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Carbon Dioxide Capture And Storage Environmental Sciences Essay

Biological carbon capture sector is still in its infancy with other renewable energy technologies like CCS, Solar, and Offshore Wind gaining precedence. However, many technologies within the biological carbon sector have gained wide acceptance due to their significant potential to mitigate climate change at relatively lower costs and in a faster period. has a lot of knowledge around CCS, solar and wind projects however there is still lack of expert knowledge base on this sector within the company. This study is an attempt at increasing the company's knowledge on the various technologies available within the biological carbon capture sector. The report evaluates the mitigation potential of technologies available within the agricultural sector for heightened carbon dioxide reduction. There is a deep dive conducted on Biochar - a technology identified in the first phase with an abatement potential of 1.8 Gt/CO2e/yr - as it was identified to hold significant potential in comparison to other technologies in the near term. Since there are considerable risks around each of the technologies, a comprehensive policy assessment was conducted to present key findings to help develop clarity on how could mitigate key commercial as well as reputational risks. The policy assessment was conducted from the point of carbon market protocol mechanisms in compliance markets - USA, Alberta, Australia, and EU. Considering the scientific uncertainties surrounding complex technologies like Biochar, this report also discussed the key technological and scientific gaps that could be addressed by through investment in R&D through its association with the Energy Biosciences Institute in the USA. An economic analysis of the pyrolysis biochar system has found that this technology is not commercially profitable currently. The report concludes with key recommendations and likely next steps for to consider from a policy as well as commercial point of view.

Table of Contents

Abbreviations

AOS

Alberta Offset System

BSI

British Standards Institution

CCS

carbon dioxide capture and storage

CCX

Chicago Climate Exchange

CDM

Clean Development Mechanism

CEC

Cation exchange capacity

CH4

methane

CO

carbon monoxide

CO2

carbon dioxide

CO2e

carbon dioxide equivalents

ETS

European Union Emissions Trading Scheme

EU

European Union

GHG

Green House Gas

Ha

Hectare

LCA

Life Cycle Analysis

N20

Nitrous Oxide

NH4

Ammonium

PBS

Pyrolysis Biochar System

Pg

Pecta gramme

MRT

Mean Residence Time

Table of Figures

List of Tables

Introduction

The world is experiencing rapid changes in land use driven by a greater demand for food, water and energy for living. "Agricultural lands (lands used for agricultural production, consisting of cropland, managed grassland and permanent crops including agro-forestry and bio-energy crops) occupy about 40- 50% of the Earth's land surface. Agriculture accounted for an estimated emission of 5.1 to 6.1 GtCO2-eq/yr in 2005 (10-12% of total global anthropogenic emissions of greenhouse gases (GHGs))" (IPCC, 2007). The International Energy Agency 2010 analysis shows emissions from energy related sources as 28GTe CO2 equivalent global warming potential. Total global warming potential of emissions is split roughly 72% carbon dioxide, 18% methane and 9% nitrous oxide. Nearly 90% of nitrous oxide emissions are associated with agriculture and small-scale biomass use.

Energy and agriculture (in the broadest sense, including forestry) are both significant contributors to climate change, with energy currently more significant than agriculture. Absent careful management of both, greenhouse gases will inevitably rise with increasing global development, through increased use of energy and fertilisers and increased beef consumption. Whilst energy related emissions in industrial applications are monitored on a regular basis, it is notoriously hard to monitor the emissions from agriculture. Unlike many other sectors, where GHG emissions can be accounted for relatively accurately, the land based sectors act as both sources and sinks for the main biogenic GHGs (CO2, CH4, N2O) and the net balance of source and sink activity is notoriously difficult to quantify. As such, the current methods applied on available datasets have relatively large associated errors [up to +/- 50%], especially when applied at finer spatial scales (Smith et al., 2011).

The Kyoto protocol established by the United Nations Framework Convention on Climate Change (UNFCCC) makes it mandatory for developed countries to meet their yearly emissions targets. Several countries have in turn established national cap and trade regimes like Emissions Trading Scheme in the European Union, California's Cap and Trade scheme, Australia's Carbon Farming Initiative, Clean Development Mechanism for countries as well as companies to develop carbon projects in developing countries. GHG abatement options within the agricultural sector are considered to be cost competitive in comparison to other options in the non-agricultural sector (IPCC, 2007).

GHG Emissions related in the biological sector and due to land use change include deforestation, biomass burning, conversion of wetlands and soil cultivation. It has been estimated that some soils have lost one-half to two-thirds of the original SOC pool with a cumulative loss of 30-40 t C/ha. (Lal, 2004) Biological carbon capture - sequestering carbon in soils to reduce GHG emissions - can reduce the rate of CO2 emissions while having positive impacts on agricultural lands as well as the environment. The potential of soil carbon sequestration through adoption of biological carbon capture range from 50 to 1000kg/ha/year that may in turn offset one-fourth of the annual increase in CO2 emissions of 3.3 Gt C/year (Lal, 2004). Therefore, biological carbon capture represents a significant opportunity to improve the agricultural ecosystem while providing carbon offset benefits.

The Purpose and Scope of this Project

This research is undertaken with an aim to understand the impact that biological carbon capturing systems would have on world CO2 reduction targets. The primary focus area is to look at options to capture carbon in land environments. Through this project, I seek to answer the below questions concerning the biological carbon capture sector:

1. Technology Review - What are the technological options available across the agriculture sector for heightened biological carbon reduction? What are the market opportunities for these technologies in the next 5-20 years?

2. Policy Review - What are the currents gaps and challenges in terms of policies around monitoring CO2 reductions? How can these challenges be overcome to unlock the business potential that this sector represents?

3. Commercial Assessment - What is the economic and commercial feasibility of implementing these options in consideration of global GHG targets and considerations? What is the range of implementation costs and degree of economic uncertainty?

Consulting Methodology

The figure below is an overview of the methodology used on this project in an attempt to develop actionable recommendations against the problem definition.

Figure : Consulting Methodology

Problem Definition: This phase of the project involved a rigorous problem definition process with key stakeholders from the steering committee at . Apart from studying the recommendations developed from one of the previous studies done on soil carbon within , a detailed project scope was decided on as per discussions with the client. The key sources of literature to be used for the data analysis as well as to identify the scientific and policy gaps were discussed and the client shared names of some authors whose work was to be reviewed. This phase also involved a detailed breakdown of the problem into individual components in order to bring structure and rigor to the problem solving approach. With respect to soil carbon technologies, key options under consideration were prioritized for detailed analysis. Based on the clients requirements, the countries of interest where the technologies would be implemented were also included within the scope in order to analyse scientific, technical and policy issues accordingly.

Problem Diagnosis: Diagnosing the problem with a critical lens on the technical and scientific uncertainties in the soil carbon sector allowed for greater clarity in the constraints that existed in understanding the true potential of some of the technologies due to lack of consensus within the academic community. However, the literature was reviewed from an exhaustive list of sources critically to construct a hypothesis and develop insightful recommendations. Considering the complexity of the technologies to be analysed, the focus at this stage in the project was on rigorous analysis in order to avoid missing key areas of investigation. The data analysis placed great importance on a technology that holds materially high abatement potential (i.e. millions of tons of CO2e abatement) from the next 20-30 years perspective and the policy measures that will need to be undertaken to achieve the potential in the said period.

Execute Solution: A fact-based approach was incorporated to validate the findings in the previous phase. By iterating the proposed solution across key stakeholders helped produce a stronger set of recommendations. This phase also involved developing a short case study on USA by building an analytical model to project the potential emissions reductions using the proposed solution. The scientific as well as technical uncertainties were addressed by identifying policy mechanisms that serve to reduce the investment risks to the client significantly. The proposed solution was an attempt to shift the client's thinking and increasing awareness in an area where the client had no established knowledgebase and to help make propose recommendations to different business units within the company.

Develop Recommendations: The focus at this stage was synthesizing the findings and presenting them analytically. The recommendations were also tested with key stakeholders before being presented to the steering committee. This greatly helped construct multiple perspectives that further broadened the range of possibilities under the proposed recommendation. By identifying relationships of the proposed solution with other similar technologies, new insights were delivered. The structure and rigour used from the first phase was followed consistently throughout the project.

The Structure of this Report

In section 1, I have covered the aim and scope of the project as well as discussed the context for this project.

In section 2, I introduce the biological carbon capture sector and present the key benefits provided by this sector from an abatement perspective. The potential for global abatement as well as cost abatement curve for different technologies has been covered in this sector to provide greater clarity on the specific technologies should consider in the near term based on material mitigation potential and project costs. The section deep dives into biochar summarizing the benefits as well as giving an overview of scientific uncertainties to be resolved.

In section 3, relevant carbon market policies have been discussed with a discussion on the specific criteria within carbon markets where issues exist with respect to biological carbon capture sector. Based on the detailed analysis, I have tried to provide a framework on the criteria could use to make potential investments in this sector with a long-term policy view (10-30 years).

Section 4 discusses the commercial assessment of biochar with a detailed analysis on the economics of biochar systems. The Biochar value chain is discussed with an overview on the important factors that will need to consider before investing in this sector.

The section 5 summarizes the key conclusions from this research with specific policy and commercial recommendations for .

Biological Carbon Capture - Technology Review

Biological carbon capture is associated with the sequestration of carbon dioxide (CO2) and other anthropogenic Green House Gases (GHG). Projects within the Biological carbon capture sector are known to less capital intensive as compared to commercial Carbon Capture and Storage (CCS) and provide larger abatement in the near term (McKinsey, 2009). The biological carbon capture includes the below mentioned approaches to climate change mitigation:

Soil carbon - Involves projects focussed on employing improved farming practices to impact soil biological processes such as reduced tillage, improved nutrient management, biochar etc

Forests - Practices such as reduced emissions from deforestation and degradation (REDD), Afforestation, Improved forestry management etc fall under this approach to mitigate climate change.

Grazing Land Management - This approach involves enhancing the soils capacity to store carbon via photosynthesis to impact the soil organic carbon. This also provides ecosystem benefits like improved water retention, reduced soil erosion and enhanced biodiversity.

Biogas - this technology involves the heating of organic matter in the absence of oxygen. This can be used to replace diesel.

Based on these specific approaches and the technology used, biomass feedstocks represent carbon that could be stored over a longer mean residence time (MRT) in soils as opposed to qualified as waste and left to decompose on lands. Apart from being cost effective, biological carbon capture has the capacity to sequester 50-100Pg carbon globally in the next 25 to 50 year period (Lal 2004a,b). The technologies across this sector are readily available in most eco regions of the world (IPCC, 2004). This sector presents a material opportunity for to meet its compliance emissions requirements in climate regimes as well as monetise the emissions benefits that some of the technologies present by developing offset projects eligible in carbon markets.

GHG Mitigation Potential in Agriculture till 2030

A variety of options exists within the agriculture sector to mitigate GHG emissions. However, the effectiveness of these options vary greatly by climate regimes as well as local soil conditions. As shown in the figure below, the most prominent options mitigation measures include Biochar, cropland management, as well grazing land management. (IPCC 2007, Woolf et al 2010)

Figure 3: Technical potential of each measure for GHG Mitigation in the Agriculture Sector by 2030 - Mt CO2-eq/year (Built based on estimates in IPCC 2007)

There are a number of different mitigation technologies under each measure that vary in their ability to reduce emissions in the longer term. As shown above, biochar has the biggest impact on GHG mitigation.

Figure 4: Technologies under each measure for GHG Mitigation in the Agriculture Sector by 2030 (Built based on estimates in IPCC 2007)

There are several mitigation technologies that can be used to manage croplands. It is important to note that Biochar can be used to restore degraded lands as well as organic soils.

Since biochar was identified as the technology with the biggest potential for carbon abatement, a focussed study was conducted to understand the key scientific, technical as well as economic factors from 's perspective. The sections below will focus on these aspects of biochar within the biological carbon capture sector and present key findings from the literature reviewed.

GHG Mitigation Technologies

The figure below illustrates the different mitigation technologies within the agriculture sector. All these strategies can be employed to restore degraded soils. There are soils that are degraded by erosion, nutrient depletion, acidification and contamination. Restoring degraded soils and ecosystems is a strategy with multiple benefits for water quality, biomass productivity and for reducing net CO2 emissions.

Figure : Strategies for Soil Carbon Sequestration (Lal, 2004)

Soil fertility management and specifically Biological nutrient fixation is an attempt to reduce the use of nitrogen fertilizers that are very energy intensive and reduce CO2 emissions. The carbon markets do accept offsets from the agricultural sector but not all these practices have been covered under the existing protocols. A preliminary analysis of these technologies, specifically tillage methods and soil fertility management, did suggest great potential from a cost-abatement perspective. However, from a material abatement potential and the need to identify a technology that has the potential to offset a larger share of 's compliance emissions, Biochar was identified as the technology for a detailed analysis.

Mitigation Potential and Project Cost

The figure below shows the global cost abatement curve of all GHG mitigation technologies from a low carbon economy study by McKinsey. It is important to note that technologies within the agriculture as well as forestry sector are well positioned in comparison to other types of technologies in terms of both mitigation and cost. Technologies within the agriculture and forestry sectors highlighted in yellow, provide an opportunity for material mitigation at relatively low cost.

Figure : GHG abatement cost curve 2030 (McKinsey, 2009)

As shown above, the cost-abatement curve represents the mitigation potential of different technologies across four major sectors - including energy efficiency, low carbon energy supply, and terrestrial carbon which includes forestry and agriculture till 2030 (McKinsey, 2009). While there is a high degree of uncertainty with the estimates represented in the curve above, the cost curve does point to different technologies that are implemented today or offer a high degree of certainty to be implemented till 2030. It is particularly important to note the relative position of technologies within the Agriculture and Forestry sector - Tillage and residue management, cropland nutrient management, rice management, reduced slash and burn agriculture, degraded forest reforestation, organic soil restoration etc - in comparison to other technologies and the significant potential that this sector presents to to meet its compliance emissions targets in climate regimes globally. All the technologies within the agriculture and forestry sector fare well both in terms of cost and mitigation. The technologies within terrestrial carbon provides an opportunity of 12GtCO2e/year in 2030 (McKinsey, 2009). However, considering the carbon market uncertainties associated with these technologies, the challenges are majorly around creating effective policies to ensure reliable monitoring and verification of the carbon abatement rather than around implementation of these technologies.

Soil Carbon Sequestration - The Basics

Carbon sequestration can be defined as capturing and storing atmospheric carbon that would otherwise be emitted in the atmosphere. Carbon sequestration is important for four major reasons: lack of non-carbon fuel sources, urgent need to reduce atmospheric CO2, need to improve ecosystem services that enhance agricultural productivity and advance efforts to mitigate climate change. The major mitigation techniques are to either reduce emissions or avoid emissions. Emission reduction involves technologies that enhance energy efficiency, and involve low carbon or no fossil fuel sources. On the other hand, soil carbon sequestration is a strategy used to avoid emissions by storing carbon in soils through technological options with mean residence times spanning hundreds of years. There are three main types of carbon sequestration: (i) Terrestrial sequestration (i.e. Soil sequestration falls under this option) (ii) Geological sequestration involving engineering techniques and (iii) Ocean sequestration involving carbon capture and compression or injection. (Lal, 2008)

Figure : Strategies for Carbon Sequestration in different Ecosystems

Carbon sequestration can be enhanced by increasing the stocks of soil carbon in terrestrial ecosystems (Lal, 2004a, 2004b). As a result of the strong dependency between climate change and soil conditions (Lal, 2004), the role of sequestering soil carbon is strategically important to decrease the future rate of increase of CO2. As shown below, there are primarily five different types of carbon pools globally. There is uncertainty with respect to exact estimates of the individual pools, however it is important to note that these pools are inter-connected (Lal, 2004a, 2004b). The rate of reducing CO2 emissions can be increased through its transfer to other carbon pools using different technological options through three major sequestration technologies as discussed below.

Figure : Global Carbon Pool Sources

Soil carbon sequestration is dependent on a range of factors such as type of vegetation, soil types and climate conditions. Amongst all the technologies considered for heightened carbon reduction, Biochar was identified as an attractive terrestrial sequestration mitigation tool considering the material mitigation potential of biochar till 2050. While there is a brief discussion of the potential of different technologies within the agriculture sector, the project will deep dive into the specifics of biochar as this was the technology identified in the initial stages as a potentially attractive technology as per discussions on the initial findings with the client. The project will focus on a range of factors with respect to biochar - type of feedstocks, type of suitable climate conditions as well as type of soils - which have the potential, make the technology an attractive investment option in the near term.

Soil Carbon Sequestration - Biochar

Biochar is charcoal or biomass-derived back carbon that is produced on heating biomass in the absence of oxygen (Lehmann, 2006). It is predicted that globally biochar could sequester up to 1GtC/yr using only waste biomass (Woolf, 2009) by 2050, or between 5 and 9 GtC/yr if purpose grown crops are used (Lehmann, 2006). In addition, if 40% of the currently unused agricultural residues are pyrolyzed for biochar production could help reduce 230 Mt/CO2eq/yr or 8% USA annual emissions (Roberts et al, 2010). Apart from the biggest benefit of sequestering carbon in soil and reducing emissions, the production of biochar is also beneficial to improve crop productivity and soil fertility. The most important business opportunities to incorporate biochar in the biological carbon capture sector are in (i) Improvising Agricultural Productivity; (ii) Waste Diversion or recycling of agricultural residues (iii) Climate Change Mitigation and (iv) Renewable Energy Generation. However, it should be noted that conversion of biomass to biochar and its impact on soils is dependent on local soil conditions, climate and the type of biomass feedstock used.

The practice of applying biochar to land has been around for many years and the conversion of biomass to bio-char as a carbon sink has been proposed before (Seifritz 1993) however, this was not applicable to soils. Biochar improves soils conditions by improving soil biological properties as result of improved regeneration of soil organic matter and water and nutrient retention. These ecosystem benefits have a great impact on plant growth and agricultural productivity (Lehmann et al. 2003a; Lehmann and Rondon 2005). The table below details the benefits of Biochar from a scientific lens.

Table : Scientific Summary of Advantages of Biochar

pH, Mineral Nutrients and

Labile Carbon

Soil acidity is determined by pH. The biggest benefit of Biochar is its ability to be make an impact on acidic soils i.e. soils not suitable for agriculture production. The mineral contents of biochar (ash content, N, P, K) provide the ecosystem benefits that were discussed above. Biochar has two components of carbon - a portion that does not break down in soils and labile carbon that is typically released to the atmosphere as a result of rapid break down in soils.

Water

retention

One major factor of enhanced crop yields due to Biochar is a result of its ability to retain water particularly on drylands or lower quality sandy or silty soils. Enhanced water retention has an impact of crop productivity and there are a range of results that show enhanced productivity on a variety of soils as result of biochar application.

GHG suppression

Biochar has an impact on the environment through the following major ways: suppression of soil-based emission of anthropogenic greenhouse gases like N20, CH4 and CO2. By reducing the amount of fertilizer required, it avoids the emission of N20 as a result of reduction in requirements of nitrogen fertilizer. It is also important to note that there is significant uncertainty with respect to biochar's ability to reduce soil emissions. However, the impact of biochar on fertilizer reductions holds great potential in the near term considering biofuels' synergies with biochar based on this attribute apart from its benefits for heightened carbon reduction.

With a big focus on biofuels in Brazil and USA, will gain value from technologies that provide synergistic benefits to both the biofuels business as well as deliver carbon abatement benefits. Since biochar is well suited to make significant impacts on agricultural productivity [1] as well as have potential for climate change mitigation, it is uniquely positioned to deliver these synergistic benefits. The energy crops grown for biofuels are typically grow on acidic soils or degraded lands. And Biochar's ability to make an impact on such soils makes it a potentially attractive investment proposition for strictly subject to greater clarity in the uncertainties and satisfactory resolution of product performance against the company's key criteria as well as appropriate policies on biochar in carbon markets.

Mitigation Benefits of Biochar and Bioenergy

As discussed above, Biochar has multiple pathways through which it creates value. The major pathways by which biochar will deliver avoided emissions are analysed in detail below as per discussions within Amonette, J et al 2009 and Blackwell, P 2010:

Avoided soil emissions - N20 and CH4

Avoided CO2 emissions by diverting biomass feedstocks for biochar production

Sequestering carbon in soils as a result of thermal transformation of carbon contained in feedstocks and the application of biochar to soils

Avoided CO2 emissions as result of fossil-fuel displacement where pyrolysis is used to produce biochar from biomass feedstocks

Savings in fertilizer inputs (N20) associated with increased soil productivity and nutrient retention

Carbon Sequestered in Soils

The carbon through non-transformed biomass decomposes rapidly in soils. The majority of the soil organic matter consists of carbon fractions that break down rapidly. The result of this is the release of CO2 back to the atmosphere within a few years that contributes significantly to climate change (Kleiner, K 2009). There is a growing interest in storing or sequestering carbon in soils as it has been identified as one of the high potential options to mitigate climate change. (Lehmann, J 2007). Carbon can be sequestered in soils in one of the following ways (Lal, 2002):

Adding soil organic matter that is resistant to decay as a result of manipulation of characteristics of biomass

Reducing the rate of release of CO2 as a result of improved soil conditions (no till, nutrient retention, etc)

Enhanced production of biomass per unit area as a result of increases in net primary productivity (NPP)

However, it is important to note that many of the existing technologies for soil carbon sequestration are risky due to uncertainties associated with permanence of the carbon sequestered. On the other hand, biochar sequesters carbon in one of the following ways (EPRI, 2011, Lehmann, 2009):

Pyrolyzing biomass at temperatures ranging from 300 C to 500 C creates an increase in terrestrial carbon stocks as it stabilizes biomass carbon. The composition of biochar allows it store carbon in soils with a long mean residence time.

Field studies indicate that Biochar alters the soils to enhance the stability of non-biochar carbon. However, there is uncertainty on the magnitude of this benefit of biochar.

Biochar also has been shown to enhance crop yields per unit of fertilizer input. In conditions where plant growth is the result of biochar application to soils, there will be greater carbon sequestered through growing biomass. These properties of biochar lead to an enhanced reduction of CO2 as well as carbon sequestration for longer periods.

Fossil Fuel Displacement

Pyrolysing biomass feedstock to produce biochar can be used to displace fossil fuels as the bio-oil and syngas generated from the production process can be used to generate bioenergy. This net energy output will depend on the feedstock properties and the type of pyrolysis system used. This renewable energy can be used to displace fossil fuel energy sources. The mitigation benefit will depend on the emissions intensity of the fossil fuel source being displaced. For eg natural gas is not as emission intensive as coal.

Avoided Emissions of N20 and CH4 from Soil

N2O and CH4 emissions from soils constitute 38% and 32% of total non-CO2 emissions from agriculture (IPCC, 2007). This necessitates the need to reduce these emissions from soil through application of biochar. This could be a major contribution to climate change, as it will also reduce the need for energy intensive nitrogen fertilizers. Shackley, S et al, 2010 found that there was significant reduction of CH4 emissions and N2O emissions were reduced by 50% on application of biochar to soil. As discussed within Cowie et al, 2009 biochar application may significantly reduce N2O and CH4 emissions from soil.

Avoided Emissions from Change in Biomass Feedstock Management

Conventional management of biomass feedstocks leads to release of anthropogenic GHG like methane and nitrous oxide as the feedstock decompose under normal conditions. For example, secondary agricultural residues (rice straw, green waste, garden waste) deposited on lands releases significant quantities of methane. In addition, animal manures break down to release methane and nitrous oxide, which have a huge impact on GHG emissions. Biochar is a strategy that can make a significant impact to climate change mitigation and help meet its mandatory emissions targets across geographies annually. Since different biomass feedstocks have different abatement potential, the quantity of emissions reductions will vary greatly based on the type of feedstock used to produce biochar.

Displaced Fertilizer and Agricultural Inputs

Biochar could displace fertilizer use in two ways: as a substitute for other sources of fertilizer when it is produced using nutrient rich feedstocks or by increasing, the efficiency with which fertilizer is used as biochar increases the soils' nutrient retention capacity (Lehmann, 2003). The high pH of biochar is important because agricultural soils require liming to reduce the acidifying effect of fertilizers over time. Biochar also influences soil structural properties that increases soil strength and reduces the need for fertilizers as result of moisture holding capacity and water retention.

The table below details the PESTLE analysis of Biochar from 's perspective. As explained below, the benefits of biochar provide synergistic value to Biofuels and - in enhancing agricultural productivity and mitigating climate change respectively. However, these benefits would be limited by factors such as land availability, sustainable sourcing of biomass feedstocks, and the type of soils on which biochar is applied. The PESTLE analysis shows the potential of biochar as a mitigation tool that fits with long-term strategy with respect to emissions reduction and Biofuels need for agricultural productivity.

Table : PESTLE Analysis of Biochar

Political Factors

operates in countries with strict climate regimes such as USA (California Cap & Trade), Australia (Carbon Farming Initiative), UK (EU ETS), and Canada (Alberta Offset System) and in countries with an emissions cap under the United Nations Framework Convention on Climate Change Clean Development Mechanism (UNFCCC CDM).

The above mentioned climate change regimes have a great degree of intervention in the economy and impacts how an oil major like operates to meet its annual emissions targets.

The climate change policies created as a result of international negotiations on climate change necessitates the need for to identify mitigation options for heightened carbon reduction.

Failure to meet obligations under the climate regimes may lead to great reputational damage as well as pose a threat to 's commercial performance.

Biochar, with its potential for material GHG abatement at a low cost in comparison to its counterparts within the biological carbon capture sector, is a promising technology to minimize the reputational and commercial risks that may face in the near term and help the company achieve its annual emissions targets.

Apart from reducing emissions and earning revenue from offsets on the carbon market (subject to biochar protocol approval in the CDM compliance markets), Biochar provides synergistic benefits to with significant potential to make an impact by way of carbon sequestration and climate change mitigation.

Leading efforts to commercialize Biochar and introducing 's unmatched scale and expertise in technology to make further breakthroughs in Biochar would enhance 's image and brand value globally similar to 's next generation investments in Biofuels.

Economic Factors

With Biochar's ecosystem benefits, there is great potential to make big impacts economically.

There will be a rise in incomes in the forestry and agricultural sectors as a result of improved productivity.

Agricultural and forestry wastes that currently have no economic value will be monetized because of their suitability as feedstocks for Biochar production.

The economic benefits will also contribute to national income generation as well as value creation at the bottom of the pyramid i.e. to the farming community.

Pending biochar protocol approval in the compliance carbon markets, CO2 offsets earned through Biochar application to soils could earn a premium in carbon markets globally.

However, if biochar offsets start earning a premium there could also be negative impact in the form of undesirable land-use change to grow feedstocks especially for biochar production that will lead to criticism similar to first generation biofuels.

On the other hand, if the benefits of biochar are scientifically proven and is introduced as a mitigation measure in the carbon markets, governments around the world may give subsidies across the Biochar value chain. However, it is too early to develop clarity considering the gaps that need to be addressed to establish greater certainty on biochar.

Social Factors

Climate change will affect agriculture and forestry systems through higher temperatures, elevated carbon dioxide (CO2) concentration, and reduced soil productivity.

By 2050, the world's population will increase by 34% to an estimated 9.1 billion that will increase the demand for food and in turn agricultural land [2] . This will put greater pressure to improve agricultural productivity apart from other requirements like enhanced mechanisation etc.

Biochar with its impact on soil enhancement and crop yields could prove to be one of the major innovative products to solve the issues mentioned above.

While Biochar is an attractive investment proposition for due to the benefits it provides to both Biofuels (due to enhanced soil productivity ) and (heightened CO2 abatement), it also provides benefits that are external to core focus. However, 's investment in biochar will lead to job creation amongst the economically weaker agricultural community i.e. farmers.

Technological Factors

While there is considerable research on biochar, the large improvements in soil productivity and carbon sequestration offers great opportunities for soil scientists, geologists, carbon market experts, policy makers as well as corporations like to further make technological improvements and create more business opportunities by innovating the biological carbon capture sector.

While biochar can be applied to soils using existing mechanised seeding technology, it is necessary to minimize the negative impact of incorporating biochar in soils to avoid the release of carbon. These factors will lead to greater technological improvements in the way biochar is applied to soils in order to avoid the above-mentioned negative impacts and in turn also enhance agricultural mechanisation.

Environmental Factors

Biochar will have the greatest impact on the environment and hence its benefits will fall under this factor. The capacity of Biochar to sequester carbon in soils "permanently" will have great impacts on national as well as regional emission reduction targets.

Biochar can also displace the carbon negative fossil fuel energy and can essentially function as a sustainable mitigation strategy along with other renewable energy options.

will benefit greatly from the environmental benefits of Biochar and can meet a majority of its annual emissions targets through just one single measure.

Legal Factors

Biochar protocol development will benefit policy-making bodies like UNFCCC CDM, EU ETS, VCS, Australia CFI to create legally binding quantification methods for biochar.

There are at least two active biochar protocol development efforts in progress within CDM. If a protocol is developed to quantify, monitor, and verify the multiple GHG abatement benefits of Biochar, there could be great advancements in the legal frameworks within climate regimes globally.

If were to participate in biochar protocol development within CDM, it would also greatly benefit from its own efforts in creating a successful protocol economically as well as politically.

Biological Carbon Capture - Carbon Offset Policy Review

Biochar as an emerging industry has generated a significant interest amongst the scientific community, policy makers and government regimes. Given the growing interest in Biochar from researchers, there are a number of efforts being undertaken to introduce biochar in carbon markets and national climate regimes (De Gryze, S et al 2010). It will be essential to develop a protocol to introduce Biochar in carbon markets. In order to make biochar projects financially viable, carbon markets will monetize the climate benefits of biochar to ensure profitability (Lehmann 2010; Roberts et al 2009). Biochar projects can be monetized by selling GHG offsets under a cap-and-trade system. This section will analyse the current state of carbon market policy with respect to Biochar and details the investment criteria for that will minimize the risk associated in the near term.

Carbon Markets - The Basics

Carbon market is an emissions trading system where stakeholders - individuals, corporates, governments - trade credits that represent tonnes of carbon dioxide emissions reduced leading to mitigation of global climate change. Carbon markets have developed as countries around the world have collectively agreed to limit their emissions to a pre-agreed level under the Kyoto protocol. As reducing the emissions may be economically cheaper for some developed countries as compared to developing countries, the Kyoto protocol permits trading of emissions reductions. This mechanism allows stakeholders with high emission reduction costs to purchase credits from those with lower costs. This has also shaped the development of "Cap & Trade" regimes across the world in countries like Canada, Australia, USA and Europe Union. The cap & trade regulation encourages corporate entities like within such climate regimes to invest in cleaner technologies rather than purchase costlier credits from the carbon markets. Trading in carbon markets happen in tonnes of carbon credits where

1 carbo credit = 1 tonne of CO2 equivalent (t/CO2e)

Carbon offsets are tradable emissions reductions created by entities (corporations or governments) that are not subject to GHG emissions limits (Steiner, C et al 2010). Carbon offsets can be generated through improved management practices in both the agricultural and forestry sectors. However, a number of monitoring and verification challenges need to be addressed through appropriate protocols. This section will detail the criteria that need to be assessed for Biochar projects under the agriculture sector from 's point of view. In order to minimize the risk to , the section below details the criteria that should be considered for any investment proposition for biochar.

Key Criteria for Carbon Offset Projects

The potential for biochar as a tool to achieve heightened carbon reduction is dependent on the quantity of biomass available for pyrolysis. There is a perception among policy makers that biochar could be criticized the same way as first generation biofuels that could lead to land use change, soil erosion and a negative impact on the environment (Biofuelswatch, 2010). To avoid these outcomes, it is important that feedstocks are sourced sustainably. As discussed within Woolf et al (2008), the below criteria must be met to ensure that the maximum sustainable technical potential of biochar can be achieved. The feedstocks used for biochar production should:

"Not lead to land-use change or deforestation

Be produced on marginal or degraded land

Be extracted at a rate that does not create soil erosion or loss of soil function

Not be sourced from industrial waste" (Weisberg et al, The Climate Trust, 2010)

In order for biochar projects to generate emissions reductions under a climate policy, should validate the projects against the below mentioned criteria. These criteria are based on the points illustrated by Offset Quality Initiative (Offset Quality Initiative, 2008), a consortium of national non-profit organizations working to develop protocols in carbon markets. should ensure that investments in biochar projects minimize carbon market risk by validating additionality, baseline, monitoring and verification, leakage and permanence risks.

Policy Assessment for Biochar Projects

A price on carbon emissions by incorporating biochar projects in carbon markets is one policy that would increase the viability of biochar projects for . A regulated system like the CDM or a compliance emissions regime would disincentivize energy generated from fossil fuels thus increasing the attractiveness of renewable energy from biochar as well as emissions reductions through sequestration. A compliance emission regime like will also maximize revenue from companies with high residual emissions targets by trading carbon credits. This revenue could be invested into biochar projects to monetize the agricultural and environmental benefits of biochar discussed above.

Additionality

Additionality risk focuses on whether the project is in addition to reductions that would have occurred without the revenue generated by selling carbon-offset credits. To determine whether a project is implemented in addition to a business as usual scenario is highly subjective that makes this criterion of carbon markets very controversial. One of the earlier requirements within the carbo markets was financial additionality with an analysis to determine whether a project with and without carbon revenues justify the investment. Other common measures of additionality are technical - is it technologically proven, regulatory - is the activity required by law, institutional - is the project overcoming institutional barriers that would have prevented the activity from occurring and investment - is investment in the activity inhibited, for example by subsidies or other market distortions. Protocol developers within carbon markets develop uniformly applicable criteria based on above points to determine whether projects meet the additionality criteria. However, protocols could benefit from a standardised approach that demonstrates the ability of biochar projects to be additional. This will guarantee carbon finance is available to support biochar projects and make them attractive for further investment.

Monitoring, Verification and Reporting

There are a number of scientific gaps with respect to the monitoring of emissions reductions achieved through biochar. Every carbon-offset project is quantified and monitored as per the guidelines of the protocol created based on the project type. However, there is no existing protocol that captures all the emission reduction benefits associated with biochar projects. There are critical gaps as to whether biochar projects provide enough scientific certainty to calculate potential and actual emission reductions. There are also technical barriers to monitoring projects and translating this information into quantifiable emission reductions.

The backbone of all protocols is a quantification methodology that defines how project developers calculate emission reductions. Since there is no existing protocol on the carbon sequestration benefit of biochar, could participate in the protocol development process in the compliance markets in order to minimize the risk associated with biochar projects. The table summarizes the state of protocol development under different categories applicable to biochar based on its climate benefits.

Table : Summary of Carbon Market Protocols for Biochar projects (Adapted from Weisberg et al, The Climate Trust, 2010, Driver, K 2010)

GHG Reduction

Carbon Market

Protocol

Comments

Carbon sequestration

Voluntary Carbon Standard

The proposed protocol was criticized by the International Biochar Initiative for insufficient mechanisms to quantify the sequestration benefits provided by Biochar. A new protocol to quantify these benefits is under development.

Renewable Energy

Clean Development Mechanism

There are multiple extremely reliable protocols within renewable energy that could be adapted to biochar projects.

Waste Diversion

Clean Development Mechanism

"Avoidance of methane from biomass decay through controlled pyrolysis" is a CDM protocol specially for pyrolysis projects. This could be easily applied to biochar projects.

Reduction in soil emissions

None

There is considerable uncertainty on how biochar reduces nitrous oxide and methane emissions in soil. These reductions vary based on local conditions like rainfall, temperature, land-use change and crop yields. There are significant challenges in developing a protocol for this benefit and monetize it as an offset.

Reduction in Fertilizer Manufacturing

None

It would be easy to develop a protocol for this benefit as long as the fertilizer reductions can be quantified and easy to document.

Leakage

Biochar projects will be implemented within a pre-defined boundary. Leakage occurs when a Biochar project increases emissions outside of that specific project's accounting boundary. For example, a biochar project implemented in a will reduce emissions in that area however will lead to increased emissions elsewhere. It is important that projects avoid leakage to accurately account represent an emission reduction. Biochar projects could be impacted by leakage in cases where feedstock has alternate uses and causes land-use change. Biomass feedstocks that have no alternate uses and would have been burnt or left to decompose on land do not cause any land-use change. Considering that the largest source of leakage with respect to biochar projects is land-use change, feedstocks that impact the market for wood products, timber production and food will lead to land-use change.

There is considerable risk in the inconsistent methodologies used in carbon markets to account for the land-use change and hence a mature accounting protocol needs to be developed. Biochar production should be restricted to these feedstocks that will not lead to leakage and have a greater emissions benefit. Based on these findings, De Gryze et al. (2010) recommend focusing protocol development on the following feedstocks:

Corn stover (waste leaves of the corn plant) left to decompose in the field in the absence of a biochar project

Switchgrass grown on degraded land.

Yard waste that is composted in the absence of a biochar project

Wood waste left to decompose in the absence of a biochar project

In summary, in order for biochar to achieve its climate benefits sustainably, carbon markets should credit projects that use feedstocks that do not lead to land-use change. Hence, any feedstocks such as secondary agricultural residues, forestry residues as well as energy crop residues that would have been left to decompose or would have been burnt should be considered for biochar production.

Permanence

One of the primary risks associated with soil carbon sequestration is that it can be reversed. As biochar is known for relatively for longer mean residence times, reversals for biochar projects could occur unintentionally. Reversals in biochar projects could occur in three major ways - emissions during biochar application as result of tillage, biochar decomposition, and loss of soil organic carbon because of lost soil organic matter. This makes it monitoring the sequestration benefits of biochar extremely difficult. Under the current requirements for many carbon-offset protocols and industry standard for permanence, project developers will have to demonstrate that biochar exists in soils even 100 years after the biochar was first incorporated. (Lehmann, J et al, 2010)

Biochar decomposition is the largest and most consistent amongst the three negative effects of biochar that are likely to occur over a projects crediting period. Biochar decomposition will vary significantly based on feedstock, type of pyrolysis used as well as the environment where the char is incorporated. De Gryze et al. (2010) suggest sampling be carried out every 1, 5, 10, 20 and 50 years after biochar is applied to soils. Climate regimes across the world are addressing permanence by using buffers for unintentional reversals. This implies that projects have to allocate a small percentage of the money earned through credits as insurance against unintentional reversals. If there are reversals then the regulator sells the credits from the buffer account to compensate for the reversal. There are also various insurance schemes available from the financial sector to cover the risks of unintentional reversal. The latest development within carbon markets is the creation of a pooled permanence buffer that was developed by the Voluntary carbon standard. In this case, if applied to a biochar project, it will be assessed on the perceived level of permanence and a discount factor is applied to the total volume of credits issued. For eg, if a biochar project is developed in Brazil and graded as high risk, a 20% discount factor is applied to the biochar that results in 20% emissions reductions being held in a pooled buffer account.

The protocols being proposed within carbon markets are attractive from 's investment proposition. Since pyrolysis plant must account for and monitor all of the biochar that is incorporated in soils in order to sell offsets, vertically integrated projects that consume all of the biochar produced matches with 's requirement of incorporating this biochar on fields growing energy crops for biofuels.

Cause no net harm

For any climate mitigation measure, it is important that the overall benefits of the technology are higher than the unintentional disadvantages. Biochar projects can cause adverse effects on the environment in one of the following ways:

Feedstocks like sewage sludge containing heavy metals which can damage the soil conditions as well as contaminate food and impact biodiversity

Biochar can develop a form of hydrocarbon that can be harmful to the environment

To avoid feedstocks with heavy metals used for biochar production, a protocol should meet the below mitigation measure: Due to the harmful nature of feedstocks containing heavy metals, a protocol should meet the following mitigation requirements:

Biochar projects that use municipal solid waste, sewage sludge should not be certified to generate credits as these feedstocks contain heavy metals

The biochar should be tested periodically to test whether their char contain heavy metals

In order to minimize air pollution, the biochar must be wet before applying to ground

In summary, carbon in soil is highly stable and can be quantified using appropriate mechanisms. However, the variability of biochar projects as well as lack of certainty in the creating a baseline for the projects makes it very difficult to standardise the implementation of biochar. Also, the emissions reductions achieved through the pyrolysis process and biochar application to soils makes it challenging to verify as well as certify the emissions reductions achieved on site. A robust offset protocol will help develop greater clarity and close the gaps associated with the scientific and technical uncertainties with biochar.

What is the investment criteria for ?

The table below details the investment criteria in biochar projects from 's perspective. This analysis is adapted based on the recommendations of Weisberg, P et al, 2010 made to the California energy commission representing The Climate Trust. 's investment in biochar projects will be driven by the level of risk associated with the respective technology. The column Risk indicates the type of risk that can be mitigated if the strategy summarised in the table below is followed with respect to investment in biochar projects. Commercial risk represents a financial or economic risk that entails loss of revenue through carbon credits, insurance payments on reversal of emission reductions, any cost incurred towards restoring the physical damage caused by biochar. On the other hand, reputational risk is concerned with perception about in the carbon markets and its overall brand as an energy company. Regulatory risk can also arise when 's operations under a country-specific climate regime is unable to meet its compliance requirements. Biochar if done correctly will help to mitigate its regulatory risk in a geography where biochar projects can be implemented in the carbon markets.

Table : Investment Criteria for (Source: Adapted based on The Climate Trust, 2010)

Project

Component

Desirable

Quality

Carbon Market

Rationale

Risk [3] 

Type of

feedstock

Biochar is produced using waste biomass that would be burnt or left on land to decompose. Purpose grown feedstock should be grown on marginal land.

Leakage - Since carbon market protocols are not advanced to account for land-use, should source waste feedstocks that do not cause land use change.

Commercial

Reputational

Feedstocks that do not contain heavy metals in order to avoid contamination of soils.

Cause No Net Harm - By contaminating the soils, heavy metals cause damage to the environment.

Reputational

Projects can validate how feedstock was being managed before implementation of the biochar project and forecast how it would likely be managed in absence of project.

Baseline - Protocols need to account for any energy generated before the biochar project is implemented and any portion of organic matter incorporated into soil.

Commercial

Reputational

Pyrolysis Process

Project might have occurred anyway without the funding raised by selling carbon-offset credits or the Project may represent a common practice or already conform to an industry standard.

Additionality - Project has to be additional and represent additional emissions reductions over the business-as-usual scenario.

Commercial

Reputational

Vertically integrated projects where all the biochar produced is consumed by the same stakeholder

Verification - Since economics favour large projects, vertically integrated projects will have much lower verification costs.

Commercial

Biochar Application

Degraded lands, dry lands are most suited to biochar projects due to their soil types and biochar's equivalent efficiency on such soils.

Permanence - Biochar is proven to sequester carbon with long MRTs but the results will be more effective on such soils. Emissions reduction may be reversed because of intentional activity (e.g. change in land use) or natural occurrences.

Commercial

Reputational

Biological Carbon Capture - Commercial Review

There are very few analysis of biochar from a commercial point of view. These commercial assessments were carried out to analyse the GHG impact as well as the economics of biochar and these studies are known as Life Cycle Analysis. However, in the two in-depth LCA studies carried out for biochar, type of feedstock is one of the most important factors of the study. As discussed above, agricultural wastes and residues provide the greatest potential for carbon abatement. Lehmann, J et al (2008) conducted the very first full LCA of a slow pyrolysis system for two feedstock sources - field waste and purpose grown crops. Gaunt and Lehmann compared slow pyrolysis with an input of 16,000 t/yr dry feedstock to produce biochar and applied to wheat. However, Lehmann, J et all assumed that the project will deliver Kyoto compliant net-negative emissions that has not been approved for any biochar project to date Lehmann, J et al 2008). The study also concludes that bioenergy from the project will be economically feasible when the CO2 offset price is $37/t. However, the study has a number of uncertainties as the details on the technology is not explained, carbon cost of transporting the char to fields is not incorporated, and the impact of biochar on crop yields as well as soil types is limited on a small number of studies.

Bruce McCarl et al (2009) conducted an economic study on biochar production with a comparison on pyrolysis facilities processing 70,000t/yr biomass. A comparison between slow pyrolysis optimized for biochar production and fast pyrolysis optimized for energy production showed that both technologies are currently economically not feasible. The slow pyrolysis system makes a loss of $70/t feedstock whereas the fast pyrolysis is projected to make a loss of $40/t feedstock. Both studies have made different assumptions on energy conversion efficiency, soil enhancements, longevity of biochar, and biochar application rate.

Roberts et al (2010a) conducted an exhaustive LCA focussed on biochar energy, GHG impact and economics with yard waste, biomass crops as feedstocks. Only the waste feedstocks were found to provide economic and GHG benefits with net benefits of -870 kg CO2e/t of dry feedstock. The biomass crops were net emitters as a result of the negative impact of land use change that was incorporated in the GHG accounting method. The study concluded that only waste feedstocks can deliver emissions reductions assuming that the biochar system is in a "closed loop" to ensure a minimal impact on carbon cost incurred through transportation. The economic viability of biochar is however, dependant on the market value of carbon as well as cost assumptions made for pyrolysis.

Economics of Biochar

This section examines the economic, emissions balance and energy balance benefits that would arise as a result of producing biochar using slow pyrolysis using four different types of feedstocks in the USA. The analysis is based on the findings of the LCA conducted by Roberts et al (2010a). In considering the economic aspects of biochar the below mentioned sources of costs and benefits were incorporated in the study.

Figure : LCA Stages in Pyrolysis Biochar System (Hammod, 2009 and Fairchild, 2010)

The figure above depicts the different stages in a pyrolysis biochar system that are used to calculate the economics of a pyrolysis biochar system. Each of these stages has a net positive and negative environmental and financial impact. The individual costs and benefits across all the stages are as detailed in table 6 below. The individual components of the financial, environmental and policy issues associated with each stage have been summarised in table 7.

Table : Costs and benefits with PyrolysisBiochar System

Feedstock production and collection

Every type of biomass feedstock requires assembly, harvesting and collection that incurs costs. Each feedstock type will have a different cost associated with respect to moving the feedstock to the processing site, loading costs etc.

Soil organic carbon lost as a result of feedstock removal in terms of nutrient reduction

This is the value associated with the value of the feedstock if it were not diverted to the pyrolysis facility. For eg. The value of corn stover left on the field that may lead to retention of soil organic matter. Assumptions made to account for a minimum amount left on the field to avoid soil erosion.

Feedstock storage and pre-processing costs

Significant costs are incurred to store the biomass feedstock. Different biomass feedstock will have different sizes and the service areas required to store millions of tons of dry feedstock has to be take into account to calculate an appropriate value.

Feedstock processing costs

Processing biomass feedstocks through pyrolysis is a capital-intensive process. This includes fixed as well as variable costs incurred towards constructing the pyrolysis plant and operating costs to run the pyrolysis plant.

Pyrolysis operation costs

Generated energy value

As discussed above, pyrolysis plant generates bio-oil, syngas and biochar. This parameter will consider the value of the energy generated from the pyrolysis operation.

Biochar hauling and application costs

Biochar application to soils also involves costs associated with transporting biochar to the field and application to soils. This transporting cost would be minimized by having a centralised processing facility and a closed loop biochar system.

Biochar impact on crop yields

The value of biochar can be calculated using data on the N, K, P and the CEC values of biochar and its impact on crop yields. This will also include the benefits of carbon sequestration as a result of biochar incorporation to soils.

Table : Benefits and Issues across each stage in Pyrolysis

Stage

Financial<

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