Insight Focus
US climate rollback clouds outlook for biofuels demand. The rescinding of the 2009 endangerment finding removes the legal foundation for greenhouse gas regulations, potentially easing pressure on oil and automakers while creating uncertainty for ethanol and SAF producers. Even so, global investment and policy support for SAF are accelerating as the industry seeks new demand to offset ethanol losses from rising electric vehicle adoption.
Like an ostrich hiding its head in desert sand, the Trump administration’s denial of the reality of global climate change could lead to a dampening of demand for biofuels such as ethanol and sustainable aviation fuel (SAF) by eliminating all greenhouse gas emissions standards under the Clean Air Act for motor vehicles, power plants and other pollution sources that are heating the planet.
On February 12, Trump’s EPA rescinded a 2009 government declaration that determined that carbon dioxide and other greenhouse gases threaten public health and welfare. The finding is the legal underpinning of nearly all climate regulations under the Clean Air Act. The White House called the reversal the “largest deregulation in American history,” saying it would make cars cheaper by reducing costs for automakers by USD 2,400 per vehicle.
The EPA’s action will almost certainly be challenged in the courts by environmental groups and others.
Emissions Rollback Puts Ethanol’s Role in Question
Rolling back regulations on greenhouse gases will likely have an impact on biofuels, as the petroleum and auto industries celebrate the potential removal of restrictions on the production of their respective products. The rollbacks may also somewhat disincentivise further development within the biofuels sector.
Environmental groups say the move is by far the most significant rollback on climate change yet attempted.
For some in the US car industry, there will be uncertainty about the rollback, as manufacturing less fuel-efficient vehicles might limit their sales overseas.
“This rollback is sort of cementing things that have already been done, such as the relaxation of the fuel economy standards,” said Michael Gerrard, a climate law expert from Columbia University. “But it really does put US automakers in a bind, because nobody else is going to want to buy American cars.”
Assembly line production of new cars in the US
Will the rollback of regulations on GHG emissions affect the production and use of ethanol in transportation fuels? No one is yet willing to make a guess.
What we do know is that grain-based ethanol cuts greenhouse gas emissions significantly—by 44 to 52% compared to gasoline, according to the Department of Energy’s Argonne National Laboratory. Similarly, researchers from Harvard, MIT and Tufts concluded that today’s corn ethanol offers an average GHG reduction of 46% versus gasoline.
Emerging technologies promise to boost that reduction to near 70% in the next few years, according to USDA. Ethanol made from corn kernel fibre and other cellulosic feedstocks is already delivering reductions of 80% or more.
Airlines and Energy Firms Double Down on SAF
Meanwhile, the world is intent on reducing the carbon footprint of air transportation by increasing the use of SAF.
In Finland, Neste and World Fuel Services have extended their existing relationship with a five-year agreement that will expand the availability of Neste-supplied SAF at more than 100 airports across World Fuel’s UK and European network. Through World Fuel’s European network, SAF will be available to its commercial, business and general aviation customers, Neste said.
“As Neste is scaling its SAF production capability from 1.5 to 2.2 million tonnes per year in 2027, leveraging World Fuel’s extensive network of airports in Europe will increase the availability and flexibility of SAF supply for airlines,” said Carl Nyberg, Senior Vice President, Commercial, Renewable Products at Neste.
In the Netherlands, SkyNRG has reached financial close for its SAF production facility DSL-01 at the Delfzijl chemical park in the north of the Netherlands. Once operational, it will produce 100,000 tonnes of SAF each year and 35,000 tonnes of sustainable by-products, including biobased propane, butane and naphtha.
LanzaJet, a leading next-generation fuels technology company and fuels producer, announced the first close of an overall USD 135 million target equity investment round at a USD 650 million pre-money enterprise valuation. The round is co-led by IAG and Shell, with participation from Groupe ADP, LanzaTech and Mitsui—all existing shareholders expanding their investment in LanzaJet’s growth and operations at LanzaJet Freedom Pines Fuels in Soperton, Georgia, US—the world’s first fully integrated, commercial-scale ethanol-to-fuels plant.
The continued investment from these industry leaders underscores strong confidence in the future of SAF and LanzaJet’s proprietary ATJ technology. The financing will support existing and future commercial deployments of its ATJ technology.
Source: ING
In the US, a draft farm bill from the House Ag Committee calls for USDA to develop a plan to advance production of SAF. The bill would include using crops and promoting public-private partnerships that would lead to commercial-scale production of SAF.
The adoption of electric vehicles is threatening consumption of corn-based ethanol. The hope is that new markets such as SAF can help replace demand for over-the-road liquid motor fuel. The House Ag Committee is scheduled to begin debate on the farm bill soon.
