The New Carbon Cycle

Norway Gets Saudi Arabia and Seeks Other Countries Support of Carbon Capture and Storage as a Carbon Credit Project

Saudi Arabia and Norway have agreed to work together to obtain the approval of the Clean Development Mechanism(CDM) Executive Board for carbon capture and storage (CCS).   CCS is a process by which carbon dioxide (CO2) I captured from industrial processes, such as coal-fired powered plants or natural gas processing plants, and then injecting it far below the ground in oil and gas formations or in deep saline aquifers.  The technology for injecting CO2 in the ground has been used for 30 or more years for enhance oil and gas recovery.  The capture of CO2 from industrial processes requires technology still being developed.

Norway's goal is to have a baseline and monitoring methodology approved for CCS so that projects can be approved under the CDM of the Kyoto Protocol.  By allowing for these projects reduce greenhouse gas emissions in developing countries and to have carbon credits or Certified Emission Reductions to be issued by the Executive Board, capital could be mobilized to reduce greenhouse gas emissions.

A U.N. climate conference in Bali, Indonesia, in December postponed a decision on inclusion in the CDM scheme pending further talks this year to clarify safety, legal and commercial viability issues. 

Norway is trying to convince as many countries as possible to lobby for this effort.   Norway's oil and gas company StatoilHydro has been injecting CO2  from the natural gas stream below the seabed at its Sleipner field in the North Sea since 1996.  The Norwegian government is promoting CCS projects at gas-fired power plants at the Mongstad refinery and the Kaarstoe gas-processing and export plant on Norway's west coast.

If CCS were approved under the CDM, it would provide a means of contributing to the capital needed to implement this technology, but it would the sale of carbon credits probably would not be sufficient to meet the costs per ton of CO2 sequestered to pay for construction and operating CCS projects. 

Norwegian company Aker ASA and engineering group Aker Kvaerner believe that CCS projects could be a $1.5 trillion to $2.0 trillion per year business as important globally as the construction of oil platforms. 

The Aker prediction may be overly bullish, but the capture and storage of  CO2 will be a necessary part of any climate change solution.  Approving CCS as a technology or process that may generate carbon credits under the CDM would be a significant step to creating incentives to finance CCS.  The Lieberman-Warner Climate Security Act, that was voted out of the Senate Environment and Public Works Committee, contains provisions that would allow CCS projects to generate carbon credits under that bill’s proposed greenhouse gas cap-and-trade system.  In a prior blog, I had suggested the sale of  government “Carbon Bonds” to provide low interest loans to finance CCS projects to allow the use of coal to produce low polluting energy in the United States.  As we look to the future, finding ways to create sufficient incentives to generate sufficient capital to finance CCS will be critical as this process will be a necessary part of any future US climate change legislation and international program to significantly reduce greenhouse gas emissions.

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.