Trucks transporting sugar cane to a
Cosan mill, Brazil.
The number of cars on the road is expected to triple to 2 billion by 2050. There are likely to be twice as many trucks then as now. Sustainable biofuels are expected to play an increasingly important role in helping to meet customers’ fuel needs and reduce CO2 emissions.
The international market for biofuels is growing, due largely to the introduction of new energy policies in Europe and the USA that call for more renewable, lower-carbon fuels for transport. Today, biofuels make up around 3% of the global road transport fuel mix. This is expected to rise to 9% by 2030.
In 2010, Shell sold 9.6 billion litres of biofuels in petrol or diesel blends. We are one of the world’s largest distributors. We are now investing in the production of the lowest CO2, most sustainable and cost-competitive of today’s biofuels – Brazilian sugar-cane ethanol. This can reduce CO2 emissions by around 70% compared to petrol. In 2010, we agreed to form the $12 billion Raízen joint venture with Cosan, Brazil’s largest producer of ethanol. We also continue to invest in developing advanced biofuels for the future.
Today’s biofuels pose some sustainability challenges. From cultivation to production to use, some biofuels can emit significantly less CO2 than conventional fuels. But the CO2 benefits of biofuels vary depending on factors including the raw materials used, and how they are processed and distributed.
If land used for biofuels crops is not carefully managed, concerns can arise over competing directly with food crops or displacing these crops into sensitive areas, such as forests rich in biodiversity. Other challenges include contested land ownership, labour rights, and the water used in producing biomass and processing some biofuels.
We support international certification schemes that require biofuels to come from sustainable sources. We have also been introducing our own sustainability clauses into new and renewed supplier contracts since 2007. These clauses require suppliers to respect human rights in the production of their biomass and biofuels. They also require suppliers not to cultivate, produce or manufacture biofuels in areas rich in biodiversity. Suppliers must be able to trace supply chains, and they must belong to relevant international bodies promoting sustainable biomass production. In 2010, 83% of the volume of biofuels we purchased was from suppliers signed up to these clauses.
We are working with the International Union for Conservation of Nature (IUCN) to learn more about helping to protect areas rich in animal and plant life. We have been working to influence the industry to adopt more sustainable biofuel production processes. In 2010, we developed a joint approach to encourage governments to recognise and offer financial incentives for better management of land use. We have been engaging with other energy companies and environmental non-governmental organisations – such as WWF and Conservation International – to investigate ways to promote sustainable production of biofuel crops on underused land, without displacing existing farming activities to other areas.
We also work with industry, governments and voluntary organisations towards the development of global sustainability standards for biofuels. We are active in a number of roundtable organisations that have developed sustainability certification schemes. For example, we belong to Bonsucro, formerly the Better Sugar Cane Initiative, which works to reduce environmental and social impacts of sugar-cane production. Bonsucro has developed industry standards for the certification of biofuels from sugar cane.
Soy and palm oil accounted for less than 5% of the biofuels we bought in 2010. We take part in the Roundtable on Sustainable Palm Oil (RSPO), which checks and approves claims for sustainable palm oil production and assures the transparency and traceability of supply chains. We are also a member of the Roundtable on Responsible Soy, which promotes responsible soy production and has been developing a certification system for use from 2011.
Producing low-carbon biofuels
Brazilian sugar-cane ethanol is the most sustainable biofuel available today. From cultivation through to use, it produces less CO2 than any other commercially available biofuel. Our partnership with Brazilian company Cosan is our first involvement in producing biofuels on a large scale. The Raízen joint venture, to be finalised in 2011, will have the capacity to produce over 2 billion litres of sugar-cane ethanol a year, with significant potential to grow.
Sugar cane used in the process is grown on land hundreds of kilometres from the Amazon rainforest. Shell supports the work of the Brazilian government to implement effective land use policies and address concerns over sugar-cane production displacing other crops to areas rich in biodiversity. We also support government efforts to protect the land rights of indigenous peoples.
Cosan’s approach uses waste material from sugar cane to power its own plants, delivering electricity it does not need to the national grid. This further reduces overall CO2 emissions from the process.
Brazilian sugar cane needs virtually no irrigation to grow because of high seasonal rainfall. With recycling, the production process uses around 10 litres of water to produce each litre of ethanol. In 2010, Cosan recycled about 90% of the water used in 19 of its 23 mills, and there are plans to install the same technology in the remaining mills by 2013. New technology that air dries sugar cane is also reducing the need for water.
Cosan uses liquid derived from the crushed cane as natural fertiliser on its land. Other residues from filtering the cane and ash left from burning cane for power are also used to nourish the soil, limiting the use of chemical fertilisers.
Cosan is planning to phase out most of its manual harvesting by 2014 in advance of São Paulo state requirements. Mechanical harvesting is more efficient and removes the need for first burning the straw from the cane. Cosan is training some staff for new opportunities under mechanisation, as well as to gain new skills for employment elsewhere.
As part of our agreement with Cosan, we have drawn up a series of robust sustainability standards and procedures that must be followed. They include sound land, water management and labour practices. In the coming years, Raízen aims to have its mills and all ethanol produced from its own sugar cane certified under the Bonsucro scheme. It also plans to have certified all ethanol produced from suppliers’ sugar cane.
Raízen will include our interest in Codexis and part of our interest in Iogen Energy – two advanced biofuels ventures. We expect Raízen to provide plant residue for feedstock, power, and technical expertise, which could help these advanced biofuels processes achieve commercial scale.
FUELS FOR THE FUTURE
Shell was one of the first energy companies to invest in developing advanced biofuels from non-edible plants and crop waste. We continue to invest in a range of projects, but scaling up the technology from the laboratory to commercial viability can take many years. Not all projects will succeed in becoming technically and commercially viable.
In our work to develop advanced biofuels we have partnerships with leading biotechnology companies and academic institutions. With Iogen Energy, a Canadian company, we are developing technology that uses enzymes to break down the cellulose in plant walls and turn it into sugars. These are then fermented and distilled into ethanol. Iogen Energy opened a demonstration plant in Ottawa in 2004, which produced over 430,000 litres in 2010. We continue to make progress towards possible investment in a full-scale commercial cellulosic ethanol plant.
Our research programme with Codexis in the USA develops natural enzymes into “super-enzymes” for faster conversion of non-edible crops or plant waste to ethanol, as well as directly into components similar to petrol and diesel. With US company Virent, we are working on the conversion of plant sugars directly into high-performance liquid transport fuels. In 2010 this partnership started production at a demonstration plant that has the capacity to produce up to 38,000 litres of biogasoline a year. We have also started research into producing diesel and aviation fuel using this approach.
In early 2011, Shell transferred its interest in Cellana, a joint-venture company researching the conversion of algae into biofuel, to partner HR BioPetroleum. The decision allows us to focus on other advanced biofuels options that better suit our portfolio and strategy.
Electric and hybrid vehicles that can switch to petrol or diesel offer the potential to reduce CO2 emissions from road transport, although this depends on how the electricity is produced. If the electricity is generated by gas-fired plants or by renewable energy, the overall CO2 emissions will be significantly lower than if generated by coal.
Hydrogen fuel cells are expected to play a role in the longer term transport energy mix. Car makers, fuel suppliers and governments will need to work together to invest in new vehicles and distribution points in order to establish a hydrogen market and infrastructure that will bring down costs. We have invested in a number of hydrogen filling stations around the world as part of a demonstration programme. There were nine of these at the end of 2010 in the USA, China and Japan.