sustainable biofuel production in south east asia

Khoo Hock Aun Managing Director, Cosmo Biofuels Group Vice-Chair of the RSB Board of Directors

Sustainable Biofuel Production in South East Asia: Mitigating Impacts on Water and Food Security

SINGAPORE INTERNATIONAL ENERGY WEEK

30th October 2014

Roundtable on Water Energy Food Nexus

COSMO BIOFUELS GROUP

How biofuel production impacts water use and food production in South East Asia

PRESENTATION OUTLINE

• Global and regional trends in biofuel production

• Regulatory, technology and market drivers

• Frameworks for sustainable biofuel supply chains

• Best practice models

• Implications for policy makers, project developers and investors

GLOBAL AND REGIONAL TRENDS

IN BIOFUEL PRODUCTION

BIOFUELS PRODUCTION TO GROW 25% TO 2018

INTERNATIONAL ENERGY AGENCY RENEWABLE ENERGY MEDIUM TERM MARKET REPORT 2013


ASIAN BIOFUELS PRODUCTION TO GROW 50% 2012 TO 2018

REGULATORY, TECHNOLOGY AND MARKET

DRIVERS

Indonesia

An on-and-off 2 – 2.5 percent biodiesel mandate, and an E3 ethanol mandate. The government is pushing mining companies to introduce biodiesel into their operations with the first mandate of 2% coming into effect on July 1. So far 25 mining operations have signed up to introduce biodiesel into their energy supplies. The plan is meant to help boost domestic demand for palm oil biodiesel as international demand for the fuel falls. Malaysia

The country’s B5 blending mandate kicked off in June 2011. Malaysia is reported boost its biodiesel blend to 7% in December from 5% currently while Indonesian state-owned oil company just finished a tender to purchase 6 million metric tons of biodiesel. The Philippines

Has an E10 ethanol and B2 biodiesel mandate, supporters are asking the biodiesel mandate to be increased to B5. Thailand

Has a B5 biodiesel mandate in place, but it has been on and off based on palm oil supplies, and a B3 program has been the fallback. Vietnam

Has an E5 ethanol blending mandate. .

http://www.biofuelsdigest.com/bdigest/2013/12/31/biofuels-mandates-around-the-world-2014

REGULATORY, TECHNOLOGY AND MARKET DRIVERS












Source: UNEP


ADVANCED BIOFUELS PRODUCTION CAPACITY TO DOUBLE BY 2018

FRAMEWORK FOR SUSTAINABLE

BIOFUEL SUPPLY CHAINS

Source: UNEP

http://www.oecd-ilibrary.org/agriculture-and-food/oecd-fao-agricultural-outlook-2014_agr_outlook-2014-en

FRAMEWORK FOR SUSTAINABLE BIOFUEL SUPPLY CHAINS

FOOD AND WATER SECURITY ARE MAJOR CONCERNS

Roundtable on Sustainable Biomaterials (RSB)

Vision :

Global Sustainable Production,

Conversion, And Use Of Biomass.

Mission:

Provide and promote the global

standard.

Provide a global platform for multi-

stakeholder dialogue.

Ensure that users and producers

have access to credible, practical

and affordable certification.

Support continuous improvement

through application of the standard.


Management and technical

Legal

Legality

Land rights

Social

Human and Labor Rights

Rural and Social Development

Local Food Security

Environmental

Biodiversity

Conservation

Soil

Water/rights

Air

Planning, Monitoring and Continuous Improvement

Use of Technology, Inputs, and Management of Waste

GHG emissions

RSB Principles & Criteria


www.rsb.org

APPLIED ACROSS THE ENTIRE BIOFUELS SUPPLY CHAIN


Specific standard on residues and byproducts

• Including bagasse, stalks/leaves, stover, used cooking oil

• Municipal solid waste, forestry operations

Upstream verification for agricultural residues

• Ensure enough residues to maintain soil organic matter

• GHG emissions limited to transport and conversion to fuel

• Direct land-use change

Standard for Agricultural and other Residues

RSB STAKEHOLDERS 120+ organizations from 30 countries including 30 NGOs


Companies RSB Works With (RSB Members or Certified Companies)

RSB is a B2B certification program that works with all steps in the supply chain to ensure sustainable feedstocks for the developing biochemical industry.

Feedstock companies developing novel biomass sources

Carinata & Camelina

Jatropha Algae

Novel industrial biotech companies targeting biochemicals

Farnesene

Ethanol & 2,3-butanediol

Butanol

Tailored Oils




• Algae in the US and Asia

• Sugar cane in Peru, Sierra Leone, Brazil

• Wheat residues in Australia

• Jatropha oil in Mexico and Asia

• Used cooking oil and animal fats in the US, Europe, Canada, China, South Korea

• Camelina in Spain

• Coppice trees – Poplar, US; Gliricidia, Sri Lanka

• Macaúba oil, tobacco, Moringa tree – suited for smallholders

DIVERSITY OF FEEDSTOCKS

• Aviation industry seeks early adoption biofuel

• 10% replacement alone by 2030 requires 20.4 Mtoe aviation biofuels.

• Enormous pressure on land and water requirements

• Aviation industry requires truly sustainable biofuels

• Technical Regulations are fierce but in place

• Airlines prefer 2nd generation sources such as jatropha, algae and camelina

• Second generation processes biomass conversion into biofuel

• Algae is an important candidate

Aviation Sector Is a Major Partner of the RSB

Members: GOL, TAM, Avianca, United, Air France, KLM, Lufthansa, British Airways, Air China, AeroMexico, Air New Zeland, Cathay Pacific, Gulf Air, JAL, Qatar, SAS, Singapore Airlines, etc – 32 % of jet fuel demand Associated: Boeing, Embraer, Airbus, among others

http://www.safug.org/safug-pledge/

Commitment to RSB certification





• Main direct impacts on water: farm, plantation and processing unit.

• Overall potential impacts are not specific to biofuels: excessive irrigation, water pollution, infringement of water rights.

• New challenges: indirect impacts, algae, wastes

RSB and Water: Identifying the Issues

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er FRAMEWORK FOR SUSTAINABLE BIOFUEL SUPPLY CHAINS

www.rsb.org

RSB and Water: Overview

• Principle 9: Biofuel operations shall maintain or enhance the quality and quantity of surface and ground water resources, and respect prior formal or customary water rights.

Criterion 9b: Develop & Implement a Water Management Plan Criterion 9a: Evaluate and respect water rights of local communities Criterion 9c: Do not contribute to depletion of water resources Criterion 9d: Maintain/enhance the quality of water resources

+ Specialised Guidelines for evaluation of water impacts!


www.rsb.org

RSB and Water: in practice (1)

• Water-related requirements are for feedstock producers, feedstock processors and biofuel producers (not for biofuel blenders)

• Evaluation of water rights and baseline situation are parts of the impact assessment process (cf: Principle 2).

• Complexity of the evaluation depends on the project design and context: irrigation vs rainfed; annual rainfall; occurrence of droughts; possible run-offs; water treatment/recycling; etc.

• Simplified process and lower costs for low risk operations


www.rsb.org

RSB and Water: in practice (2)

1. Screening: Evaluate the water resources used for the project: existing water rights, scarcity, potential runoffs, etc…

2. If required during the screening: Specialised impact assessment for water rights, water availability and water quality.

3. Set a water management plan (part of the ESMP defined under Principle 2), which describes practices to achieve compliance with Principle 9 and criteria.

4. Monitor impacts on water rights, water availability and water quality against Principle & Criteria 9. If required, corrective actions.


www.rsb.org

• Appropriate water management represents a critical component for biofuel sustainability.

Water rights, water depletion and water quality are the key issues to be addressed.

• It is feasible to address water issues through biofuel standard.

• The RSB requirements on water aspects carry some legitimacy due to the multi-stakeholder

process: they were developed in consultation with experts and achieved consensus among

NGOs, civil society, industry actors and the business sector.

Some Key Messages


www.rsb.org

Biofuel operations shall ensure the human right to adequate food and improve food security in food insecure regions.

Criterion 6a: • Biofuel operations shall assess risks to

food security in the region and locality and shall mitigate any negative impacts that result from biofuel operations.

Criterion 6b: • In food insecure regions, biofuel

operations shall enhance the local food security of the directly affected stakeholders.

PRINCIPLE 6: LOCAL FOOD SECURITY


Biofuel operations shall assess risks to food security in the region and locality and shall mitigate any negative impacts that result from biofuel operations.

Operators who must comply: Feedstock Producer, Feedstock Processor and Biofuel Producer.

Minimum requirements

• Where the screening exercise of the RSB impact assessment process reveals a direct--‐impact on food security in food insecure regions, Participating Operators shall conduct a food security assessment in accordance with the RSB Food Security Assessment Guidelines,

• The scope of the food security assessment shall include additional impacts that the biofuel operations may have on cross‐cuttingrequirements for food security including land, water, labor, and infrastructure.

• If the food security assessment indicates a food security risk as a result of biofuel operations, a mitigation plan shall be developed and implemented through the ESMP.

• Measures developed under Principle 5 that mitigate food insecurity shall be integrated with the measures developed under Criterion 6a.

Criterion 6a In food insecure regions, biofuel operations shall enhance the local food security of the directly affected stakeholders.

Operators who must comply: Feedstock Producer, Feedstock Processor and Biofuel Producer; small-scale operators are exempt.

Minimum requirements

• In regions where food security is an ongoing risk and concern, operations shall enhance food security of the locally affected community by, for instance, setting aside land for food growing, increasing yields, providing opportunities for workers to carry out household--‐level food production, sponsoring agricultural support programs and activities, and/or making value‐added food byproducts available to the local market.

• Measures to enhance regional food security shall be integrated with measures that contribute to rural and social development developed under Principle 5.

Criterion 6b

www.rsb.org

BEST PRACTICE MODELS

1G TECHNOLOGY, THE MOST WIDELY USED BIOFUEL TECHNOLOGY, REQUIRES FEEDSTOCK THAT INTERFERES WITH THE FOOD CHAIN

• One of the primary concerns about biofuels has been the raging food versus fuel debate, which highlights the risk of food supply disruption due to increased diversion of land for biofuel feedstock.

• Other concerns :

• include soil erosion,

• increased pressure on water resources,

• loss of biodiversity, and

• environmental imbalance caused by large-scale clear-cutting of forest land for biofuel production.


2G & 3 G TECHNOLOGY ADDRESSES THESE CONCERNS It uses non-food-based feedstock, namely lignocellulosic material, which is currently used primarily for self-consumption as fuel or fodder. Typical feedstock includes rice husks and straw, grass, empty fruit bunches (EFBs), palm fronds, wood fuel, and corn stover. The Southeast Asia region has abundant availability of 2G-specific feedstock . For example, Malaysia and Indonesia are the largest palm oil-producing nations in the world, resulting in high quantities of available palm waste (such as palm fronds and EFB). Wood fuel and rice waste are also available in large quantities, which can be leveraged for biofuel production


RUBBER JATROPHA AGROFORESTRY

• Latex production

• Timber production

• Biomass and Bifuel

production

• Integrated with • food production

• Mitigation of production

risk/ gestation period

• Zero waste

Contract Farms

Plantations

CPO

MILLS

Jatropha Oilseed/

Collection Expeller

Biodiesel Refinery

Distribution/ Tradiing

Of Biodiesel

Downstream Technology Joint Ventures

Processing Value Add Profits

Plantation Agency Management Services

Final Product Development & Trading Services

Distribution & Trading Profits

Production and Collection Profits

BIOENERGY INTEGRATED OPERATING SYSTEM

BIOFUEL PRODUCTION AND PROCESSING VALUE CHAIN

EFB/EF/ ALGAE

FFB

RES OIL/ SLUDGE/

PFAD

HIGH FFA

CPO/CPKO

BIOGAS ELECTRICITY GENERATON POME


The new algae production platform has a number of environmental benefits: • sequester carbon and reduce emissions; • converts Palm Oil Mill Effluent (POME)

completely into valued products with zero waste, and

• eliminates the need for current treatment of POME using ponds and digesters to reduce pollutants.



MULTIPLE FEEDSTOCK PRODUCTION STRATEGIES INTEGRATED WITH FOOD PRODUCTION

The Model will encompass the following components:

• 3-Phase Renewable Energy based-Tourism Resorts For Eco-Agro Tourism;

• Algae Production Systems; • Solar, Wind and Tidal Wave Farms

to Harness Renewable Energy

• Agriculture Based Systems for production of BioEnergy, Biofuels and BioElectricity

• Wastewater and Waste Management and Conversion to Energy Systems

RENEWABLE ENERGY TECHNOLOGY REGION FOR ECO-AGRO TOURISM (RETREAT)


IMPLICATIONS FOR POLICY MAKERS, PROJECT

DEVELOPERS AND INVESTORS

AT Kearney’s Recommendations 2014:

• Robust support would include blending targets to propel production, 2G-specific tax and incentive policies, market-determined and optimal price setting for economically viable production, and subsidies for producers (especially until 2G technology enters specific countries or areas).

• Constructive policies also can drive financing for capital expenditure on biorefineries, R&D in biofuel technology, and aid in supply chain setup, from harvest points to refineries

Tax incentives

• Federal income tax credits for flex fuel and alternative fuel vehicles

• Tax credit for cellulosic-biofuels producers.

• Tax credit for alternative fuels infrastructur.e

• Subsidies and credit facility 2G biofuel plant depreciation deduction allowance

• Multiple credits, grants, and loans for development of bio-refineries and research on advanced biofuels.

Regulatory Support for Advanced Biofuels

• Supply chain costs can constitute up to 50 percent of feedstock cost. With no established supply chain, intense coordination is required across multiple stakeholders (including farmers, collectors, logistics partners, and producers).

• The feedstock is dispersed across vast agricultural areas. The geographical spread of some countries, such as the archipelago Indonesia, magnifies the logistical problems.

• For biofuels to succeed, establishing an efficient feedstock supply chain is one of the key prerequisites. It also will play a major role in determining the economic feasibility of production.

• Increasing the current supply chain's efficiency and developing alternate means of logistics.

• Multiple approaches can increase supply chain efficiency.

. SUPPLY CHAIN CHALLENGES

Source: AT Kearney

• Defining an optimal network for bio-refineries, including the number and location of storage facilities and capacity planning;

• Refining the design of collection, storage, and transportation according to the type of feedstock and storage facilities (such as bale form versus pelletized) is another option;

• Increasing the energy density of feedstock before transportation may help optimize costs, specifically after weighing the benefits with the additional preprocessing costs that would be incurred.

• Pipeline transportation of feedstock in land based SE Asia

• A fleet of ship based platforms for biorefineries for maritime SE Asia

. POTENTIAL SUPPLY CHAIN SOLUTIONS

Recommendations

• Provision of long term policy for agricultural biofuel production

• Integration of biofuel projects with food production and water provision

• Emphasise agricultural residues and waste recovery and utilisation

• Development of community based closed loop in-situ projects

• Meet local demand rather than commoditised exports of biofuels

+6016-301 4079

[email protected]

Thank You!


Khoo Hock Aun

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