Carbon chaos? Producers face patchwork of pitfalls

By Marc Hequet | April 08, 2008
Web exclusive posted April 14, 2008 at 12:35 p.m. CST

Will carbon certification raise havoc for biofuels producers? That is a distinct possibility, claims a report from SRI Consultants.

The Menlo Park, Calif., research firm outlines a patchwork of pitfalls awaiting producers because different nations have different sustainability standards for biofuels feedstocks, and score feedstocks differently.

For example, according to Germany, U.S. corn ethanol represents a carbon-emissions saving of 43 percent compared with fossil fuels. However, the United States rates its own corn ethanol at only a 22-percent saving, while the United Kingdom figures U.S. corn ethanol at 27 percent.

Such disagreement may create market confusion and public distrust, warns SRI. Meanwhile, billions of dollars are in play in the form of tax incentives for producers complying with national standards. Germany, the Netherlands and the United Kingdom plan tax relief for biofuels based on producers' carbon footprints. The European Union likes the idea as well and has proposed a Renewable Energy Directive that would apply to all 27 European Union member states.

Europe targets biofuels savings at 30 percent in 2009, rising to 40 percent in 2011. The United States has a target of 20 percent. In either case, producers not in compliance in a given nation won't get any tax break that applies. In 2007, U.S. biofuels tax relief was $4 billion, while the European Union's was $5 billion.

SRI's Carbon Certification of Biofuels Report predicts a cascade of lobbying and litigation. The benefit may be that producers must learn how to measure their own carbon footprint - which means looking upstream and downstream at their processes to determine whether they and their supply chain introduce carbon, remain neutral or remove it from the atmosphere.

How far up and down the supply chain to look remains to be seen. Some countries might pressure others into changing standards, but consensus isn't guaranteed. "I wouldn't be surprised if we see a lot of lawsuits over this," says Eric Johnson, who is based in Zurich as senior advisor with SRI Consulting. "There's a ton of money at stake."