How political pressure is building to combat urban air pollution – and creating an opportunity for cellulosic ethanol

Sebastian-Soderberg-downloadThe Digest speaks with Sebastian Soederberg, Novozymes’ VP for Biomass Conversion, on how the emotional issue of city smog is creating an opening for cellulosic ethanol, even with currently low oil prices.

Q: Sebastian, how do you see political pressures shifting, and why is it important?
S: There are an impressive number of developments happening this year on the global political front. It’s happening in a lot of different places and levels. And it is good news for ethanol producers. I’d like to talk about how attention to these issues is rising, and what I think it means for cellulosic ethanol production.

Let me start with air pollution in cities, which is a growing, local, immediately visible, and highly emotional issue. When you can’t see the tops of buildings and you can smell it with every breath, you get worried and angry about the health consequences for you and your loved ones.

Evidence is growing that it’s correct to be worried. In April, WHO and OECD (the World Health Organization and the Organisation for Economic Co-operation and Development) estimated that the air pollution in Europe cost a staggering US$1.6 trillion in premature deaths and diseases in 2010. “Reducing air pollution has become a top political priority,” Christian Friis Bach, Executive Secretary of the UN Economic Commission for Europe (ECE) said this spring.

In China, public concern over air pollution issues has led to demonstrations that occasionally turn violent. In response, the political agenda is changing. In March, President Xi Jinping pledged at the annual session of the National People’s Congress to punish violators of the nation’s environmental laws with an “iron hand.” For the first time, use of coal actually dropped in China in 2014. China has recently become the world’s top builder of “clean” nuclear power plants.

Air pollution in cities is closely linked with cars. In March this year, within a week of each other, both Beijing and Paris independently introduced new strict traffic rules to curb smog.

The most extreme example is New Delhi, which has the world’s highest annual average concentration of small airborne particles – higher than major Chinese cities – according to a 2014 report by the World Health Organization. Fine particulate (PM) emissions are hazardous because they penetrate deeply into the lungs, and transportation is estimated to account for roughly a third of this kind of emission in New Delhi. Last year, India’s environment court, the National Green Tribunal, slammed the local government and directed all vehicles older than 15 years be taken off the city’s roads.

So what accounts for the other two-thirds of PM emissions in New Delhi? Part of it comes from burning of agricultural wastes in the bordering states of Punjab and Haryana. And New Delhi is not alone. Similar problems with smog from burning fossil fuels and/or municipal waste and agricultural waste can be found in Jakarta, Kuala Lumpur, Singapore, Shanghai, Cairo, Sao Paulo, a number of mega-cities in China and the list goes on.

So what can be done?

I predict that it’s only a matter of time until politicians connect the problem of city air pollution with the advantages of cellulosic ethanol:

• According to the US-based Renewable Fuels Association, ethanol reduces tailpipe fine particulate
emissions by 50%
• creates local jobs
• creates a valuable new market for municipal/agricultural waste instead of burning it, and
• can be used by the car fleet that exists today.

In short, it tackles the main causes of city smog head-on.

Just FYI, here are some additional facts on how ethanol reduces air pollution.

Another potential solution, electric cars, is attracting attention. As of March 2015, Tesla Motors has delivered about 70,000 electric cars since 2008. The Chinese government has a goal to have five million total battery-electric and plug-in hybrid electric cars on the road by 2020. But the number of electric cars is dwarfed by the number of cars with conventional engines. In 2014 alone, nearly 20 million vehicles were sold in China and 16.5 million in the United States, and these numbers have been rising. Electric cars will certainly be part of the solution – also hybrids using ethanol – but their progress in the market is too slow to do the heavy lifting to counter smog in cities any time soon.

Q: I know you’re also watching some of the U.N. efforts this year. How come?
S: It’s not just the local issue of air pollution that’s getting more attention. The global issue of CO2 levels is too. One of the reasons is that scientific evidence is more and more alarming. The NOAA (the US National Oceanic and Atmospheric Administration) reported this May that the amount of carbon dioxide in the atmosphere is at the highest level in “at least” a million years.

The United Nations has set a goal to avoid average global temperatures rising by more than 2 degrees Celsius. But the average has already increased by about 0.8° Celsius since 1880, according to NASA’s Goddard Institute for Space Studies. Two-thirds of the warming has occurred since 1975.

The sense of urgency is also supported by new predictions of population growth. Demographers from the U.N.’s Population Division are now saying there’s an 80% chance that the world’s population will expand to between 9.6 and 12.3 billion by 2100. They give only a 5% chance that the population stabilizes at around 9 billion. This is happening within my children’s lifetime.

In response, the U.N. is driving three global projects this year towards greater alignment on climate change: the COP21 meeting in Paris in December, the SDGs and the FFDs (respectively: the Sustainable Development Goals and the related Financing for Development goals.) These are all ways of giving an international push for more action at the national level on energy and environmental issues.

Even the Roman Catholic Church is involved. Pope Francis is preparing a report on the environment to be issued in June, and indications are that it will urge more than a 50% cut in carbon dioxide emission by midcentury to prevent perhaps a hundred million premature deaths.

Q: So how is this relevant for the cellulosic ethanol business?
S: The situation today is that people are angry about air pollution, the scientists are giving us scary facts, and the U.N. is seeking some sort of global alignment. How immediately relevant this is for an emerging cellulosic ethanol industry, it’s hard to say, but the INDCs (Intended Nationally Determined Contributions) – which are national action plans that countries are submitting to the U.N. to address climate change — could give rise to concrete actions within the next few years. Let me explain.

The climate summit in Copenhagen in 2009 was the culmination of a top-down process, and resulted in a stalemate between the developing countries who didn’t want to pay a premium for green solutions, when in the past, richer countries had the luxury to pollute at no cost.

Lessons learned, this year’s climate summit, COP21 in Paris in December is organized in a decentralized, bottom-up way, with each country invited to participate in preparation ahead of the meeting to ensure alignment.

Some are arguing that the chief polluting countries are not participating enough in the prep work, but nonetheless, so far over a third of all countries globally have submitted an INDC. The INDCs are documents promising how the country will address climate change at a national level. This will include selecting or deselecting specific technologies for support, and an indication of investment levels. The next waves of INDCs are expected at end of June and October.

I think it’s reasonable to expect some kind of high-level agreement coming out of COP21, binding or not, with a two- or three-year window afterwards to give countries time to figure out how to implement their promises.

And I think it is reasonable to be optimistic about the INDCs. Potentially the INDCs will spur action at the national level for specific policies and projects promoting clean-energy solutions – among them, cellulosic ethanol.

A final reason to watch the action at COP21 is that carbon pricing is on the agenda. If markets are required to pay for “externalities” – for the pollution that development creates – it would make renewable energy cheaper relative to fossil-derived fuels. In the long run, it would help create a more even playing field and could significantly help clean-energy solutions of all kinds, including cellulosic ethanol.

In summary, I argue that political pressure is rising as environmental problems become worse. Of course I don’t have a crystal ball, but I think there are a lot of reasons to expect increased political and investment support for cellulosic ethanol in the future. And please note that all of this is independent of the fluctuating price of oil.

I hope that readers of this column will take action. Now is the time – up to COP21 – to do whatever you can to talk with the decision-makers in your area, be they investors, politicians or NGOs, to advocate for clean tech solutions in the transportation sector. Make certain they are aware of the entire package of benefits that cellulosic ethanol offers – reduced pollution, new local jobs, new market for agricultural waste, increased energy security and independence.

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