Comment: The New York Times Fails Biology 101

Source: By Tristan R. Brown, Seeking Alpha • Posted: Friday, February 20, 2015

Shortly after I began my PhD studies, I met with two acquaintances for coffee and the inevitable questions about my dissertation topic came up. Knowing that my audience members were both pro-environment, I took some pride in telling them that I was studying the economics of cellulosic biofuel production. Cellulosic biofuels (i.e., those produced from lignocellulosic feedstocks, such as forest trimmings, short-rotation woody crops, agricultural residues) are widely acknowledged to produce at least 60% fewer greenhouse gas [GHG] emissions than petroleum fuels on an energy-equivalent basis, and no less an authority than the Environmental Protection Agency [EPA] recently calculatedthat common cellulosic biofuel pathways achieved emission reductions of 100% or more compared to petroleum fuels (i.e., the production of a gallon of cellulosic biofuel avoids more GHG emissions than combusting a gallon of petroleum fuel releases). Imagine my surprise, then, when my audience reacted with horror, one of them expressing his shock that I wanted to sacrifice the world’s forests to make fuel. “Just think of the carbon emissions from all of that wood being burned!” was his response. A short while later, I heard something similar while discussing cellulosic ethanol production with a high school science teacher and fellow homebrewer, who stated that the fuel couldn’t possibly reduce GHG emissions due to all of the CO2 that he saw being released during fermentation when making beer.

Thanks to those early experiences, I was disappointed but not necessarily surprised when a recent article in The New York Times expressed a similar level of ignorance regarding basic biology and the carbon cycle. (Full disclosure: I pointed out the article’s errors in an email sent last week to the author, but have not received a response at the time of writing). The article argues that the conversion of forest biomass (i.e., lignocellulose) to energy results in net increases rather than decreases to GHG emissions, concluding that:

The United States used to rely heavily on bioenergy for transport: 100 years ago, tens of millions of acres were devoted to growing feed for pack animals. Since then, much of this land has reverted to forest. Razing it again for fuel is not the best idea.

In reaching this conclusion, the article relied heavily on an interview with Tim Searchinger, a research scholar at Princeton and former Environmental Defense Fund attorney. Mr. Searchinger became widely known in academic circles following the 2008 publication of a paper in the journal Science, on which he was lead author, that attributed Brazilian deforestation to the production of U.S. corn ethanol and cellulosic biofuels. This paper spawned a lengthy international debate on GHG emissions resulting from such “indirect land-use change” that at one point threatened to set U.S. bioenergy development back by a decade, before U.S. policymakers reconsidered the issue. Among other results, the paper purported to prove that cellulosic biofuel’s GHG emissions were actually 50% higher than those of gasoline, due to the rainforest destruction that its U.S. production would purportedly cause. While widely cited at the time, the paper is now known for using extreme assumptions to generate results that, in retrospect, were very inaccurate; while the paper predicted that vast Brazilian deforestation would result from an increase in U.S. corn ethanol production, the former actually fell by 83% between 2004 and 2012, even as the latter tripled (see figure). The paper’s results were so inaccurate that most of Mr. Searchinger’s co-authors on it published a subsequent analysis demonstrating just how unlikely they were to occur.

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Sources: EIA, FAOSTAT, INPE (2014)

Mr. Searchinger has remained staunchly opposed to cellulosic biofuels in the intervening years, however. The New York Times article quoted him as saying that:

“‘Surplus forest growth’ he said, is already pulling CO2 from the air. Harvesting it for energy will provide no further benefit for climate change. The same could be said of idled agricultural land, where forest usually starts regrowing soon, capturing carbon from the air.

‘In many contexts, allowing a forest to grow will do more to reduce carbon dioxide in the atmosphere for decades than producing bioenergy,’ he told me.”

The statement that harvesting forest biomass for energy will provide no further benefit for climate change completely ignores the concepts of the carbon cycle and biogenic carbon emissions. As every high school biology student is (or at least should be) aware, plants consume CO2 from the atmosphere while growing that is then released back into the atmosphere as they decompose, creating a closed loop cycle. Biogenic carbon emissions are those that are related to this cycle. According to the EPA:

Biogenic CO2 emissions are defined as CO2 emissions related to the natural carbon cycle, as well as those resulting from the combustion, harvest, combustion, digestion, fermentation, decomposition, or processing of biologically based materials.

The carbon cycle ensures that biogenic carbon emissions do not have the same effect on the global climate as fossil fuels due to the time frame over which they occur. Plant growth occurs over very short time spans from a geological perspective, lasting from a single season to 100 years or more. During this growth phase, the plant absorbs and temporarily sequesters CO2from the atmosphere that is released when the plant ultimately decomposes. Many cellulosic bioenergy producers focus on the production of fast-growing, short-rotation crops such as switchgrass and willow that have rapid growth phases, since most investors are unwilling to wait for several decades before they start to see a return on their investment. The carbon cycle of these cellulosic bioenergy feedstocks is therefore very rapid, with the full loop frequently being completed in as little as a single growing season. The effect of cellulosic biofuel production on atmospheric CO2 concentration over a span of five years is therefore zero or even negative. This is in stark contrast to fossil fuels, which are comprised of atmospheric carbon that was pulled from the atmosphere millions of years ago by plants and then buried underground (“sequestered”) until very recently. Fossil fuels result in a net contribution to atmospheric CO2 concentration when viewed on any but the longest of time spans as a result, given how long it has been since the carbon of which they are comprised was last in the atmosphere. When a gallon of cellulosic biofuel replaces a gallon of fossil-derived gasoline (assuming energy-equivalency), then it avoids most or all of the sequestered carbon release that would otherwise be caused by the gasoline’s combustion. In other words, the replacement of fossil fuels with cellulosic bioenergy causes the net change to atmospheric CO2 concentration that would result from the former’s use to remain substantially lower than it would be otherwise (see figure).

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Source: Wikipedia (2015)

Both the article and Mr. Searchinger are also incorrect when they state that cellulosic bioenergy production increases net GHG emissions over shorter time spans, since the emissions would remain temporarily sequestered as biomass were it not harvested and combusted (either directly or indirectly as biofuel). Old-growth forests, for example, are comprised of carbon that has been sequestered in the form of biomass for a century or longer. While this is a much shorter sequestration period than that presented by fossil fuels, it is significant if we believe that net GHG emissions need to be reduced within decades if catastrophic climate change is to be avoided. The problem with this contention, however, is that it ignores the legal and financial realities of cellulosic bioenergy production. The revised Renewable Fuel Standard [RFS2] is the U.S. program that is expected to generate the country’s largest demand for cellulosic biofuels in the coming decade. Both the underlying legislation (the Energy Independence and Security Act) and the EPA, which oversees the RFS2, have explicitly defined cellulosic biofuels to exclude those made from ecologically sensitive, old-growth, and late-successional forest biomass. The definition further focuses on non-federal forest biomass that does not include the above forest types and is produced via slash and pre-commercial thinnings. In other words, contrary to what the article says, U.S. biofuel policy does not incentivize the wholesale destruction of U.S. forests for energy purposes. It instead focuses on forest biomass that is removed as part of the process of making existing forests more productive, i.e., better at absorbing and sequestering atmospheric carbon.

The other problem with the article’s contention that U.S. bioenergy policy incentivizes the destruction of existing forests for energy purposes is that this would never work financially. Cellulosic biorefineries are very expensive, averaging roughly $10/gal of installed capacity. A 50 million gallon per year [MGY] biorefinery capable of taking advantage of economies of scale requires a total capital investment of around $500 million. Furthermore, these static facilities will need to remain operational for at least 20-30 years if they are to generate a positive NPV. Finally, the expense of feedstock transport means that these facilities must rely on the immediate surrounding area for biomass supply; international or even interstate shipping of feedstock is not financially feasible. Taken together, these characteristics of cellulosic bioenergy production mean that producers cannot engage in the sort of “fly-by-night” illegal logging operations that have contributed to old-growth forest destruction in the past. Rather, biorefineries are expected to resemble traditional paper mills in that they must carefully manage the surrounding supply of lignocellulosic biomass if they are to be profitable. As already mentioned, this type of intensive management can actually increase forest CO2 sequestration rates by enhancing growth rates.

Finally, it should be pointed out that the concerns posed by the article do not even apply to the short-rotation woody crops and agricultural residues that the U.S. Department of Energy expects the vast majority of U.S. cellulosic feedstock production to take the form of by 2030. The former is frequently grown on marginal cropland and pastureland, and during their growth cycles, these crops can actually achieve net sequestration by transferring carbon from the atmosphere and fixing it in the degraded soil where it will remain, improving future yields and sequestration potential. Agricultural residues such as corn stover, on the other hand, can actually contribute to GHG emissions if left unharvested (as they currently are), due to decomposition. While it is true that excessive harvesting can also contribute to GHG emissions by exposing soil carbon to erosion, it is not in the financial interest of cellulosic biofuel producers to engage in this type of unsustainable harvesting technique, since doing so would negatively impact future biomass yields, reducing the project’s future returns due to its static nature. Sustainability is not just a PR move for cellulosic biofuel producers, but rather the key to their continued survival as going concerns.

Investment implications

The cellulosic biofuel industry is widely known for its lack of historical production; as the old joke goes, “cellulosic biofuels have been five years away from commercialization for the last three decades.” While it is true that producers such as KiOR (OTCPK:KIORQ) have failed in recent years, focusing on this aspect of the industry fails to account for the numerous listed firms that are currently engaged in cellulosic biofuel production both directly and indirectly. A JV between POET LLC and Royal DSM (OTCQX:RDSMYbegan biofuel production at a 25-MGY cellulosic ethanol biorefinery in Iowa last September. A 25 MGY cellulosic biorefinery built by Abengoa (OTCPK:ABGOYalso opened last year in Kansas. Finally, a 30-MGY cellulosic biorefinery being built by DuPont (NYSE:DD), also in Iowa, is expected to commence operations as soon as a labor shortage ends.

A number of companies are also engaged in the feedstock side of the cellulosic biofuel equation. CNH Industrial (NYSE:CNHI) has been actively engaged in the development of willow harvesters since 2008 that recently became commercially available after several successful field trials. Ceres(NASDAQ:CERE) and Novozymes (OTCPK:NVZMF) produce genetically engineered seeds and enzymes for the conversion of cellulosic biomass to fermentable materials, while Metabolix (NASDAQ:MBLX) is developing genetic engineering systems for multiple energy crops, including switchgrassADM (NYSE:ADM) is one of several companies to have received government grants in recent years supporting the development of new microbial strains for the production of cellulosic ethanol. All of these companies are focused on reducing the costs of dedicated energy crops and improving their growth rates.

Finally, some companies stand to benefit from an increase in cellulosic bioenergy production from the demand side of the industry. Murphy USA(NYSE:MUSA), for example, has been profiting in recent quarters from its ethanol blending operations, and is offering higher blends near cities as a result. While U.S. corn ethanol production has stagnated in recent years, the availability of growing volumes of cellulosic ethanol would allow the fuel retailer to continue its expansion of high-blend offerings.

Conclusion

The above companies all have the potential to improve global environmental security via the mitigation of CO2 emissions from the U.S. transportation fuel and electricity sectors. In order to do so, however, they will require the support of consumers, investors, and policymakers. This support will in turn require both groups to act on accurate information regarding the long-term hurdles and advantages facing the cellulosic bioenergy industry. Learning that a high school science teacher doesn’t understand the concept of the biogenic carbon cycle is unfortunate, but unlikely to have much of an impact. Reading the same mistake in The New York Times, which has earned more Pulitzer Prizes than any other news organization, is a very different matter, however. The challenges facing renewable energy in general and cellulosic bioenergy in particular are large enough as is, without bringing scientific illiteracy and widely published misinformation into the field as well. It would be a shame if the last decade’s substantial investments in cellulosic bioenergy were to falter just as they are achieving success as a result.

Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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