Asia Biofuels Travelblog, Pt. 2

If this is Wednesday, it must be Singapore.  No, wait -- the signs all say Hong Kong.  I barely remember Monday.  The schedule says we were in Kuala Lumpur, and so do my photos of the Petronas Towers, but it took 10 minutes of brainstorming with Jim to remember where we had lunch on that day.

In the end, it was the push back on European criticisms of Malaysian palm oil that brought it back for us.  Let me explain: As I wrote about a few weeks ago, there is recent concern that clearing jungle and peat bogs to plant oil palms has been contributing 8-10% of global emissions of carbon dioxide in recent years.  When cleared, the soil and peat release somewhere between ten and fifty thousand years worth of fossil carbon dioxide into the atmosphere.  Such an immense pulse of greenhouse gas into the atmosphere completely overwhelms the benefits of planting this land with any crop destined for refining into biodiesel.  If it is true, we are talking about thousands of years worth of deficit – we are better off, by far, burning petrodiesel.

As a result of this sort of criticism, palm-to-biodiesel investment in Europe has crashed, and The Netherlands has recently banned the import of oil from land that has recently been peat bog.  Granted, the Holland is not the biggest market in Europe by any means, but they have a clear interest in keeping all their reclaimed land dry, which increased carbon emissions threaten via sea level rise.  (I wonder if in Holland you can hear the thunder sounds made by the icecap on Greenland as it melts?)  It is worth considering whether the rest of the EU will follow suit, given the stated policy of reducing carbon emissions by 20% compared with 1990 levels.  Some of the people listening to our presentations about biofuels here are in fact investors in palm plantations, and they were decidedly of the opinion that, at least in Malaysia, no virgin jungle or wetlands are being cleared form growing oil palm.  We were even invited out into the bush to check it out for ourselves.

Perhaps on the next trip.

As a result of the hubbub caused by accusations about carbon release from land cleaning in SE Asia, Malaysia and Indonesia this week sent a delegation to Europe to explain that all is in fact well.  Indonesia is claiming that it has 18 million hectares of degraded land it can use for planting oil palm -- land cleared illegally for timber harvest and now left to rot, as it were.  The word down here is that Indonesia has really cracked down on illegal logging, and the people on the ground seem to think this is credible.  But having just flown over large sections of Borneo, with all the rows of neatly planted oil palm, literally as far as the eye can see from 30,000 feet, I am led to wonder where the truth is.

More news on the topic this week.  From Bloomberg, via The Business Times (6 June, 1007):  According to the story, Indonesia “ups efforts to protect primary forests,” and “won’t allow oil palm growers to cut primary forests for establishing plantations”.  Rachmat Witoelar, Minister for Environment, claims that, “They will be planted in lots already empty.  There are plenty of these, 18 million hectares of them.”  The article goes on to say that Indonesia plans to add seven million ha of plantations by 2011, thereby roughly doubling the global supply of palm oil.

Palm oil has nearly doubled in price in recently, despite the almost quadrupling of supply in recent years.  The price appears to be supported almost entirely by food use of the oil in Asia (primarily India and China), and is presently at a 20-30% premium over the price of petrodiesel.  That means, for the time being, converting palm oil to biodiesel is way underwater.  The only palm oil flowing into gas tanks is due to mandates by national governments for blending, which happens regardless of price.  But that volume is small compared to food use.

Naturally, this leads to a discussion about whether palm oil will stay this high, or whether economic forces will somehow come into play and restore prices to the historical range.  I’m just a simple physicist, but I can’t see prices falling, and my guess is you don’t want to be short on palm oil.

If Indonesia indeed plants all that additional palm, because palm takes a few years to start producing oil, the land will gradually come into production over something like eight years.  This will be completely absorbed by a mere annual ~9% increase in demand, which is less than we have seen in recent years.  The economies of China and India are growing at 8-12% per year, depending on who is doing the accounting.  This suggests anyone who was planning on cheap palm oil for biodiesel is out of luck and needs to find a new feedstock.

But the connection to food markets is a general problem for biofuels these days.  There is already plenty of talk about price pressures on corn due to ethanol demands, and in general biofuels are putting significant pressure on food prices around the world.  And it doesn't look to be the case that we actually have enough arable land or water to simply start cultivating dedicated energy crops at large scale.  There is some hope for jatropha, but it takes a long time to mature and the number of trees presently in production is so small that assertions of it's commercial role are simply guesses.  China is evidently planning on planting 13 million hectares in jatropha -- an area the size of England -- but it just isn't clear what sort of oil production those trees will provide.

All this comes back to Synthetic Biology because in the medium to long term, breaking the connection between biofuels and food crops will only come from building new fuel production pathways in plants and microbes.

More on this in the coming days.