The New Carbon Cycle

Atlantic Article Delves into Complexities and Interrelationships of Energy and Climate

A very good article from The Atlantic was shared with me by Mike Titens, one of Thompson & Knight's corporate partners and a member of our Climate Change and Renewable Energy Practice Group.  The article is entitled The Elusive Green Economy and delves into the complexities of and interrelationships between climate change, renewable energy, energy independence and security, as well as how entrepreneurship and government can have a positive impact or a negative one depending on the policies adopted. 

 

It's rare that any insight is shown on these issues by the press (or politicians for that matter).  While I may not agree with every conclusion, I was pleased to see a more in-depth discussion of these complex issues and recommend it for your reading.

Energy Efficiency and the Competitive Advantage of Our Nation

Management guru and professor Michael Porter's concludes in The Competitive Advantage of Nations that one of government's roles involves "acting as a catalyst and challenger, . . to encourage--or even push--companies to raise their aspirations and move to higher levels of competitive performance. . .."  In the Senate debate over the American Clean Energy and Security Act, H.R. 2454, the "Waxman-Markey Bill", the Senators should consider the extent to which energy efficiency contributes to both domestic firm competitive performance and to the competitive advantage of the nation as a whole.

No doubt companies that can substantially reduce their energy consumption can reduce costs and,therefore, increase profits.  As an example, Walmart is working with numerous potential vendors to reduce its energy consumption as its energy costs are significant.  Walmart's Sustainable Building Plans among other efficiency plans would reduce energy usage dramatically.  Other companies such as Dow cite substantial reductions in electrical use and concomitant reductions in greenhouse gas emissions.  Dow's energy savings program  has resulted in energy savings of $8.6 billion and has prevented 86 million metric tons of CO2 from entering the atmosphere. With the ability to monetize these greenhouse gas reductions in the form of carbon credits, these firms will have an additional incentive to reduce electrical and transportation fuel consumption.

In addition, these firms will be incentivized to switch transportation fuels for their fleets of trucks.  Natural gas is now abundant in the United States with the discovery of the means to extract natural gas from the various shales from across the United States that contain huge stores of natural gas.  Not only does the use of natural gas allow the potential savings in fuel costs over the long term, but the monetization of the greenhouse gas reductions by switching from diesel to natural gas permits yet another revenue stream to assist in financing a more sustainable and more efficient company.

As a nation, these changes make the firms in the country more competitive as costs of production decrease and allow the use of domestic fuels.  To the extent, new regulations promote not only energy efficiency and fuel switching, but the invention and domestic manufacture of new technologies and products for export, then the nation become even more competitive.

Nations that reduce their dependence on foreign oil will undoubtedly increase their domestic and international competitiveness.  Those that can design new, more distributed energy sources for their troops to produce water, drive electronic-based weapons and communications, and alternative ways of fueling mechanized aspects of their sea, ground, and air-based forces will have a stronger military.  The United States armed forces are spending significant money to develop these technologies.

McKinsey & Company recently issued a report entitled Unlocking Energy Efficiency in the U.S. Economy.  In this report, the leading business consulting firm states its central conclusion as follows:

Energy efficiency offers a vast, low-cost energy resource for the U.S. economy--but only if the nation can craft a comprehensive and innovative approach to unlock it.  Significant and persistent barriers will need to be addressed at multiple levels to stimulate demand for energy efficiency and manage its delivery across more than 100 million buildings and literally billions of devices.  If executed at scale, a holistic approach would yield gross energy savings worth more than $1.2 trillion, well above the $520 billion needed through 2020 for upfront investment in efficiency measures (not including program costs).  Such a program is estimated to reduce end-use energy consumption in 2020 by 9.1 quadrillion BTUs, roughly 23 percent of projected demand, potentially abating up to 1.1 gigatons fo greenhouse gases annually.

The McKinsey Report demonstrates that a more energy efficient country is a more competitive country.

To put this in competitive context, Europe and China are pushing for more energy efficiency and the building of domestic sources of energy and fuel and the development of renewable energy technology firms, energy efficiency technology firms, and the domestic manufacturing of new 21st-century products.  Technologies like LED lighting that will reduce the consumption of electricity dramatically are the race to the future by companies around the world.  The countries that achieve development of firms with lower energy consumption and energy efficient technologies and alternative fuels will likely be the more dominant economic powers in this century.

Thus, a look back at Michael Porter's book and the application of its model to the current debate about the Senate version of the American Clean Energy and Security Act is warranted.  Putting politics and ideology aside, the empirically demonstrated need to move toward a 21st-century energy policy is critical to the future competitiveness of the nation.  This should be at least one of the critical strategies underlying the debate in the Senate over the next few months.

Significant Climate Change Developments Part 1: European Parliament Adopts 20/20/20 Plan on Climate Change

The European Parliament after eleven months of long and tumultuous debate among the various countries and constituencies reached an agreement called 20/20/20.  By 2020 the EU plans to address climate change by achieving: a 20% reduction in greenhouse gas emissions, a 20% improvement in energy efficiency, and a 20% share for renewables in the EU energy mix.  The EU plans to extend and amend its cap-and-trade program referred to as the EU Emissions Trading System or ETS to control greenhouse gas emissions as well. 

A compromise was reached to address concerns by industry in the former communist countries that depend almost entirely on old coal-fired power plants for their electricity.  The EU agreed to provide free carbon allowances to industries that face stiff international competition as a result of greenhouse gas reductions if they face a 5 percent increase in costs.  The former communist countries will receive 70 percent of their carbon allowances without charge in 2013.  The exemption will be fazed out over time and end in 2020, when all allowances in these countries must be purchased at auction.

The revised EU ETS will apply from 2013 to 2020 and is designed to reduce greenhouse gas emissions by 21 % of 2005 levels. The EU ETS is a "cap and trade" system: it caps the overall level of emissions allowed but, within that limit, allows participants buy and sell allowances as they require, so as to cut emissions cost effectively. The Community-wide quantity of allowances issued each year will decrease in a linear fashion, so as gradually to reduce the overall level of emissions each year.
 
The ETS currently covers over 10,000 installations in the energy and industrial sectors, which are collectively responsible for close to half of the EU's emissions of CO2 and 40% of its total greenhouse gas (GHG) emissions (the remaining 60 % will be covered by the 'non-ETS' Effort Sharing decision).
 
In the first and second ETS trading periods (2005 -2012) the great majority of allowances were allocated free of charge to installations. The revised directive establishes auctioning from 2013 in principle (as proposed by the Commission and backed by the Environment Committee), but includes several exceptions, as advocated by the European Council on 12 December 2008.

The "effort sharing" decision sets binding national targets for each EU Member State to reduce greenhouse gas emissions from non-ETS sources (e.g. road and sea transport, buildings, services, agriculture and smaller industrial installations), between 2013 and 2020. These sources currently account for about 60% of all EU greenhouse gas emissions. The decision aims to reduce these emissions by 10% overall between 2013 and 2020, so as to contribute towards the EU's overall aim of a 20% reduction in total greenhouse gas emissions by 2020. The effort sharing decision is the first of its kind worldwide.

The EU Parliament also approved a proposed directive providing for the legal framework for the new carbon dioxide capture and storage technology (CCS). To cut their CO2 emissions, industrial installations and power plants could in the future use this new technology to capture CO2 and store it "permanently and safely underground" in geological formations.  Great Britain's Prime Minister Gordon Brown succeeded in winning a fund of 6 billion Euros to invest in technology to capture and store carbon dioxide from coal-fired power plants in underground formations.  The fund will apparently be established by earmarking 300 million allowances for CCS.

A new regulation will set emission performance standards for new passenger cars registered in the EU. The compromise backs the Commission's proposed target of an average of 120g of CO2/km for the whole car industry by 2012, compared to the current levels of 160g/km. The regulation sets an average target of 130g CO2/km for new passenger cars to be reached by improvements in vehicle motor technology.  It will be supplemented by additional measures to achieve a further 10g/km reduction, so as to reach the 120g/km target, through other technical improvements. The compromise introduces a long term target for 2020 for the new car fleet of average emissions of 95 g CO2/km.
 
Manufacturers will be given interim targets of ensuring that average CO2 emissions of 65% of their fleets in January 2012, 75% in January 2013, 80% in January 2014 and 100% from 2015, have to comply with each manufacturer's specific CO2 emissions target. In case the average emissions of CO2 exceed the targets, manufacturers will have to pay fines.

The revised fuel quality directive requires fuel suppliers to reduce greenhouse gas emissions caused by extraction or cultivation, including land-use changes, transport and distribution, processing and combustion of transport fuels (i.e. fossil fuels like petrol, diesel and gas-oil and also biofuels, blends, electricity and hydrogen) of up to 10% by 2020.

The adoption of post-2012 greenhouse gas reductions is a critical first step in the process of moving toward a global carbon cap and trade system.  The EU has laid down the first step internationally to create the atmosphere for negotiations of a post-Kyoto climate change treaty. The negotiations in Poznan, Poland were to some extent inconclusive, but the Bush Administration was not going to make any commitments late in its administration and has not been willing to take steps to impose a greenhouse gas reduction program in the United States.  2009 could shape up to be the Year of Climate Change.

I will further discuss the other three developments in late 2008 that may lead to a global carbon-constrained economy.

MIT Discovery May Revolutionize Power Production through Solar Power and May Resolve Greenhouse Gas Emissions Challenge

Scientists at Massachusetts Institute of Technology (MIT) have announced a discovery that may unleash solar power to generate power during the day and generate oxygen and hydrogen to produce power from fuel cells at night.  This discovery has the potential to revolutionize power production over the next ten years.

Until now, solar power has been a daytime-only energy source, because storing extra solar energy for later use is prohibitively expensive and grossly inefficient. With today's announcement, MIT researchers have hit upon a simple, inexpensive, highly efficient process for storing solar energy.

Requiring nothing but abundant, non-toxic natural materials, this discovery could unlock the most potent, carbon-free energy source of all: the sun. "This is the nirvana of what we've been talking about for years," said MIT's Daniel Nocera, the Henry Dreyfus Professor of Energy at MIT and senior author of a paper describing the work in the July 31 issue of Science. "Solar power has always been a limited, far-off solution. Now we can seriously think about solar power as unlimited and soon."

Inspired by the photosynthesis performed by plants, Nocera and Matthew Kanan, a postdoctoral fellow in Nocera's lab, have developed an unprecedented process that will allow the sun's energy to be used to split water into hydrogen and oxygen gases. Later, the oxygen and hydrogen may be recombined inside a fuel cell, creating carbon-free electricity to power your house or your electric car, day or night.

The key component in Nocera and Kanan's new process is a new catalyst that produces oxygen gas from water; another catalyst produces valuable hydrogen gas. The new catalyst consists of cobalt metal, phosphate and an electrode, placed in water. When electricity -- whether from a photovoltaic cell, a wind turbine or any other source -- runs through the electrode, the cobalt and phosphate form a thin film on the electrode, and oxygen gas is produced.

Combined with another catalyst, such as platinum, that can produce hydrogen gas from water, the system can duplicate the water splitting reaction that occurs during photosynthesis.

The new catalyst works at room temperature, in neutral pH water, and it's easy to set up, Nocera said. "That's why I know this is going to work. It's so easy to implement," he said.

"This is just the beginning," said Nocera, principal investigator for the Solar Revolution Project funded by the Chesonis Family Foundation and co-Director of the Eni-MIT Solar Frontiers Center. "The scientific community is really going to run with this."

James Barber, a leader in the study of photosynthesis who was not involved in this research, called the discovery by Nocera and Kanan a "giant leap" toward generating clean, carbon-free energy on a massive scale.

"This is a major discovery with enormous implications for the future prosperity of humankind," said Barber, the Ernst Chain Professor of Biochemistry at Imperial College London. "The importance of their discovery cannot be overstated since it opens up the door for developing new technologies for energy production thus reducing our dependence for fossil fuels and addressing the global climate change problem."

Currently available electrolyzers, which split water with electricity and are often used industrially, are not suited for artificial photosynthesis because they are very expensive and require a highly basic (non-benign) environment that has little to do with the conditions under which photosynthesis operates.

More engineering work needs to be done to integrate the new scientific discovery into existing photovoltaic systems, but Nocera said he is confident that such systems will become a reality.

"This is just the beginning," said Nocera, principal investigator for the Solar Revolution Project funded by the Chesonis Family Foundation and co-Director of the Eni-MIT Solar Frontiers Center. "The scientific community is really going to run with this."

Nocera hopes that within 10 years, homeowners will be able to power their homes in daylight through photovoltaic cells, while using excess solar energy to produce hydrogen and oxygen to power their own household fuel cell. Electricity-by-wire from a central source could be a thing of the past.

The project is part of the MIT Energy Initiative, a program designed to help transform the global energy system to meet the needs of the future and to help build a bridge to that future by improving today's energy systems. MITEI Director Ernest Moniz, Cecil and Ida Green Professor of Physics and Engineering Systems, noted that "this discovery in the Nocera lab demonstrates that moving up the transformation of our energy supply system to one based on renewables will depend heavily on frontier basic science."

The success of the Nocera lab shows the impact of a mixture of funding sources - governments, philanthropy, and industry. This project was funded by the National Science Foundation and by the Chesonis Family Foundation, which gave MIT $10 million this spring to launch the Solar Revolution Project, with a goal to make the large scale deployment of solar energy within 10 years.

After Lierberman-Warner Defeat, Business Leaders Call for Action on Climate Change

The Lieberman-Warner Bill was blocked by a Republican fillibuster in the Senate a few weeks ago.    While it was not expected to get through the Senate and then the House this year, most of the potentially regulated industries expect something to be passed in the next two years.  The international negotiation and discussion of a post-Kyoto treaty continues.  As part of this public discussion, a series of CEOs from large, multi-national companies have called for action on climate change.  These leaders are part of the World Economic Forum.

A Steering Board consisting of the following World Economic Forum Industry Partner companies guided development of this CEO statement for the G8: Alcoa (USA), AIG (USA), Applied Materials (USA), Basic Element (Russian Federation), British Airways (UK), Deutsche Bank (Germany), Duke Energy (USA), Electricité de France (EdF) (France), Eskom (South Africa), Petrobras (Brazil), RusHydro (Russian Federation), Royal Dutch Shell (Netherlands), Telstra (Australia), Tokyo Electric Power (Japan), TNT (Netherlands), Vattenfall (Sweden).

The comprehensive statement can be found at CEO Climate Policy Recommendations to G8 Leaders. 

One of the leaders of this group, Alain Belda, CEO of Alcoa, stated, "We know we must address climate change. We may not have sorted out every detail, but we are willing to take a leadership position and embrace open dialogue... that will get us all to our common goals of protecting our world for future generations. The changes that are needed can't be incremental; we need major breakthroughs."

"Energy and the environment are the two great social and engineering challenges of our time and will only increase in importance as world economies continue to grow. As businesses and government prepare for post-Kyoto, these proposed climate change policy recommendations serve as a useful guide," advised Mike Splinter, President and CEO of Applied Materials."

One of the reccommendations of the CEOs is that the system be "market-oriented."

• Comprehensive. For environmental effectiveness and economic efficiency, the

framework should encompass all major economies, in particular the G20

economies,11 all major greenhouse gases (not just carbon dioxide) and the

principal greenhouse house gas-emitting sectors, including energy,

transportation, buildings and deforestation/land use change.

• Commitments-based. The framework should establish clear international

commitments that are “nationally appropriate”; “measurable, reportable and

verifiable”; and, in the case of developing countries, “enabled by technology,

financing and capacity-building”.

• Flexible. The international framework should respect and preserve the

prerogative of national governments to choose their own domestic policy

options to address climate change. The new framework should accommodate

this diversity by allowing variation in the magnitude and timing of countries’

commitments, providing that the overall framework is capable of meeting the

agreed intermediate and long-term environmental goals.

• Equitable. To achieve broad participation, the framework must reflect the

fundamental principle of “common but differentiated responsibilities”13. In light of

their greater historic contribution to climate change, and their stronger

capacities, G8 and other developed country governments should show

leadership in sharing the burden of addressing climate change. We would

support such an outcome. We also note that in moving forward, future equity

and future responsibilities will require developing countries to also take on clear

emission reduction commitments.

• Framed within the context of sustainable development. The new

framework must view climate change within the context of the wider

development challenge faced by many of the poorer countries in the world. The

new framework must be designed to allow for economic growth in developing

countries, while meeting its overall international environmental objectives.14 As

agreed in the Bali Action Plan, the framework should provide incentives and

support for mitigation efforts in developing countries, including finance for

technology deployment and institutional/policy development and by providing

adaptation assistance to those countries most vulnerable to climate impacts. In

combination, these elements could provide tangible support to the sustainable

development and economic growth aspirations of developing countries.

• Technology-enabling. The framework should promote an international level

playing field to support the rapid RD&D of all clean energy and fuel technologies

that can lower GHG emissions and technologies that can help adapt to climate

change. In the near term it should encourage the wide-scale deployment of all

best available technologies that improve energy efficiency to achieve emission

reductions. It must enable research, development, demonstration and

deployment (RDD&D) of the next generation clean energy technologies, in

particular those needed to de-carbonize coal powered energy emissions. It

must also contain mechanisms to protect the rights of technology owners.

• Predictable. The long-term business strategies and investments necessary to

achieve such a paradigm shift are feasible only in the context of a stable,

predictable international policy framework, based on the principles set out

above. As this framework evolves, business must be confident that the

UNFCCC will remain the principal venue for it; that nations will honour their

commitments regardless of changes in government, and that successive

agreements will be negotiated, accepted and implemented in a timely manner.

Carbon trading or a cap-and-trade emissions market for greenhouse gas reductions is therefore a fundamental aspect of their recommendations--showing a clear preference by industry and business for a cap-and-trade system in any treaty that will be negotiated to follow Kyoto.

Investors Purchase Half of Climate Change Capital

Reuters reports that investors have aquired one half of Climate Change Capital, one of the largest carbon credit investment firms based in London.  The investors are Alliance Trust PLC, a UK investment trust, the Universities Superannuation Scheme, a UK pension fund, SNS REAAL N.V., the Dutch-based banking and insurance business and Japanese trading house, Mitsui & Co Ltd.  The combined investment has been estimated at $ (US) 110.1 million.

The carbon investment firm has been a leader in investing in projects that produce carbon credits, known more specifically as Certified Emission Reductions, under the Kyoto Protocol.  The company has expaned their investments, with 250 million euros under management for investing in clean technology, clean fuels and renewable energy, much of which is invested in UK-based wind farms.

Climate Change Capital is reportedly the third largest owner of carbon credits in the world with an estimated 91 million tonnes of carbon dioxide (CO2) equivalent under ownership, behind the Paris-based chemical company Rhodia and the Italian utility ENEL.  If those credits trade at over 16 euros per tonne in a secondary market where delivery is guaranteed, the value would be over 1.4 billion euros.

New Carbon Finance Study Predicts One Trillion Dollar US Carbon Market

Various stories have arisen on the Internet regarding a study released on February 14, 2008 by New Carbon Finance, a division of New Energy Finance, a provider of information and analysis on renewable energy and low-carbon industries.  The study reportedly predicts that the USlegislation now being considered that limits carbon trading to the US market, would create a $1 trillion US carbon market by 2020. However, the exact nature of such market is not clear.  It is not clear whether the study predicts an annual market, which would seem overstated, or a cumulative market over 10 years, or on average $100 billion per year, which seems very possible.  The study predicts the US market would be twice the size of the EU market.

Major investments in the US would occur in clean technology, accoding to the study. These projects would include renewable energy, energy efficiency, and greenhouse gas mitigation projects.

At present there are about thirteen bills that have been filed in the Congress, in both the House of Representatives and the Senate.  Almost all are based on a cap-and-trade program.  Thus, it appears if any bill is actually passed, a market-based program to cap greenhouse gas emissions and to allow the selling of carbon allowances and offsets will be the system that is implemented in the US to reduce greenhouse gas emissions and to address climate change.

The study by New Carbon Finance reportedly concludes that an economy-wide cap-and-trade system will be implemented within four to five years.  An economy-wide greenhouse gas emissions reporting system has already been passed in the December Omnibus Spending bill and the President has signed it into law.  The US Environmental Protection Agency is already working on the implementing regulations.  The law requires EPA to propose draft reporting regulations by September 2008 and final regulations by September 2009.  The reporting regulations form the foundation of any future greenhouse gas emission law.

The three currently viable presidential candidates from both parties have committed to controlling greenhouse gases and to passing climate change legislation.  John McCain, the Republican candidate, co-authored a bill with Joe Lieberman restricting greenhouse gas emissions and creating a cap-and-trade system.

"Even if the current Bush administration rejects all of these bills, the next president will be less inclined to use a veto. All leading 2008 presidential candidates have endorsed the need for action and some have already supported significant emissions reductions," said Michael Liebreich, CEO of New Energy Finance.

The US legislation that has made it the farthest in the legislative process, the Lieberman-Warner Climate Security Act, which was passed out of the Senate Environment and Public Works Committee, would impose restrictions on the use of international credits under any post-Kyoto agreement, such as the Certified Emission Reductions generated through the Clean Development Mechanism.  The CDM program allows the use of cheaper offset credits generated through less expensive greenhouse gas reduction projects in developing countries.

"This will have two important consequences. For the US market, it will rule out a significant source of inexpensive abatement, pushing the carbon price to unnecessarily high levels. It will also remove most US demand for international credits, hampering the growth of projects and technology transfer to developing countries," said Milo Sjardin, who heads the North American division of New Carbon Finance.

The press release on New Carbon Finance’s website also states that the study predicts that, if US legislation does not allow domestic companies to purchase cheaper international carbon credits from projects in developing countries, the price of carbon will rise to $35 to $40 per metric tonne of carbon dioxide equivalent by 2015. At this price for carbon, the study predicts that the prices of electricity would rise by 20%, gasoline by 12%, and natural gas by 10%.  Other prices for goods in the economy would also increase as a result of power and fuel price increases. 

On the other hand, if the legislation allows the purchase of offsets from projects in the developing world, the price of carbon would be around $15 to $20.  At a $15 per ton of CO2 equivalent, the effect on the economy would be reduced.  The study predicts the price of electricity would rise by 7%, the price of gasoline 4% or about 13 cents a gallon, and natural gas would rise by 5%.  The resulting economy-wide price increases would be less as well.

The real focus of the study appears to be on the differential in the price of carbon and the impact on the economy if greenhouse gas emitters are not allowed to purchase international carbon credits to offset their emissions. Under this analysis, any US legislation should permit international carbon trading to offset US greenhouse emissions to lessen the impact of greenhouse gas limitations on the US economy.

Company Enters Agreements to Produce Biodiesel from Corn at Ethanol Plants

(Adapted from Business Wire). A company, GreenShift Corporation, that is developing new technologies to extract more value and produce more profit for ethanol production facilities announced an agreement with United Ethanol, LLC to initially extract up to 1.5 million gallons per year of crude corn oil from the distillers grain that is produced as a co-product from United Ethanol's new dry mill ethanol plant.  This oil can then be used as a feedstock for ethanol.

United Ethanol began operating in March 2007 and is seeking to develop product streams and income streams from their process:  with GreenShift to extract and sell corn oil), EPCO Carbon Dioxide, Inc. (to bottle and sell carbon dioxide, and with Environmental Credit Corporation and Carbon Green, LLC to monetize carbon credits.  The new technologies and processes are a step that may produce more income to an industry that has suffered under higher feedstock prices and lower prices for ethanol.

The GreenShift process for which a patent is pending is called Corn Oil Extraction Systems.  This process has been engineered to help ethanol producers increase cash flows through the introduction of a third revenue stream - corn oil. GreenShift provides turn-key extraction systems to participating ethanol producers at no cost to the ethanol producers in return for the long-term right to purchase the extracted corn oil at a per pound premium to its value when trapped in the distiller's grains. GreenShift's extraction technology also reduces overall plant emissions and utility costs by upwards of $1 million per year for a 100 million gallon per year ethanol plant that dries 100% of its distiller's grains.

Kevin Kreisler, GreenShift's chairman said that "Corn ethanol producers recognize the need to use technology to enhance margins and defray risk. The best way to do this is to implement "plug and play" technologies that enhance the yields and operating efficiencies of traditional ethanol production process. Our corn oil extraction technology is the first of several technologies that meet that goal that we are bringing to market and we are excited by the opportunity to work with United Ethanol."

GreenShift is focused on delivering technologies and process innovations to the ethanol production industry with a view towards maximizing the yield of corn-based ethanol production. GreenShift's currently available offerings in its ethanol program include its:

-- Corn oil extraction systems;

-- Integral biodiesel production systems; and,

-- Integral biomass gasification for combined heat and power solutions.

GreenShift is also developing new technologies, such as its carbon dioxide algal bioreactor technology, for application at ethanol facilities.

Traditional ethanol processing converts each bushel of corn, which weighs about 54 pounds, into about 18 pounds of ethanol, 18 pounds of carbon dioxide, and 18 pounds of distillers dried grains, which contain about 2 pounds of fat. This corresponds to about 2.8 gallons of fuel production per bushel of corn. GreenShift's ambition is to increase this efficiency as much as possible by converting as co-products such as dry distiller’s grain and carbon dioxide into additional renewable fuels.

GreenShift Agrifuels (OTCBB: GSGF - News) and Global Ethanol, LLC today announced the execution of agreements to extract about 10 million gallons per year of crude corn oil from the distillers grain co-product of Global Ethanol’s 100 million gallon per year ethanol facility in Lakota, Iowa and 57 million gallon per year ethanol facility in Riga, Michigan, and to convert the extracted corn oil into biodiesel at Global Ethanol’s Lakota facility.

Under the terms of the agreements, GS AgriFuels Corporation and Global Ethanol formed a jointly owned company called GS Global Biodiesel, LLC to build, own and operate the Lakota, Iowa-based biodiesel facility. The GS Global Biodiesel facility will be initially sized for 10 million gallons of biodiesel production per year but will be designed to scale up to 30 million gallons per year in coordination with the onset of production of nearby corn oil extraction systems that are installed by GS AgriFuels’ parent company, GS CleanTech Corporation.

GS CleanTech’s patent-pending corn oil extraction system is designed to extract crude corn oil out of the distillers dried grain co-product of the dry mill ethanol production process. This crude corn oil has been proven to be an excellent biodiesel feedstock with the proper processing. GS CleanTech executed a development agreement with Global Ethanol and GS Global Biodiesel to build and install corn oil extraction systems at Global Ethanol’s Lakota and Riga ethanol facilities and to design and build the GS Global Biodiesel facility.

GS AgriFuels will raise and provide the financing for the construction of the corn oil extraction systems at Global Ethanol’s Lakota and Riga ethanol facilities, as well as the financing for the construction and operation of the GS Global Biodiesel facility. Global Ethanol will manage and operate the GS Global Biodiesel facility and market all of the biodiesel produced. GS AgriFuels has recently engaged an investment banker to raise the estimated $35 million needed for the project. The parties expect that the first tranche of financing, which will support the construction and installation of two extraction systems in Lakota and one extraction system in Rega, will close in December 2007. The GS Global Biodiesel facility is expected to be commissioned during the fourth quarter of 2008.

Trevor Bourne, the chief executive officer of Global Ethanol, said that “We are very excited by the formation of GS Global Biodiesel. Global Ethanol is a leading producer of renewable fuels and is committed to increased production efficiencies and diversifying our commodities mix. GreenShift’s corn oil extraction and biodiesel production technologies have proven themselves to be the best solution available to achieve this. We are looking forward with great anticipation to the construction of GS Global Biodiesel and to exploring expanded opportunities to work with GreenShift in the future.”

“Global Ethanol is clearly committed to technology-driven production improvements and is a key strategic partner for GreenShift,” added Kevin Kreisler, GreenShift’s chief executive officer. “In addition to converting the 10 million gallons of corn oil that we extract from Lakota and Riga into biodiesel, we plan to ship an additional 20 million gallons of corn oil as we bring extraction systems online at nearby ethanol facilities to GS Global Biodiesel for conversion as well. Global Ethanol’s team will run the facility and market the biodiesel and their expertise in commodities management and operations will make a facility of this scale an exciting and successful project.”

These developments demonstrate that new technologies and new innovations may provide ethanol producers an ability to generate additional revenue streams to remain or become profitable at times of high feedstock prices or low ethanol prices, or both.   The ability to generate carbon credits is another opportunity to generate revenue.  This additional revenue will only grow as states and then the federal government impose limits on greenhouse gas emissions and implement a greenhouse gas cap-and-trade program.

El Paso Electric Issues RFP for Renewable Energy Credits

El Paso Electric has issued a Request for Proposal (RFP) under the state of New Mexico's Renewable Energy Act (REA) and the New Mexico Public Regulation Commission's renewable portfolio standard requirements. The solicitation seeks competitive proposals for a range of renewable energy resources.

A percentage of EPE's retail energy sales in New Mexico must come from renewable energy resources as represented by renewable energy certificates (RECs). Proposals will be considered for RECs from supply-side renewable energy resources, with or without physical delivery of the associated energy.

The RFP is posted on EPE's website.

US Commerce Department Sending 18 Clean Energy Companies to China and India

As part of the Asia Pacific Partnership on Clean Development and Climate, the US Commerce Department is reportedly sending 18 companies that specialize in clean energy to promote US technology that reduces greenhouse gas emissions.  This is apparently part of the current and future trade missions the US Commerce Department will sponsor as a means of promoting  "Made in the USA" climate change solutions.  This is a positive step for development of the US market and industry for renewable energy and environmental products.