Bioethanol as a fuel additive
A proposal to introduce an ethanol escalator to achieve climate change targets.
This paper considers the implications of developments in fuel escalator policy for the achievability of government climate change targets. It argues that a disengagement of policies on congestion and CO2 emission is now necessary, and examines the feasibility of the introduction of an annual escalator of bioethanol in petrol to a limit of 10% as an alternative method of achieving CO2 emission targets.
Labour’s white paper ‘a new deal for transport’ states that ‘in the UK, emissions of CO2 from road transport are the fastest growing contributor to climate change - the greatest environmental threat facing the international community………..we are faced with dramatic increases in traffic. Over the next twenty years car traffic could grow by more than a third. Van and lorry traffic is forecast to grow even faster.’ Labour’s policies to deal with this problem include an imperative: ‘we need to reduce the rate of traffic growth. We also want to see an absolute reduction in traffic in those places and streets where environmental damage is worst.’ The combined target of reducing CO2 emissions from motor vehicles and reducing the miles vehicles travel are to be addressed by a raft of policies, ranging from joint EU proposals to reduce CO2 emissions from new cars to motor tax policies to encourage the purchase of fuel efficient and well maintained models, encouragement of local authorities to tax work place parking and urban congestion, to the discouragement of shorter trips and unnecessary car use by means of the fuel duty escalator. The impact of these various measures is difficult to forecast, but the Transport White Paper estimates that the reduction in emissions from new cars will reduce CO2 emissions from transport by 8-14% alone by 2010, and that local charging could reduce CO2 by 20% in large cities over the same period. Overall, it is estimated that the measures contained in the ‘New Deal for Transport’ could reduce road traffic emissions of CO2 by 22 -27% Road traffic contributes just over 20% of total UK CO2 emissions. Under a ‘business as usual scenario, CO2 emissions from road traffic are expected to rise from a 1990 level of 33.3 mtc equivalent to a 2010 level of 40.7 mtc equivalent. Under the Kyoto protocol the UK accepted a legally binding target of a 12% reduction of CO2 from 1990 levels by 2010 as part of its obligation under the EU basket, and unilaterally imposed an additional target of a 20% reduction over the same period. A substantial plank of the UK strategy to reach both of these targets is a reduction in CO2 emissions by transport. This entails, as the previous figure shows, both a reversal of the projected growth in emissions, and a reduction in total. It was suggested in the DETRs green paper on climate change that transport contributes 4 Mtc equivalent to the 12% target and a further 2 mtc as part of the 20% target. In the Green Paper the Government estimated that savings in the range of these figures (5-8mtc) could be achieved by the application of ‘the EU carbon dioxide from cars strategy, in combination with increases in fuel duty’. The fuel duty escalator is projected to contribute to these savings specifically on the basis of ‘6% per annum fuel duty escalator to 2002’. There are some other effects projected (eg local transport measures, enforcement of speed limit etc.) some of which are accompanied by estimates of effect, and others merely noted as making a possible, but as yet unquantified contribution. Those quantified add up to a maximum of about 1.5 mtc. It is clear that two measures - EU emissions targets for new cars and the fuel duty escalator - formed the backbone of the Government’s strategy at the time of the Green Paper. However, by the time of the publication of the White Paper ‘Climate change: draft UK programme’ a number of policy developments had cast these initial estimates into some doubt. Firstly, the Chancellor has now directly repudiated the strategy of a fixed 6% fuel escalator - increases will be announced on a budget by budget basis. Although any increases will be ‘ hypothecated to assist transport investment’, the projection inherent in the climate Change document must now be seen as substantially compromised. Secondly, the extent to which the powers likely to be awarded to local authorities that manage traffic will be taken up looks uncertain, and the suggestion that 0.8 mtc might be saved by ‘full take up in areas greater than 25 km2’ looks to be very optimistic. Thirdly, the suggested effect of ‘strict enforcement of 70mph speed limit (0.4 -2.8mtc) now looks to be redundant since the government has repudiated such a possible policy. These changes have been reflected in the estimates set out in the White Paper. Whilst savings from ‘voluntary agreement on CO2 from cars and impact of changes from company car taxation and vehicle excise duty’ remain at a reduced estimate of a 4.0 mtc saving, transports only other quantified contribution is an estimate of take up of various measures implementable by local authorities (such as congestion charging and workplace parking levies). These range from a ‘low level’ estimate of a saving of 0.6 mtc to a saving from a high level of implementation of 2.4 mtc. A small additional allowance is set out for integrated transport savings in rail policy (0.3 mtc.) In summary, the contribution that transport is projected to make to the achievement of the UK’s CO2 emission targets has been substantially downgraded, and has been replaced in the White Paper with other, often more nebulous targets in other fields. 2. An alternative policy direction - a bioethanol escalator These gloomy conclusions about the now limited nature of the governments projections on the attainability of greenhouse gas targets from the transport sector are underlined by the political climate in which they are now set. It is fair to say that the initial proposals for the reduction in car use, together with the fuel escalator produced a reaction which suggested that the political cost of seeing the policy through would be difficult to sustain. This reaches to the heart of the debate on climate control: how can the steps that are necessary be undertaken in a democratic environment where the agency to carry out the policy has to be granted by those most adversely affected by it? Under these circumstances, it seems prudent to review a policy that seemed to be leading to a perception that the government was ‘anti-car’. The problem with the review that has been undertaken is that no proposals seem yet to have emerged which can replace the saving in CO2 emissions lost in the process. The most direct way of achieving this is to disengage the two presently closely linked reasons for traffic reduction - congestion and climate change. At present, the two are seen as coefficients of each other. Reduce traffic use and congestion is eased - and as a result, calculations about the savings in CO2 can be made. This process is then reversed: the savings are placed as the centrepiece of the strategy, and the means to achieve it is to deal with congestion. It is important to deal with congestion for reasons of quality of life in cities, for the maintenance of supply chains and for commercial efficiency, but emission reduction is a bonus, not a reason for doing it. Using this analysis, two strands of policy can emerge: one set of policies to deal with congestion, and the other to deal with the reduction of CO2 emissions from traffic. This latter policy can then be cast into a separate mould: how can CO2 be saved AS the motorist drives? Part of the answer lies with the action being taken by the EU to develop targets and standards for vehicle manufacture, so that replacement new vehicles coming on stream are far more emission-efficient than those they replace. This process has already been ‘claimed’ as ‘achievement of the EU’s CO2 from cars target’ and, as has been illustrated, is a staple of both Green and White Paper calculations. This target assumes that whatever fuel goes into cars is used more efficiently. No assumptions have been made about the nature of the fuel. Indeed, all the work that has been done on alternative fuels places the adoption of such policies well into the future - the development of fuel cells or the widespread introduction of electric cars. Some progress has been made with LPG but relates mostly to the cleaner emissions properties of gas excluding CO2. LPG cars do not emit substantially lower levels of CO2 as such. It is possible, therefore, to make considerable C02 savings by changing the composition of fuel that presently goes into cars. As the rest of this paper attempts to demonstrate, this would produce very substantial savings in emissions (at least equivalent to what is currently likely to be lost as a result of changes in strategies to curb emissions) and would not, at the same time, raise the spectre of the government being labelled ’anti-car’. In other words, it would be deliverable now, in the present political climate. The central proposal is that, over a period of time, up to 10% of ethanol should be added to each litre of petrol sold. This would be achieved by a requirement that all petrol sold is subject to this composition, and would represent a similar arrangement to that which achieved the elimination of lead additives over a period of time. The most suitable arrangement would be for government to introduce this requirement by way of an anti-emission escalator - that is a requirement that each year that the refining industry should add an additional 1% of ethanol until the 10% was achieved. This would, in policy terms appear very similar to the requirement that energy suppliers obtain 10% of their supplies from renewable sources.
The overwhelming advantage of such a policy would be that instant savings of CO2 emissions could be made as a direct result of this order being put into place, and without any change in the behaviour of motorists. This is because ethanol is a bio-fuel, made from energy crops. It is most widely used currently in Brazil, where substantial numbers of cars run on an 85% ethanol mixture. Less generally well known, however, is that ALL petrol is required by law to contain 22% ethanol, derived from the fermentation of sugar cane grown within the country. Fuel consisting of almost pure ethanol requires engine modification or specifically designed vehicles, but lower levels would not require modification and would not lead to a loss of performance on the part of the vehicle. Indeed, ethanol in the quantities suggested would act as an octane enhancer, and would therefore substitute for other additives already introduced by the industry to replace lead. Ethanol, whilst being derived from an energy crop, nevertheless requires an energy input to bring it to market. The energy involved in processing is not inconsiderable, but still results in savings of CO2 emissions of between 50 and 70% depending on the study cited. An initial calculation of the potential saving of CO2 can therefore be made on the assumption that a 60% saving is a reasonable starting point. At present, according to the Climate Change Green Paper, 23% of CO2 emissions derive from transport, of which 85% is road traffic. A substantial majority of this, in turn is petrol driven, and currently produces some 32.3mtc per annum. The achievement of a 10% substitution of ethanol therefore reduces this total by 6% or 1.9 mtc. This in itself increases the contribution made by the transport sector to climate change targets by 40%, and requires very little speculation about its effect: it will produce a certain and quantifiable contribution as the escalator takes hold.
One of the purposes of an escalator would be to allow the industry time to build up effective sources for ethanol and to allow potential producers a stable period in which to develop the ability to supply. Ethanol in Brazil is sourced almost exclusively from sugar cane. It is estimated by Prof. Goldenberg that Brazil itself would be able to supply one or more industrialised countries deciding to add ethanol to petrol, and there is no doubt that a number of other tropical countries currently overproducing sugar from cane could develop a source of supply rapidly. However, it is likely that the industry might seek to source ethanol form within the UK, or the EU. The most likely candidate for such production would be sugar beet, wheat wood chips arising from short rotation coppicing, and most interestingly, from the fermentation of paper-making residues. A study carried out for the Government by ETSU sounded a cautionary note about domestic ethanol production, pointing out that if all set-aside land in the UK were diverted to ethanol production ‘less than 10% of the total UK petrol market could be supplied’. However, it is significant that, for the purposes of its study ETSU only considered wheat and discounted other promising forms of conversion. It is likely, therefore, that sourcing could arise by a variety of means: some importation, some production from existing UK crops, and as the escalator rose, the development of new capacity using wood pulp or wood chip technology.
There is considerable dispute in the literature about the ‘real’ cost of a litre of ethanol, compared to a litre of petrol. In any event, the ‘price’ of petrol is determined by factors relating only very indirectly to the actual cost of production and transportation, even if the effect of duty is discounted. ETSU calculated that the best estimate suggested that a litre of ethanol would be about twice as expensive to place on the market as a litre of petrol. This again is based on the use of wheat. No research seems to have been done into accessing the post production residues of other processes as substitute raw materials. It is likely therefore that the cost differential suggested by ETSU will be on the high side. Furthermore, one of the properties of ethanol is that it is an octane enhancer, and its use would therefore displace other forms of octane enhancement presently accounting for between 3 and 5% of petrol volume. The price of this enhancer should therefore be factored into any equation: a ‘best guess’ therefore is that, overall, the attainment of a 10% ethanol substitution would increase the price of petrol by about 5% over what it otherwise would have been. This cost difference could be treated in policy terms in various ways. It could simply be left to the market to absorb the cost differential. This might bring pressure to bear on the efficient production of ethanol. It would, alternatively, be possible to factor the additional cost into a revised policy of a pre-announced fuel escalator - announcing, say, a 3% escalator and rebating the 0.5% price increase represented by the additional cost of the ethanol additive.
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01-Jun-2004
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