosystems.

A second private geoengineering outfit, Ocean Nourishment Corporation (ONC) of Australia, caused uproar this week in the Philippines with the discovery of a proposal to dump industrial urea in the ecologically sensitive Sulu Sea region. ONC is reportedly in discussions with the government of Morocco on another proposed dump:
energy :: sustainability :: biomass :: bioenergy :: climate change :: geoengineering :: ocean fertilization :: marine ecosystems :: Galapagos :: IMO :: London Convention ::

Geoengineering profiteers should have no right to alter the ocean commons for their private gain. Until now they’ve been exploiting the lack of international governance. The London convention is sending a clear message to geoengineering cowboys that ocean-dumping schemes are scientifically unjustified and must be regulated. We welcome the London Convention’s decisions on ocean-based geoengineering. We urge governments meeting at the United Nations Framework Convention on Climate Change in Bali next month, as well as the UN Convention on Biological Diversity, to follow the London Convention’s lead and begin an international process to put all geoengineering technologies under intergovernmental oversight. - Jim Thomas, ETC Group

Meanwhile, a third private geoengineering firm, Climos, Inc. of USA, attended the London Convention meeting where it proposed a voluntary “code of conduct” for ocean fertilisation – a proposal met with little enthusiasm.

The London Convention decisions were greeted with enthusiasm in the Philippines, where civil society organizations, small-scale fishers and environmentalists are protesting a proposal by Ocean Nourishment Corporation ”to dump urea in the Sulu Sea. The groups will hold a press conference on Monday 15 November in Manila to outline concerns and actions in the region.

There’s clearly an urgent need for international oversight. We were alarmed to discover that a geoengineering company had already approached the Philippines government. Although no permit has been issued yet, at least one experimental dumping of urea has already occurred in the Sulu Sea – without a permit, without environmental assessment, and without public consent. - Neth Dano, Third World Network.

According to Hope Shand of the ETC Group, a civil society organisation which screens the responsible use of new technologies, the London Convention has taken a first, important step to prevent geoengineering abuses. However, it maintains its call for a moratorium on large scale and commercial geoengineering projects until there is public debate, intergovernmental oversight and thorough assessment of social, economic and environmental impacts. Geoengineering techno-fixes are not an acceptable response to climate change, the ETC says.

References:
International Maritime Organization: London Convention.

ETC Group: London Convention Puts Brakes on Ocean Geoengineering - November 9, 2007.

Third World Network, SEARICE, Corporate Watch, ETC Group and Greenpeace South East Asia: Geoengineers prepare to pollute Philippine Seas as International Ocean Dumping Body Meets - November 5, 2007.

Rex Dalton, "Ocean tests raise doubts over use of algae as carbon sink", Nature 420, 722 (19 December 2002) | doi:10.1038/420722a

Biopact: The end of a utopian idea: iron-seeding the oceans to capture carbon won't work - April 26, 2007

Biopact: WWF condemns Planktos Inc. iron-seeding plan in the Galapagos - June 27, 2007

Biopact: Simulation shows geoengineering is very risky - June 05, 2007

Biopact: Climate change and geoengineering: emulating volcanic eruption too risky - August 15, 2007

Biopact: Capturing carbon with "synthetic trees" or with the real thing? - February 20, 2007

Biopact: IPCC Fourth Assessment Report: mitigation of climate change - May 04, 2007

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RWE and AEP to test carbon capture and storage on hard coal-fired power plant in West Virginia

American Electric Power (AEP) and RWE plan to collaborate in the testing of carbon capture and storage (CCS) technology for modern coal-based power plants. To this end, the partners have now signed a Memorandum of Understanding. Alstom will also participate in this project, which will be implemented on the AEP hard coal-fired Mountaineer plant (1,300 MW) in New Haven, West Virginia.

Alstom has developed a capture process based on ammonia that is to be used for the post-combustion capture of CO2 from flue gas. This process will be tested in a demonstration plant with an electrical capacity equivalent to 20 MW by capturing and scrubbing a corresponding slipstream from the flue gas. This way, up to 200,000 tons of CO2 are expected to be captured and stored on-site in deep saline formations – salt water-bearing strata – per year.

Biopact tracks developments in CCS, because the technology can be applied to biomass, resulting in carbon-negative energy and fuels. This kind of negative emissions energy, also known as 'bio-energy with carbon storage' (BECS) takes historic CO2 emissions out of the atmosphere. This sets it apart from both nuclear and renewables like wind, ordinary biofuels or solar, which are all 'carbon neutral' at best (schematic, click to enlarge, and see previous post, here and here).

Recently, RWE Power signed a collaboration agreement with BASF and Linde on the testing of new 'scrubbing agents' for capturing carbon in a pilot plant at RWE’s lignite-fired power plant site in Niederaussem (earlier post). Now it is joining American partners to validate the technology further.

Once the captured carbon is stored, the complete technology will have been tested. This area is managed by RWE's upstream subsidiary RWE Dea. The sub-project "storage", which will also be carried out by AEP, is subsidized by RWE Dea. Site-specific investigations of carbon storage capabilities, inter alia at the Mountaineer plant site, have been conducted in the US since 2002.

During the investigations, an approximately 2,740-meter exploratory well and seismic studies determined that the site was suitable for deep geological storage of CO2. Battelle Memorial Institute, a global science and technology enterprise and a leader in carbon storage research, is serving as the consultant on geological storage. RWE Dea will contribute its upstream and gas storage expertise.

The overall project – demonstration plant based on chilled ammonia and storage – is set to begin in 2009, provided that the application of this capture technology in a small-scale Wisconsin pilot plant operated by Alstom and the Electric Power Research Institute is successful. AEP and RWE are participating in this project as well:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: carbon capture and storage :: bio-energy with carbon storage :: carbon-negative :: emissions :: climate change ::

Once commercial viability of the capture technology is validated at Mountaineer, AEP plans to use Alstom’s chilled ammonia process on one of the 450-MW coal-fired units at its Northeastern Station in Oologah, Oklahoma. This commercial-scale system is scheduled to be operational at the end of this decade. It is expected to capture about 1.5 million tons of CO2 a year. The CO2 captured at Northeastern Station will be used for enhanced oil recovery (EOR).

AEP and RWE are members of the e8, a non-profit international organization composed of the nine leading electricity companies from the G8 countries. The e8 promotes sustainable energy development through electricity sector projects in developing nations worldwide.

8 November 2007 - American Electric Power (AEP), RWE and Alstom will collaborate during a planned validation of commercial-scale application of carbon capture and storage technology on an existing AEP coal-fired power plant.

RWE will join a project AEP announced in March when it signed a deal with Alstom, for post-combustion carbon capture technology using Alstom's chilled ammonia process. RWE will also participate in an associated project for deep geological storage of captured CO2.

References:
RWE AG: RWE and AEP to test carbon capture and storage on existing Mountaineer hard coal-fired power plant in West Virginia - November 8, 2007.

Biopact: RWE Power, BASF and Linde to cooperate on CO2 capture technology - September 28, 2007

Biopact: A quick look at 'fourth generation' biofuels - October 08, 2007

Biopact: Carbon-negative bioenergy recognized as Norwegian CO2 actors join forces to develop carbon capture technologies - October 24, 2007

Biopact: Carbon-negative bioenergy is here: GreatPoint Energy to build biomass gasification pilot plant with carbon capture and storage - October 25, 2007

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New public-private hybrid rice group aims to raise rice yields in the tropics

A new international research initiative, linking the private and public sectors for the first time and launched on November 9 at the 2007 Asian Seed Congress, aims to boost the research and development of hybrid rice for the tropics.

The Hybrid Rice Research and Development Consortium (HRDC), established by the International Rice Research Institute (IRRI), will strengthen public-private sector partnership in hybrid rice, a technology that can raise the yield of rice and thus overall rice productivity and profitability in Asia.

The news is important for the bioenergy community, because one of the criteria that need to be met in order to tap the vast theoretical potential for biomass production (previous post), is increased and more efficient food production. Both processes go hand in hand. Rice is the world's most important food crop, grown on approximately 152 million hectares of land (statistics here).

Hybrid rice takes advantage of the phenomenon of hybrid vigor - known as heterosis - to achieve yields 15 to 20% higher than nonhybrid (inbred) varieties. Over the past three decades, the technology has helped China achieve food security, but has not yet reached its potential in the tropics - the place where food production can be vastly improved and where the largest bioenergy potential can be found.

National agricultural research and extension systems and other public sector organizations engaged in hybrid rice research and development will be among the primary beneficiaries of funds generated by the HRDC. Rice farmers in Asia will benefit from accelerated access to hybrid rice-based technologies such as more and better hybrids, good-quality seed, knowledge, and services provided by the private and public sectors. - Dr. Fangming Xie, IRRI senior hybrid rice researcher

IRRI and its partners in the public and private sector have led research on development of, and use of, hybrid rice technology in the tropics for almost 30 years. Successful deployment of hybrid rice in Asia, however, requires more effective cooperation between public research institutions and the private sector in research to overcome current constraints.

The HRDC will be hosted by IRRI and will have three major objectives:

1. Support research on developing new hybrids with enhanced yield heterosis, improved seed production, multiple resistances to stresses, and grain quality.
2. Support research on best management practices for rice hybrids.
3. Improve information sharing, public awareness, and capacity building.

Public and private sector organizations and companies with interest in hybrid rice development are invited to become members of the HRDC. For private-sector members, annual financial contributions under the consortium structure will take into account the status of seed companies at different stages of development. HRDC members will have access to improved parents, hybrids, and breeding lines, including seeds and associated information:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: biotechnology :: agriculture :: rice :: tropics :: Asia ::

The HRDC will have a public-private sector advisory committee and will meet annually to provide information to its members on new plant genetic resources available or under development, review research on hybrid rice management, discuss new research priorities, and make decisions on other consortium activities such as capacity building for both the public and private sectors.

According to IRRI senior hybrid rice researcher Fangming Xie, the HRDC will significantly enhance the capacity for hybrid rice research and product delivery, while providing services and support to the private sector in its product development and delivery that will benefit the general public.

References:
International Rice Research Institute: New hybrid rice group aims to raise rice yields in the tropics - November 9, 2007.

International Rice Research Institute: At Last, Tropical Hybrids - April 19, 2000.

IRRI / FAO: Adoption of Hybrid Rice in Asia - Policy Support - Proceedings of the workshop on policy support for rapid adoption of hybrid rice on large-scale production in Asia, Hanoi, Viet Nam, 22-23 May 2001, Rome 2002

Biopact: IEA report: bioenergy can meet 20 to 50% of world's future energy demand - September 12, 2007

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Al Gore invests in biofuels

Spanish renewable energy company Abengoa jumped as much as 7 percent Wednesday after an investment fund headed by former U.S. Vice President and Nobel Peace prize laureate Al Gore bought a stake in the firm.

UK-based Generation Investment Management purchased a small position in Abengoa, which specialises in biofuels, a company spokeswoman said. Abengoa declined to comment on the value of the Gore stake.

Abengoa was the top gainer on Spain's IBEX blue chip stock index Wednesday at 0842 GMT, trading at 29.30. The company is at the forefront of developing next generation cellulosic biofuels.

Gore won the Nobel Peace Prize last month, together with the UN's Intergovernmental Panel on Climate Chance (IPCC), for campaigning against climate change. He is chairman of Generation Investment Management, a firm which specialises in companies that promote sustainable development [entry ends here].
energy :: sustainability :: biomass :: bioenergy :: biofuels :: ethanol :: cellulose :: Gore ::

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Syntroleum announces successful completion of CTL demonstration; important for BTL technology and carbon-negative biofuels

Syntroleum Corporation, a synthetic fuels technology company, has successfully completed a demonstration of its proprietary technology designed to convert coal into clean synthetic liquid fuels. The test run utilized synthesis gas produced from coal and Syntroleum's proprietary cobalt catalyst technology in the conversion process. The 2,500-hour bench-scale test run was recently completed at Eastman Chemical Company's Kingsport, Tennessee facility.

Syntroleum says the demonstration is a very important step towards the development of biomass-to-liquids (BTL) processes resulting in synthetic biofuels. Importantly, because the cobalt catalyst used by Syntroleum localizes carbon capture to the shift reactor syngas product, it allows for easier CO2 capture and sequestration. With BTL technology combined with carbon capture and storage (CCS), a whole range of new bioenergy opportunities becomes available, including the production of carbon-negative biofuels. Unlike ordinary biofuels or renewables like wind or solar, which are merely 'carbon-neutral', these 'negative emissions' fuels take historic CO2 emissions back out of the atmosphere (earlier post).

Syntroleum's demonstration proved that fuels made from coal have the same superior synthetic Fischer-Tropsch (FT) qualities as those made from natural gas. The demonstration also indicated that Syntroleum's proprietary cobalt-based catalyst performs robustly under real-world coal-to-liquids (CTL) conditions, as was predicted from earlier extended life tests performed by Syntroleum.

We have now proven that the Syntroleum Process, and specifically our cobalt catalyst, performs very well on live coal syngas in a commercial environment. This is a great step for Syntroleum and we continue to believe that this technology will help pave the way to lowering our country's reliance on foreign sources of oil, by producing domestically sourced synthetic diesel and jet fuel. This successful demonstration under the most challenging condition of live coal derived syngas is also very important for the future of our Biomass-to-Liquids technology. - Jack Holmes, CEO of Syntroleum.

By showing that live coal derived syngas can be turned into liquids, biomass-to-liquids technology, which is less challenging, becomes a step closer. The syngas produced from gasifying such biomass feedstocks as corn stover, wood by-products, and chicken litter is more difficult to clean up than natural gas-based syngas (for gas-to-liquids production, GTL) but much easier than coal-based syngas. By demonstrating the commercial viability of its cobalt catalyst for coal, the company has addressed its suitability for any renewable feedstock.

The two major process steps in CTL (and GTL, BTL) production consist of gasification and Fischer-Tropsch synthesis (schematic, click to enlarge). After these steps, the liquids are further refined.

Gasification
A gasifier converts coal feedstock into gaseous components by applying heat and pressure to the coal in the presence of steam and oxygen. A gasifier differs from a combustor in that the amount of oxygen inside the gasifier is carefully controlled such that only a relatively small portion of the fuel burns completely, minimizing the formation of carbon dioxide:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: coal-to-liquids :: gasification :: syngas :: Fischer-Tropsch :: biomass-to-liquids :: carbon-negative :: carbon capture and storage :: synthetic biofuels ::

The combustion and gasification reactions are shown in Eq 1 and Eqs 2-4 respectively. The reaction of Eq 2 is termed partial oxidation. Rather than burning, most of the carbon-containing feedstock is chemically broken apart by the gasifier’s heat and pressure producing syngas. Water introduced into the gasifier also takes part in the chemical decomposition of coal, producing carbon oxides and hydrogen as in Eq 3-4.

The produced syngas is primarily hydrogen and carbon monoxide with other gaseous components. The actual composition depends on the conditions in the gasifier and the type of feedstock. Typical coal syngas H2:CO ratios are in the 0.4:1 to 0.9:1 range. For FT conversion, the desired ratio is 2.1:1. “Ratio adjustment” via the water-gas shift reaction of Eq 4 is thus required to convert syngas to FT hydrocarbons. This may be done in the gasifier, a catalytic shift converter, or the FT reactor itself by using catalysts with water-gas shift selectivity (e.g. iron). For optimum operation of the gasifier and the FT reactor, the preferred option is the catalytic shift converter.

This has the added advantage of eliminating CO2 from FT reactor tail gas and simplifying carbon capture. All CO2 is captured after water-gas shift as part of syngas cleanup.

Note - this is where the potential of carbon-negative biofuels comes in: when the CO2 from the process is captured from an already renewable feedstock - biomass - and then geosequestered, the result is a negative emissions fuel that takes historic CO2 emisions out of the atmosphere as it is used.

Other major gaseous components found in the syngas stream are derived from the sulfur and nitrogen containing compounds found in coal. In addition to the sulfur and nitrogen components the syngas may contain metals, e.g. mercury and arsenic. The metals, sulfur and reactive nitrogen compounds are removed from the gasifier effluent to provide clean syngas for further processing. Non-combustible components e.g. calcium and silicon, typically leave the bottom of the gasifier as slag.

Fischer-Tropsch Conversion
The FT process uses a catalyst to convert syngas to hydrocarbon products according to the general chemical pathway given by the following equation:

There is a distribution of intermediate feedstocks generated during this FT chemical process including unreacted gases, short and long chain paraffins, olefins and alcohols. The type of catalyst and operating conditions impact the distribution of the intermediate feedstocks generated.

Standard refinery hydroprocessing and fractionation is used to convert the raw chemicals generated into commercial products, primarily transportation fuels. The unconverted syngas and light gas products in the reactor tail gas are used for internal power generation as shown in the schematic.

Tests
Eastman Chemical Company and Syntroleum Corporation have developed their respective technologies and expertise independently. The companies combined their experience to demonstrate that coal can be effectively converted to liquid hydrocarbons with a cobalt based FT catalyst.

FT catalysts have historically been based on iron or cobalt. While iron catalyst requires a lower initial investment, cobalt has numerous performance advantages such as higher activity, higher diesel yields, longer life, and lower water gas shift activity resulting in lower overall operating cost. The higher activity and longer life of cobalt catalyst offsets the initial higher cost.

By not causing water-gas shift in the FT reactor, cobalt catalysts localize carbon capture (CO2 sequestering) to the shift reactor syngas product. The CO2-concentrated syngas may effectively be scrubbed as part of the cleanup process shown in the schematic. Exposure to contaminants increases with the longer life of the cobalt catalyst resulting in increased potential for catalyst deactivation. Therefore cobalt catalyst must be designed consistent with commercially available syngas cleanup processes.

Syntroleum has invested over one million hours of run time in bench scale FT catalyst tests, much of it in Continuous Stirred Tank Reactors (CSTR) like those used in the present study. These tests include extensive studies on trace levels of various contaminants and a patented regeneration process. Syntroleum's regeneration process separates the catalyst from the wax matrix returning it to the original oxide form. The catalyst is then re-reduced, slurried and returned to the reactor.

This procedure has been demonstrated at lab, pilot, and demonstration scale, restoring catalyst activity from a wide range of deactivation mechanisms. With this background, Syntroleum was able to establish a maximum target level of contaminants in the syngas and designed guard beds through which syngas produced at the Eastman facility was processed. The combined experience of the two companies was essential in the success of the demonstration program.

Data on the gasification and FT demonstration can be found in a non confidential White Paper.

Jet fuels
These results in conjunction with the Air Force's successful testing of Syntroleum's Fischer-Tropsch jet fuel last fall and the recent certification of FT jet fuel for the B-52 H Stratofortress bomber create an opportunity for Syntroleum to supply synthetic jet fuel from several sources to help the Air Force meet its target of providing 50 percent of its needs with a 50/50 synthetic blend by 2016.

As previously announced, Syntroleum has contracted to deliver 500 gallons of renewable synthetic jet fuel for testing by the Air Force. This fuel will be made using Syntroleum proprietary Biofining(TM) technology using a mixture of low grade animal fats and greases as provided by Tyson Foods.

Based on preliminary testing, Syntroleum believes this renewable fuel has almost identical properties to the natural gas-based FT jet fuel used in the certification tests.


References:
Syntroleum: White Paper: Fischer Tropsch Catalyst Test on Coal-Derived Synthesis Gas - s.d. [November 2007].

Syntroleum: Syntroleum Announces Successful Completion of Coal-to-Liquids Demonstration - November 8, 2007.

Biopact: A quick look at 'fourth generation' biofuels - October 08, 2007

Biopact: Syntroleum to deliver bio-based synthetic jet fuel to U.S. Department of Defense - July 09, 2007

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U.S. Senate farm bill puts $2.3 billion into biofuels

The 2007 U.S. federal Farm Bill has made it to the full senate, after passing the house in July. It contains a very strong support package for the development of next generation biofuels in the U.S. Iowa Senator Tom Harkin chairs the Senate Agriculture Committee in charge of the bill and presented its scope. Debate is expected to last for up to two weeks on the text which sets out agricultural support policies for the next five years.

Some $2.3 billion in federal support would flow to biofuels under the bill, half of it to develop cellulose as a companion to corn as a feedstock for fuel ethanol. The bill proposed a 'very robust' program in biofuels. It puts the U.S. on a path to produce 60 billion gallons of biofuels by 2030, roughly 10 times current output.

The package includes $1.1 billion to encourage farmers to grow biomass crops, in financial aid to construct ethanol plants using cellulose, found in grasses and wood, as a feedstock, and to help refiners buy biofuel feedstocks.

An additional $1.1 billion would be expended in tax credits for biofuels, including credits for cellulosic ethanol. Those provisions came from a Finance Committee bill that was merged into the panoramic bill drafted by the Agriculture Committee.

Cellulosic ethanol would be eligible for up to $1.28 a gallon in credits. The bill has a credit to small producer of 67 cents for cellulosic ethanol, the current 10-cent credit available to all small producers and the long-standing 51-cent tax credit for blending ethanol into gasoline.

[...] we confront a classic chicken-and-egg dilemma: Entrepreneurs won’t build cellulosic biorefineries in the absence of a reliable supply of feedstocks. And producers won’t grow the cellulosic feedstocks unless and until there are biorefineries to purchase them.

Well, in this bill, we address this dilemma very aggressively. On the supply side, we allocate $130 million over five years to the Biomass Crop Transition Program. We know it takes a few years to get crops like switchgrass started and established. So farmers are going to need financial assistance during the transition. And that’s what we provide in the Senate bill.

On the demand side, we allocate $300 million to support grants for biorefinery pilot plants, loan guarantees for commercial biorefineries, and support for repowering existing corn-ethanol plants and other facilities so they can process cellulosic biomass.

In addition, we continue the CCC bioenergy program with $245 million to support feedstock purchases for advanced biofuels production. And, we’re including about $140 million for biomass research and for biomass crop experiments. - Tom Harkin, Chair Senate Agriculture Committee

A half-dozen senators want to add language to the farm bill to require the use of 36 billion gallons of biofuels by 2022, including 21 billion gallons of cellulosic ethanol, biodiesel and other alternative fuels. The mandate is now 7.5 billion gallons in 2012. Production is forecast for 6.5 billion gallons this year.

I’ll make this prediction: If we can preserve the Senate energy provisions in conference - and maybe get some additional funding for them, which we’ll certainly try to do – I predict that within five years we are going to see cellulosic biofuel refineries sprouting like mushrooms all across the country. - Tom Harkin

A more detailed overview of the provisions:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: ethanol :: biodiesel :: biobutanol :: cellulose :: subsidies :: Farm Bill :: United States ::

• $227 million for incentive payments to farmers to grow, harvest, transport and store biomass crops.
• $422 million in grants and loan guarantees for construction of ethanol plants using biomass crops and to convert plants now using corn.
• $425 million to help refiners buy feedstocks for "advanced biofuel production."
• $270 million in grants and loans to expand production and use of renewable energy; 15 percent of money reserved for projects that convert animal waste to energy (biogas).
• $2 billion in loan guarantees for biomass refineries and biofuels plants; half of the money for projects of less than $100 million, the other half for projects up to $250 million. Cost to government estimated as $800 million.
• $500 million in loans, grants and loan guarantees to expand production and use of renewable fuels in rural areas.
• $1.4 billion to help biorefiners buy feedstock for their plants and expand fuel output.
• creation of a "biomass energy reserve" with five-year contracts that pay farmers an incentive to grow, harvest, store and transport biomass crops; must be within 50 miles of a bioenergy plant. Cost $75 million.
• $200 million a year through 2016 for biomass research
• purchase of surplus sugar to be sold to refiners to make ethanol

Producer and tax credits

• Create small producer credit for cellulosic ethanol of 67 cents per gallon. Cost $282 million through 2012.
• Extend small producer tax credit of 10 cents a gallon on up to 15 million gallons of ethanol from plants with capacity up to 60 million gallons a year for two years, to December 31, 2012. Estimated cost $57 million through 2012.
• Create small producer tax credit of 10 cents a gallon, from December 31, 2007, for plants that produce ethanol with processes that do not use a fossil-based resource. Cost $211 million through 2012.
• Extend production tax credits of $1 or 50 cents a gallon for biodiesel for two years, to December 31, 2010, and extend 10-cent a gallon small producer tax credit for 15 million gallons of fuel from plants with capacity of up to 60 million gallons a year for four years, to December 31, 2012. Cost $264 million through 2012.
• Extend $1 a gallon tax credit for biodiesel created by thermal depolymerization. Credit is capped at 60 million gallons per year of co-produced fuel. Cost $211 million through 2012.

The cost of the tax credits is offset by three steps:

• Reducing the 51-cent a gallon tax credit by 5 cent in the first calendar year after U.S. production tops 7.5 billion gallons. Raises $854 million through 2012.
• Extending for two years, until December 31, 2010, 57-cent a gallon tariff on imported ethanol. Raises $25 million through 2012.
• Excluding in calculations of alcohol eligible for fuel tax credit all but 2 percent of denaturant used to make the fuel undrinkable. Raises $284 million through 2012

References:
U.S. Senate Agriculture Committee: Harkin: Farm Bill Energy Title Makes Investments in Nation’s Energy Security - November 8, 2007.

Reuters: Senate farm bill puts $2.3 bln in biofuels - November 8, 2007.

Biopact: U.S. House proposes US$4.5 billion for biomass research, biorefineries -
May 22, 2007.

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Indian sugar mills to produce 'bio-CNG' from cane biomass with European aid

In a very interesting development - a possibility Biopact hinted at long ago - three sugar factories from Maharashtra, India, have decided to produce 'bio-CNG' from sugarcane biomass as a transport fuel. The projects will be set up with finance from the German Investment and Development Company (DEG), one of Europe's largest international development banks, which has earmarked €15 million for lending to the factories. German firm Biogas Nord and Enersearch - a European research institute engaging in renewable energy solutions - will provide technical know-how.

In India, compressed natural gas (CNG) has been the fuel of choice in large metropolitan areas and major auto makers now offer CNG models (earlier post). With this new project, a bio-based alternative made from agricultural waste will make it available in rural areas. This represents an interesting case of energy 'leapfrogging' - rural communities jumping into a cleaner and renewable future, beyond what is already the cleanest alternative currently in use in the rapidly modernizing megacities. What is more, with oil approaching $100 and natural gas prices up as well, the bio-CNG makes commercial sense as well. Experts from the Indian Institute of Technology (IIT) predict it could become the cheapest of all transport fuels in India.

Biogas can be produced efficiently from any type of biomass via anaerobic digestion. The renewable gas contains around 60 to 70 percent methane (CH4) with the remainder being CO2 with minor amounts of contaminants and trace gases. For it to be used as a transport fuel in vehicles as a replacement for CNG, it has to be upgraded, with the CO2 scrubbed out. The fuel then becomes 'bio-CNG', a very clean, renewable gaseous energy source. The fuel is already being used on a relatively large scale in Europe, most notably in Sweden, Austria and Germany.

Greenhouse gas emissions and air pollutants from CNG/bio-CNG are considerably lower than those from liquid fossil fuels (previous post). Prices tend to be lower as well, which is why a switch to gaseous fuels for transport is encouraged in major metropolitan areas across the (developing) world. Several countries in the Global South - most notably Argentina, Pakistan, and India - have succeeded in converting large proportions of the public and private transport fleets to CNG. In India, demand for the fuel is now even outstripping [*.cache] that of traditional liquid fossil fuels by a factor of four.

Sugarcane and its main processing residues - distillery sludge, bagasse and spent wash - make for an excellent biogas feedstock. In fact, if sugarcane as a whole crop were to be converted into biogas instead of ethanol, around 35 percent more energy could be obtained per hectare, because anaerobic digestion is a more efficient bioconversion process. Researchers have found that when the energy from sugarcane bagasse, which is used as energy for ethanol distillation, is included in the calculations, the energy output for sugarcane biogas could be up to to 130 percent higher than the figure for ethanol.

The three cooperatives in Maharastra will be producing bio-CNG at a competitive 22-24 rupiah (€0.38-0.41/$0.55-0.61) per kilogram. This compares favorably to current CNG prices in India, which range between 20 and 25 rupiah. On an energy equivalent basis, the bio-CNG would be 30 to 50% less expensive than diesel, the cheapest liquid fuel:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: sugarcane :: biogas :: biomethane :: CNG :: India ::

In the first phase, Warna sugar factory in Kolhapur, Jaywantrao Patil sugar factory in Nanded and Kisan Veer sugar factory in Satara would introduce the technology. About Rs 40 crore (€6.9/$10.2 million) would be required for commissioning the conversion systems at the three sugar factories.

Press mud and spent wash, by-products of sugarcane processing, would be used for producing biogas. The biogas would be further treated to produce bio-CNG. It is unclear which gas cleaning technology will be utilized, but several options are available: water adsorption, pressure swing adsorption or chemical absorption.

India has the world's second largest sugar industry, producing some 14 million tonnes per year grown on 3.6 million hectares of land. A total of 165 sugar mills are located in Maharashtra alone, more than half of all large facilities in India (maps, click to enlarge).

German firms Enersearch and Biogas Nord would be providing the technical know-how and machinery for the projects. Shubhada Jahagirdar, director at Enersearch, told reporters that German companies and financial institutions were keen on providing the know-how and support for the sugar companies as the technology and fuel production path has a large and attractive commercial potential.

Biogas Nord is already active in the biogas sector in India. Recently it acquired an order to build a biogas facility at a sugar factory in Maharastra (previous post).

In India, CNG has been a fuel of the cities, especially for vehicles. Now, with CNG being extracted from agricultural waste, it would be available for the larger rural population.

Ms Jahagirdar said that the bio-CNG technology was still at a pilot stage in Maharashtra and it could receive monetary support from the Sugar Technology Fund of the Union Government. The bio-CNG would be less costly than diesel, the most widely used liquid fossil fuel in the country. German financial institutions would extend project finance only to those sugar mills that have a healthy balance sheet.

Dr Virendra K. Vijay of the Indian Institute of Technology (Delhi), a biogas research expert, said that with crude oil close to $100 a barrel, bio-CNG could be an attractive alternative fuel. Its production cost could come down to 15 rupiah per kg - becoming the cheapest transport fuel in India (CNG currently costs between 20 and 25 rupiah per kg) -, if produced on a large scale.


Background
When biomethane is produced from dedicated energy crops, it can yield more energy than any other current type of biofuel. The green gas can be made from a very wide range of biomass crops as well as from abundant crop residues. Scientists have found [*.pdf] that for temperate grass species, one hectare can yield between 2,900–5,400 cubic meters of methane per year, enough to fuel a passenger car for 40,000 to 60,000 kilometers (one acre of crops can power a car for 10,000 to 15,000 miles).

A recent 'Biogas Barometer' report, published by a consortium of renewable energy groups led by France's Observ'ER, cites a 13.6% increase growth in biogas use for primary energy production between 2005 and 2006 in the EU (earlier post).

The total energy potential for biogas in the EU has been the subject of several projections and scenarios, with the most optimistic showing that it can replace all European natural gas imports from Russia by 2020 (more here). Germany recently started looking at opening its main natural gas pipelines to feed in the renewable green gas. And an EU project is assessing the technical feasibility of doing the same on a Europe-wide scale (previous post).

Biogas as a transport fuel offers particularly interesting prospects for the developing world, where oil infrastructures are not yet developed extensively. By relying on locally produced biomethane used in CNG cars, these countries could leapfrog into a clean, secure and green post-oil future.

For comprehensive overviews of the latest developments in biogas research, development and applications, please search the Biopact website.

References:
Hindu Business Line: Maharashtra sugar mills plan bio-CNG from cane biomass - November 8, 2007.

Colen, F., Pasqual, A., "Sugar cane (Saccharum sp.) juice energetic potential as substrate in UASB reactor", Energia na Agricultura, 2003, Vol. 18, No. 4, pp. 58-71

NVG Global - country reports: Thailand and Asia – Natural Gas Vehicle Market Review. Part One, Part Two - March 21, 2007.

Natural Gas Vehicle Network: CNG Growth Outstrips Traditional Fuels in India.

Biopact: Biogas Nord to make biomethane from bagasse in India - June 17, 2007

Biopact: German biogas company to make gas from sugarcane residues in India - March 20, 2007

Biopact: India's TVS Motor to roll out CNG-fueled motorbikes, allows leapfrogging with biogas - September 04, 2007

Biopact: Report: carbon-negative biomethane cleanest and most efficient biofuel for cars - August 29, 2007

Biopact: Experts see 2007 as the year of biogas; biomethane as a transport fuel - January 09, 2007

Biopact: Pre-combustion CO2 capture from biogas - the way forward? - March 31, 2007

Biopact: Hydrogen out, compressed biogas in - October 01, 2006

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IEA WEO: China and India transform global energy landscape - demand, emissions to grow 'inexorably'

In its latest World Energy Outlook (WEO 2007), the International Energy Agency warns that the huge energy challenges facing China and India are global challenges that will affect all countries. It calls for countries to step up their cooperation to address these challenges and calls the next 10 years critical to change a course that will otherwise see an 'inexorable' growth in oil and gas imports, coal use and greenhouse-gas emissions. The WEO charts a course to a more secure, competitive, lower-carbon energy system – a course that must involve the world’s two emerging giants.

The WEO this year focuses on energy developments in China and India and their implications for the world. If governments don’t change their policies, energy demand and carbon emissions are set to grow rapidly through to 2030 – even faster, in fact, than in last year’s Outlook. These trends would threaten energy security and accelerate climate change. But the WEO 2007 also shows how new policies can pave the way to an alternative energy future.

Incorporating a global update of the WEO mid- and long-term energy projections reflecting the latest data, WEO 2007 features 3 key energy scenarios to 2030:

• Reference Scenario: shows the trends in surging energy consumption and CO2 emissions under existing government policies;
• Alternative Policy Scenario: shows how policies driven by concerns for energy security, energy efficiency and the environment, under discussion but not yet adopted, could curb growth in energy demand;
• High Growth Scenario: analyses what would happen to energy use if current high levels of economic growth in China and India persist through the projection period.

Energy developments in China and India are transforming the global energy system as a result of their sheer size and their growing importance in international energy markets. Rapid economic development will undoubtedly continue to drive up energy demand in China and India, and will contribute to a real improvement in the quality of life for more than two billion people. This is a legitimate aspiration that needs to be accommodated and supported by the rest of the world. Indeed, according to the IEA, most countries stand to benefit economically from China’s and India’s economic development through international trade.

Demand
But the consequences of unfettered growth in global energy demand are alarming for all countries. If governments around the world stick with existing policies – the underlying premise of the Reference Scenario – the world’s energy needs would be well over 50% higher in 2030 than today. China and India together account for 45% of the increase in global primary energy demand in this scenario. Both countries’ energy use is set to more than double between 2005 and 2030. Worldwide, fossil fuels – oil, gas and coal – continue to dominate the fuel mix. Among them, coal is set to grow most rapidly, driven largely by power-sector demand in China and India.

Emissions
These trends lead to continued growth in global energy-related emissions of carbon-dioxide (CO2), from 27 Gt in 2005 to 42 Gt in 2030 – a rise of 57%. China is expected to overtake the United States to become the world’s biggest emitter in 2007, while India becomes the third-biggest emitter by around 2015. China’s per-capita emissions almost reach those of OECD Europe by 2030:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: oil :: coal :: fossil fuels :: emissions :: climate change :: India :: China :: IEA ::

Oil
Consuming countries will increasingly rely on imports of oil and gas – much of them from the Middle East and Russia. In the Reference Scenario, net oil imports in China and India combined jump from 5.4 mb/d in 2006 to 19.1 mb/d in 2030 – this is more than the combined imports of the United States and Japan today. World oil output is expected to become more concentrated in a few Middle Eastern countries – if necessary investment is forthcoming.

Although production capacity at new fields is expected to increase over the next five years, it is very uncertain whether it will be sufficient to compensate for the decline in output at existing fields and meet the projected increase in demand. A supply-side crunch in the period to 2015, involving an abrupt escalation in oil prices, cannot be ruled out.

Alternative scenario
Government action can alter appreciably these trends. If governments around the world implement policies they are considering today, as assumed in an Alternative Policy Scenario, global energy-related CO2 emissions would level off in the 2020s and reach 34 Gt in 2030 - almost a fifth less than in the Reference Scenario.

Global oil demand would be 14 mb/d lower – a saving equal to the entire current output of the United States, Canada and Mexico combined. Measures to improve energy efficiency are the cheapest and fastest way to curb demand and emissions growth in the near term. The savings are particularly large in China and India. For example, tougher efficiency standards for air conditioners and refrigerators alone would, by 2020, save the amount of power produced by the Three Gorges dam. Emissions of local pollutants in both countries, including sulphur-dioxide and nitrous oxides, would also be reduced sharply. But even in the Alternative Policy Scenario, global CO2 emissions are still one-quarter above current levels in 2030.

In a “450 Stabilisation Case”, which describes a notional pathway to long-term stabilisation of the concentration of greenhouse gases in the atmosphere at around 450 parts per million, global emissions peak in 2012 and then fall sharply below 2005 levels by 2030. Emissions savings come from improved efficiency in industry, buildings and transport, switching to nuclear power and renewables, and the widespread deployment of CO2 capture and storage (CCS). Exceptionally quick and vigorous policy action by all countries, and unprecedented technological advances, entailing substantial costs, would be needed to make this case a reality.

High growth scenario
Economic growth in China and India could turn out to be significantly faster than assumed in the Reference and Alternative Policy Scenarios, resulting in more rapid growth in energy demand, oil and gas imports and CO2 emissions. In a High Growth Scenario, which assumes that China’s and India’s economies grow on average 1.5 percentage points per year faster than in the Reference Scenario, energy demand is 21% higher in 2030 in China and India combined. Globally, energy demand rises by 6% and CO2 emissions by 7%. In this case, it would be all the more urgent for governments around the world to implement policies to curb the growth in fossil-energy demand and related emissions.

Cooperation needed

The emergence of new major players in global energy markets means that all countries must take vigorous, immediate and collective action to curb runaway energy demand. The next ten years will be crucial for all countries, including China and India, because of the rapid expansion of energy-supply infrastructure. We need to act now to bring about a radical shift in investment in favour of cleaner, more efficient and more secure energy technologies. - Nobuo Tanaka, Executive Director of the International Energy Agency

IEA countries have long recognised the advantages of co-operation with China and India, reflected in a steady broadening of the range of collaborative activities through the IEA.

This relationship symbolises the interdependence of the global energy community. One of my priorities as the new IEA Executive Director is to step up our co-operation with both countries. In good time this could hopefully pave the way, with the support of all the governments concerned, to an ultimate objective of their future membership of the Agency. - Nobuo Tanaka

References:
IEA: World Energy Outlook 2007.

IEA: The Next 10 Years are Critical - the World Energy Outlook Makes the Case for Stepping up Co-operation with China and India to Address Global Energy Challenges - November 7, 2007.

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FAO forecasts continued high cereal prices: bad weather, low stocks, soaring demand, biofuels, high oil prices cited as causes

Global cereal prices are expected to remain at high levels for the coming year due largely to problems in production in several major exporting countries and very low world stocks, says the latest Food Outlook report issued today by FAO in London. The convergence and interaction of a whole range of particular circumstances is the main cause for high prices and volatility in agricultural commodity markets: unfavourable weather in key production areas, low stocks, tight supplies, strong demand from rapidly growing economies, biofuels, record petroleum prices, high freight rates, currency developments and a high degree of speculation.

The FAO food price index rose by 9 percent in 2006 compared with the previous year. In September 2007 it stood at 172 points, representing a year-on-year jump in value of roughly 37 percent (graph 1, click to enlarge). The surge in prices has been led primarily by dairy and grains, but prices of other commodities have also increased significantly. The only exception is the price of sugar, which has been declining for the second year in a row. This trend occurred despite record sugar based ethanol output in Brazil (graph 2, click to enlarge).

High price events, like low price events, are not rare occurrences in agricultural markets although often high prices tend to be short lived compared with low prices, which persist for longer periods. What distinguishes the current state of agricultural markets is rather the concurrence of the hike in world prices of, not just a selected few, but of nearly all, major food and feed commodities. As has become evident in recent months, high international prices for food crops such as grains continue to ripple through the food value/supply chain, contributing to a rise in retail prices of such basic foods as bread or pasta, meat and milk.

Rarely has the world witnessed such a widespread and commonly shared concern about food price inflation, a fear which is fuelling debates about the future direction of agricultural commodity prices in importing as well as exporting countries, be they rich or poor. - FAO Food Outlook

The price boom has also been accompanied by much higher price volatility than in the past, especially in the cereals and oilseeds sectors (more on the importance of volatility below). Increased volatility highlights the prevalence of greater uncertainty in the market. Supply tightness in any commodity market often raises price volatility in that market. Yet, the current situation differs from the past in that the price volatility has lasted longer, a feature that is as much a result of supply tightness as it is a reflection of ever-stronger relationships between agricultural commodity markets and other markets.

Among major cereals, this season’s main protagonist is wheat, the supply of which has been hampered by production shortfalls in Australia, a major exporter, and low world stocks, while demand has been strong, not only for food but also feed. In September, wheat was traded at record prices, between 50 and 80 percent above last year. Maize prices increased progressively from the middle of last year until February 2007, when they hit a ten-year high, but have fallen considerably since. Supply constraints in the face of brisk demand for biofuels triggered the initial price hike in maize prices. However, reacting to a massive expansion in plantings and expectations of a record crop this year, prices have started to come down, although by September they had still remained 30 percent above last year. Prices of barley, another important cereal, also soared lately. Supply problems in Australia and Ukraine, tighter availability of maize and other feed grains, compounded with strong import demand, have contributed to the doubling of prices of both feed and malting barley in recent weeks.

The tightness in the grain sector also affected the oilseed complex, which witnessed a year-on-year price surge of at least 40 percent, depending on crops and products. Soaring maize markets during the second half of the previous season contributed to keeping oilseed prices at high levels as maize plantings expanded at the expense of oilseed plantings. Due to the expected shrinking of world supplies and historically low inventories in 2007, in the face of faster rising demand for food and biodiesel, as well as unusually strong demand for feed, oilseed markets are experiencing further increases in prices in these early months of the new season.

Among all agricultural commodities, dairy products have witnessed the largest gains compared with last year, ranging from 80 percent to more than 200 percent. Higher animal feed costs, tight dairy supplies following (1) the running down of inventories in the European Union and (2) drought in Australia, (3) the suspension of exports by some countries (4) coupled with the imposition of taxes by others, and (5) dynamic import demand are the main factors that have sustained dairy prices at historically high levels.

High feed prices have also raised costs for animal production and resulted in an increase in livestock prices; with poultry rising most, by at least 10 percent. In addition, growth in consumption and gradual reductions in trade restrictions are contributing to the increase in meat and poultry prices this season.

Convergence of factors
The persistent upward trend in international prices of most agricultural commodities since last year is only in part a reflection of a tightening in their own supplies. Global markets have become increasingly intertwined. As a result, linkages and spill-over effects from one market to another have greatly increased in recent years, not only among agricultural commodities, but across all commodities and between commodities and the financial sector.

Financial markets
Market-oriented policies are gradually making agricultural markets more transparent and, in the process, are elongating the financial opportunities for increased portfolio diversification and reduction in risk exposures. This is a development that is taking place just as financial markets around the world are experiencing the most rapid growth, driven by plentiful international liquidity. This abundance of liquidity reflects favourable economic performances around the world, notably among emerging economies, low interest rates and high petroleum prices:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: food :: agricultural commodities :: petroleum :: drought :: speculation :: China :: India :: FAO ::

These developments have paved the way for massive amounts of cash becoming available for investment (by equity investors, funds, etc.) in markets that use financial instruments linked to the functioning of agricultural commodity markets (e.g. future and option markets). The buoyant financial markets are boosting asset allocation and drawing the attention of speculators to such markets, as a way of spreading their risk and pursuing of more lucrative returns. Such influx of liquidity is likely to influence the underlying spot markets to the extent that they affect the decisions of farmers, traders and processors of agricultural commodities. It seems more likely, though, that speculators contribute more to raising spot price volatility rather than their levels.

Soaring oil prices
Soaring petroleum prices have contributed to the increase in prices of most agricultural crops: by raising input costs, on the one hand, and by boosting demand for agricultural crops used as feedstock in the production of alternative energy sources (e.g. biofuels) on the other. National policies that aim to reduce greenhouse gas emissions are behind the fast growth of the biofuel industry.

Rising fossil fuel prices and attempts to reduce dependence on imported oil, however, have provided the extra incentive for many countries to opt for even more challenging crop production targets. The combination of high petroleum prices and the desire to address environmental issues is currently at the forefront of the rapid expansion of the biofuel sector: this is likely to boost demand for feedstocks, most notably, sugar, maize, rapeseed, soybean, palm oil and other oilcrops as we