Jim Rogers, global investor, chairman of Beeland Interests Inc. and author who co-founded the Quantum Fund with George Soros, spoke to S&P Global Platts editors Andy…
Aug 31, 2021
Jim Rogers, global investor, chairman of Beeland Interests Inc. and author who co-founded the Quantum Fund with George Soros, spoke to S&P Global Platts editors Andy Critchlow and Sambit Mohanty to share his insights on the possibility of oil revisiting $100 a barrel, the investment opportunities that the agriculture sector offers, and the impact of energy transition on the metals sector.
All over the world, central banks and governments have printed and borrowed staggering amounts of money. It has never happened in the world history in such a short period of time.
When you have a lot of money and want to build a factory, it takes a long time. But if you go online you can buy cotton futures in 10 seconds. A lot of money is floating around now. And the easiest and fastest way to invest in is financial markets. And history also shows that when you have a lot of money it often leads to higher prices. That is what that has been happening. Right now there are a lot of new investors. At the moment it’s all central bank money whether you like it or not. And I don’t like it.
With all this money floating around, who knows, anything can happen. It has happened in the past and it will happen in the future. I do know that known reserves of oil are running out. Unless fracking becomes a huge, reliable and continuous source of energy, oil can go much, much higher. Yes, certainly we will have electric cars but that takes time. I would suspect that the price of oil would be higher by the end of this year than where it is now. And people will see higher prices in 2022 than what we have seen so far this year. We know about OPEC’s decision to increase production, or they say they will. All the bad news is out here. And usually that means much of the news is out and it’s time for prices to go higher again.
I expect oil prices to continue to go higher, not every day because nothing goes straight up. Yes, we will have electric cars and alternative energy. All of that will happen but that does not mean that oil cannot go higher for a few years. Thirty years from now I am not sure. Unless there is a gigantic discovery that I don’t know about, it makes me skeptical. How can oil reserves be high and rise without new discoveries? Many of the traditional oil majors are putting their money into alternative energy sources. I am not saying they are wrong. I am just saying that companies only have so much money to invest. So if some money is going into solar, then less is going into drilling. So oil prices are not going to be in the bear market for another 10 years or so.
Everything I read about hydrogen says it’s wonderful, it’s great and it is happening. But you need to have the infrastructure for it. You need to have enough people driving it and you need to have the right prices. Henry Ford’s wife had an electric car and she loved it. She did not like Henry Ford’s cars with petrol engines. She was 100 years early. And now, electric cars are coming. If she was around, she would be very happy now.
I certainly know that the price of copper is at an all-time high. Electric cars will use copper several times more than a regular car. People can see what’s coming. Oil is not at an all-time high but copper is. What everybody knows that it is politically correct to have non-carbon sources of energy. And for a while it’s going to make metals like nickel, lithium and copper very, very popular. And supplies of nickel and copper are not expanding as rapidly as they would have to in order to keep prices down.
Everybody favors them, at least verbally. They look promising in the foreseeable future.
Agriculture offers a big opportunity. The average age of farmers in America is 58, and in Japan it is 66. The highest rate of suicide in UK is in agriculture. More people in America are studying public relations than studying agriculture. It’s been a disaster. There are very few places in the world where there is money and expertise going into agriculture.
Unless something changes very quickly, agriculture is a very promising place to be in. Agriculture land prices in some places are going through the roof because there is nobody to sell them. Maybe they will give it to their kids. The price of sugar is down 70% from its all-time high. All agriculture products are down a lot and that’s where the opportunities are going to be because somebody has to produce the stuff.
I don’t see any reason why China would not continue to grow. Nobody does straight up. They will also have their problems. I don’t think China will stop itself from having electric cars and that means growth will continue. Agriculture offers an opportunity in China. Beijing says people in the cities have done well but people in the countryside have not. Beijing is now trying to give incentives for the countryside.
I don’t think the US dollar will lose its status this year but you can look down the road and for whatever reasons—political or economic—something is going to change in the foreseeable future. I own a lot of US dollars at the moment for a variety of reasons. But I know that somewhere down the road I will have to sell them and do something else. Whether I will buy bitcoin, I doubt it very seriously. Bonds are in a bubble, property in many places are in a bubble, and we can see some bubbles developing in the stock market. The only place that I see is still cheap are commodities—silver is down 50 % from an all-time high, sugar is down 70%, oil is down 50%. These are not bubbles. Commodities are the cheapest asset classes now. I would prefer to invest in agriculture.
Aug 19, 2021
In the second instalment of a two-part series taking a broad look at the developing market for bionaphtha, Evridiki Dimitriadou examines regulations, demand, and technology. Read the first instalment: Europe’s nascent bionaphtha market gearing up to serve demand for cleaner fuels and petchems
Caught in a fierce race to become more sustainable, oil majors, startups and downstream producers are navigating regulations, funding models, and technological developments to stand out as industry leaders in an emerging market.
Bionaphtha, a more sustainable but functionally equivalent alternative to fossil-based naphtha, is projected to grow substantially in demand in order to supplement its oil-derived predecessor as a petrochemicals feedstock and gasoline blendstock.
We can make inferences about demand from production levels, which range between 150,000-250,000 mt yearly, with several expansion projects planned. Over the next three to five years, production could grow to anywhere between 500,000 mt/year and multiple millions of metric tons per year, depending on demand, according to the NOVA institute, an industry research group.
Industry sources say demand is rapidly surpassing supply, suggesting demand levels are at least as high as supply currently.
Consumer demand for more sustainable gasoline and plastics will be key to future growth.
While organic materials are key for our future, demand generated by changing regulation—driven by governments fighting climate change—is quite inorganic.
The rate at which governments impose fossil-based restrictions will not only vary across regions but also between upstream and downstream sub-sectors. This regulatory variance is even more complicated for bionaphtha due to its very different end-uses.
Arguably, the most influential legislative act for the European transportation fuels industry is the second Renewable Energy Directive (RED II), which requires renewable energy to make up 32% of the consumption mix by 2030.
The European Commission stipulates that members require a minimum of 14% renewable energy in road and rail transport by 2030. RED II adherence includes both first-generation biofuels, such as FAME, and second-generation biofuels, such as bionaphtha-yielding HVO, and levies taxes or other penalties for noncompliance.
The difference between first- and second-generation biofuels is paramount. This is because the second-generation, produced from certain types of feedstocks such as waste, is subject to double counting under the directive, meaning those biofuels count twice as much towards the mandate. This means bionaphtha can benefit more than other biofuels under RED II, although the way countries implement the mandate varies.
RED II also restricts greenhouse gas emissions (GHG), which has fueled mandatory and voluntary trading of carbon credits. These restrictions are displacing a small but growing volume of fossil-derived blendstocks and transportation fuels.
Incentives for bionaphtha use by petrochemical producers are less straightforward. Petrochemicals legislation includes the directive on single-use plastics and the directive on plastic bags from the European Green Deal and Circular Economy Action Plan. Restrictions are milder compared to transportation fuels but are expected to increase.
With fewer limitations on the regulatory side, suppliers incentivize consumers through marketing and advertising, while politicians try to alter social norms indirectly.
Several high-profile name changes such as that of TotalEnergies (formerly Total) or Equinor (formerly Statoil) signal a voluntary shift toward sustainability. This also includes processing pricy feedstocks, such as bionaphtha.
However, bio-based plastics demand is also substantially consumer-led, as individuals increasingly demand consumer goods boasting eco-friendly credentials.
A “vegan leather” coat certainly appeals to some buyers. However, consumers may feel less enthusiastic about the substitute materials employed in the garment such as polyurethane and polyester (historically crude oil-derived)—that’s if they even notice those are the substances replacing the leather. Sustainable feedstocks are increasingly a part of plastics production, but it’s likely more than advertising is required to raise consumer awareness and demand.
The technology companies use to meet bio-product demand is diverse. The three main pathways to convert biomass into liquid fuel are pyrolysis, liquid phase processing, and gasification, according to the US National Advanced Biofuels Consortium. All three of these processes can be a step in the production of bionaphtha. Hydrogen is a key component in each process.
Liquid phase processing
This is the most common route, yielding high proportions of renewable diesel (HVO). Biomass is preheated with a catalyst into a slurry, which is cleaned and processed with hydrogen. Subsequently, the slurry reacts with water, yielding different fuels depending on the refinery configuration and processes, and the raw materials and catalysts used.
In these processes, often solid biomass is heated in absence of oxygen. Forest and agricultural residues such as nut shells are feedstocks more suited to this process. Pyrolysis notably yields bio-oils. This substance isn’t a quality fuel but is upgraded through hydrotreating, catalytic cracking and gasification. Importantly, a pyrolysis process can yield bio-oil from waste-plastic, otherwise known as chemical recycling. A recent study on biomass processing has shown notable results of catalytic co-pyrolysis of plastic waste and biomass. Alternatively, companies can blend at later stages. For example, Neste uses renewable and recycled materials, such as waste and resudie oils and liquefied waste plastic, to create a more sustainable feedstock, branded Neste RE, suitable for petrochemicals cracking.
Pyrolysis also generates syngas, a mixture of primarily water and carbon monoxide, which can be used for the production of synthetic fuels such as bionaphtha through a gasification process called Fischer-Tropsch synthesis. During this process, liquid biofuels can be produced through a chemical catalytic process.
There are two main ways companies choose to implement these pathways, depending on their existing infrastructure. Producers can construct new plants or retrofit existing refineries in a co-processing approach, where biomass and fossil inputs are mutually processed into a comingled fuel.
Standalone construction of a new biorefinery is the likely option for new entrants. Key in production is a hydrotreater, which can cost more than $30 million.
While newbuilds are costly, they have the advantage of being able to yield 100% renewable fuels, which is notable given renewable products sell at higher premiums. Feedstocks such as vegetable oils are the largest production cost component and can account for 65%-80% of renewable fuels’ price. Adding new bio-refining capacity can reduce that to 40% or much less. However, feedstock costs will remain variable while capital costs become fixed over time.
For example, TotalEnergies plans to convert petroleum-refining capacity at Grandpuits into a zero-crude platform. Such an upgrade can cost more than $500 million invested capital throughout several years.
Alternatively, hydrotreaters at legacy refineries can be modified to co-process biofuels and oil together, taking advantage of existing, expensive capacity. Many producers use co-processing through liquid phase separation. This process yields lucrative byproducts such as bionaphtha and biopropane that help recoup capital investments.
The capital expenditures for co-processing at existing refineries are substantially lower than startups. However, companies wishing to tout their comingled bio-bonafides must use robust methods to trace renewable content mixed with non-renewable.
Tracking renewable content for regulators and end-users can be challenging, considering many bio-based products are a combination of recycled, renewable and fossil-based feedstocks.
The main way bionaphtha content is tracked is through a “mass-balance” approach, where the precise content of renewable or recycled input is measured as the amount of oil that was replaced. Tracking individual molecules in a final comingled product is not practical as they are blended earlier in the manufacturing process.
However, the SGS environmental agency, a global industry group, provides an International Sustainability and Carbon Certification (ISCC) to producers who provide proof of renewable content. This certification is available in Europe, aligned with RED II. Several leading petrochemicals producers such as BASF and Dow are producing ISCC-certified bioplastics.
The certification assures consumers that a producer used renewable or recycled inputs, but doesn’t track the renewable content of a single item. Compare this to a vegetable soup: you might mix in carrots and potatoes but the bite you take might be all carrots or all potatoes.
These tracking measures bring us another step closer to a circular economy where raw materials are reused, moving away from a linear economy that sees those items pile up in a landfill.
The way biofuels are tracked into the gasoline pool is similar, but a key difference is in how production costs get passed to end users.
Naphtha and bionaphtha are base components in the mixture of products that form different gasoline grades. A study on transportation fuels has shown that a combination of bioethanol and bionaphtha in gasoline can lead to a statistically significant reduction in fuel consumption and CO2 emissions.
European gasoline producers have worked alongside automotive manufacturers to develop biofuels that can meet government regulations and vehicles that can consume them.
However, a typical vehicle lifespan is up to 13 years, and considering its replacement cost, it is unlikely most consumers will rush to buy a new car specifically to accommodate biofuels if their current vehicle is unable to.
Through co-processing, producers are generating biofuels, including bionaphtha, that are equivalent in their properties to legacy oil products. These can be blended in a way that does not require substantial changes to engine, infrastructure, or fuel distribution network. This is commonly referred to in the industry as a “drop-in” fuel.
In May, Bosch, Shell and Volkswagen co-developed a gasoline blend that includes up to 33% renewables by incorporating bionaphtha or ethanol, certified by ISCC. Neste, also in May, began testing renewable gasoline in cooperation with Powertrain Engineering Sweden, which supplies Volvo.
Preem carried out tests in June to produce a new renewable gasoline at its Lysekil refinery. The company already produces a gasoline blend incorporating bionaphtha, ethanol and ETBE. USA-based biofuels producer Gevo has invested in a Speyer, Germany-located biorefinery to produce drop-in fuels by 2024. It already sells renewable gasoline in Seattle that includes bionaphtha and ethanol.
These highlights reflect some very recent growth and announcements, but many other blenders and producers, such as Eni and TotalEnergies, are also active in the market.
Bionaphtha can complement ethanol and ETBE in the gasoline blending pool or substitute them. With high price elasticity of demand, blenders seek the cheapest available blending combinations to meet the minimum European-regulated EN 288 specifications. Still, as mentioned above, bionaphtha can be subject to double counting for regulatory purposes, which can make it more attractive in these often-complex blend calculations.
Most of the largest European petrochemicals producers already use bionaphtha to produce sustainable intermediate- and end-consumer industrial products such as clothing and medical equipment.
Dow and UPM partnered in 2019 to produce renewable-based plastics, particularly incorporating bionaphtha. Dow produces bio-based polyethylene (bio-PE) and low-density polyethyelene (bio-LDPE). The latter is used by Elopak, a Norway-based global supplier of paper packaging. That partnership is producing 100% renewable cartons, which can also be recycled.
Ineos and UPM partnered in 2020 to produce bio-polymers from bionaphtha. These range from plastic food packaging to medical equipment. This partnership produced the world’s first bio-attributed, commercially available polyvinyl chloride (PVC), which can be used in piping and windows.
Sabic partnered with UPM in 2020 to process bionaphtha into renewable ethylene. Netherlands-based Dyneema uses Sabic’s renewable ethylene to produce fibers used in safety gear, clothing, and equipment such as ropes for heavy industry and marine activities. Sabic also announced in 2020 a renewable ethylene supply contract to Belgium-based Vynova for manufacture of PVC resins such as construction materials, and wires.
BASF follows the mass-balance approach of mixing renewable and oil-based naphtha to produce bio-based polymers such as PE, polypropylene (PP) and polystyrene.
LyondellBasell and Neste have partnered since 2019 to produce several thousand tons of bio-based plastics and agreed on a long-term commercial agreement in 2021 with LyondellBasell sourcing Neste RE to produce polymers and chemicals. Lyondell plans to produce and market 2 million mt of recycled and renewable-based polymers annually by 2030. Further down the supply chain, Cofresco, a producer of household items such as baking paper and cling film, uses Lyondell’s Circulen-branded LDPE.
Borealis also partners with Neste for bio-based PP production in Europe, according to the bio-consultancy NNFC. Borealis could also have another source of bio-feedstocks as Austria’s OMV acquired a majority 75% stake in Borealis in March 2020 and plans to produce second-generation biofuels at its Schwechat refinery by 2023.
IKEA has also partnered with Neste to turn waste and residue raw materials into PP and PE plastic.
While demand for bionaphtha is driven by eco-minded consumers, it will also grow alongside fossil-based feedstocks such as naphtha, LPG, and ethane, which are projected to grow by an average of 300,000 b/d per year between 2021-2050, according to S&P Global Platts Analytics. Expected growth in plastics building-block such as ethylene and propylene is also key. Global bioplastics production capacity is set to increase from 2.11 million mt (of which 26% attributable to Europe) to 2.87 million mt between 2020-2025 according to European Bioplastics and Nova institute.
Importantly, not all bio-based plastics are biodegradable. Plastics amount for roughly 10% of global waste and 80% of all marine litter, with 70% of the latter being single-use plastics, according to the International Union for Conservation of Nature.
Therefore, developments in recycling will be key for bionaphtha demand. The main method of recycling is mechanical recycling, which crushes plastics to create new materials. This process often yields an inferior grade of plastic at a price premium when compared to non-recycled production. The competitiveness of recycled material versus bio-based feedstocks will vary depending on properties, regulations, and demand.
EU introduced in January a Eur800/mt tax on non-recycled packaging. Therefore, bionaphtha and fossil-naphtha can also complement recycled materials in order to meet growing demand for end-products.
While regulation is driving a large portion of the change, a wide framework for supporting low-carbon and capital-intensive projects has developed in both the public and private spheres.
For example, the European Investment Bank aims to support more than Eur1 trillion of environmentally sustainable investments by 2030. One of the five main objectives of the EU’s Cohesion Fund is to invest in renewables. Financial support is also seen at the local level. For example, the Swedish Bioenergy Association funds investment in regional biorefineries that utilize forest residues key in bionaphtha production.
The private sector, including large-scale financial institutions, is increasingly funding renewable energy instead of oil exploration and production. Some Exchange Traded Funds (ETFs), such as the Lyxor New Energy UCITS ETF, show a preference for investing in sustainability-focused companies tracked by indices such as the S&P Global Clean Energy Index, which posted a 48.44% one-year total return as of Aug. 11.
Investment strategies focusing on environmentally responsible companies, such as positive screening, are on the rise in equity. On the debt side, there has also been rising interest in instruments such as green bonds—a type of loan a producer can take to finance green investments.
The market for renewable fuels and petrochemicals is therefore rapidly developing, giving bionaphtha an emerging role in the energy transition.
And just like many other nascent solutions to global energy and waste challenges, bionaphtha’s growth trajectory will be determined by a combination of economic, regulatory and political factors, along with a good dose of consumer psychology.
Aug 17, 2021
Ahead of London International Shipping Week 2021, a six-part S&P Global Platts podcast miniseries looks into the pricing of alternative marine fuels for the global shipping industry. In each episode of Marine Fuels of the Future, Platts editors investigate the current state of the major fuel alternatives, as the shipping sector seeks to reduce its greenhouse gas emissions ahead of stringent caps in 2030 and 2050.
In episode two, we look at biofuels – a diverse energy source derived from vegetable oils and waste matter, rather than from traditional hydrocarbons.
In this episode of the S&P Global Platts Agriculture Focus podcast, the Platts EMEA Agriculture team discusses how the prices of different agricultural commodities, from…
Jul 06, 2021
In this episode of the S&P Global Platts Agriculture Focus podcast, the Platts EMEA Agriculture team discusses how the prices of different agricultural commodities, from wheat, corn and rice, to veg oils, sugar and biodiesel, have fared during the coronavirus pandemic and whether we can expect any knock-on effects in the coming months.
Platts Daily Grains enables confident trading and investment decisions through price assessments, freight prices, market heards, analysis, and news for the grains, oilseeds, vegetable oils,…
Jun 01, 2021
Platts Daily Grains enables confident trading and investment decisions through price assessments, freight prices, market heards, analysis, and news for the grains, oilseeds, vegetable oils, animal feed and protein markets.
World events continue to heavily impact the rapidly evolving grains market. Insight from S&P Global Platts is unbiased, helping you to make confident decisions in these changing times.
We’ve been covering the grain markets for the past 7 years and continue to expand our coverage, including adding new Black Sea/Europe Grains reports to our portfolio.
Our Daily Grains report gives a quick and comprehensive glimpse into what is moving the market, across regions, every working day. This supports you to:
– Manage and hedge price risks
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For compliance teams, our rigorous methodology can strengthen negotiations between counterparties and contribute to internal auditing.
For senior strategists, S&P Global Platts market heards enable the benchmarking of company activity against that of the market. The ability to drill down to detailed data provides an opportunity for crucial interrogation of pricing, supply and demand.
Market participants, keen to minimize risk and maximize opportunity can use insight in our Grains Daily report to both plan and deliver their strategy. We understand that access to independent information and timely application of pricing analysis can be critical.
Daily information and transparent methodology, that reflects published and verified pricing information, can be fundamental to maintaining a competitive edge in a world impacted by climate change, population growth, energy demand and changing tastes.
Mar 22, 2021
Positioning the sugar industry for the future after a year of turmoil We are delighted that the S&P Global Platts Geneva Sugar Conference is back,…
Oct 19, 2021
We are delighted that the S&P Global Platts Geneva Sugar Conference is back, bringing together leading growers, processors, traders and buyers to explore the state of the European sugar markets, and understand the trends, risks and challenges into 2022 and beyond.
As global economies prepare to emerge into a new world, what will be the new normal for the sugar industry? The sugar markets have had to grapple with falling consumption, adverse weather and supply chain challenges. Vaccine optimism brings hope of a return to many industries that the sugar markets heavily rely on, but have consumer habits changed for good?
Efforts to restore nationwide year-round sales of a 15% ethanol fuel blend are shaping up along three different avenues as biofuel and farm groups pursue…
Aug 20, 2021
Efforts to restore nationwide year-round sales of a 15% ethanol fuel blend are shaping up along three different avenues as biofuel and farm groups pursue an uphill battle to provide retailers with assurances on access to the fuel before next summer.
The DC Circuit Court of Appeals July 2 vacated a 2019 Environmental Protection Agency rule that extended a summertime waiver of Reid Vapor Pressure (RVP) requirements to biofuel blends containing more than 10% ethanol (American Fuel & Petrochemical Manufacturers v. EPA, 19-1124).
The implications of that ruling are poised to devastate the market expansion of homegrown biofuels if this barrier to sales is not resolved before next summer, the Renewable Fuels Association said.
While E10, which contains 10% ethanol and 90% gasoline, is widely accepted and available from retailers across the country year-round, E15, a fuel blend with 15% ethanol, cannot be sold in conventional gasoline markets from June 1 to Sept. 15 due to EPA restrictions on air pollution from gasoline. That blackout period has deterred some retailers from offering E15, but was lifted by the Trump administration.
Just as thousands of retailers were showing interest in offering E15, as RIN values and the blending economics for E15 were attractive, “the court decision came out, and everybody slammed on the brakes,” RFA CEO Geoff Cooper told S&P Global Platts Aug. 20.
“We’ve heard directly from retailers who tell us that they’re putting their plans to expand into E15 on the shelf until there’s more clarity around the path forward,” he said. “So it really is sort of hard to overstate what a big deal this is for the future of the industry.”
About 80% of the roughly 2,500 existing E15 retail locations are located in conventional gasoline markets that are impacted by the ruling, Chris Bliley, senior vice president of regulatory affairs for the biofuel trade group Growth Energy, said Aug. 20.
“We’re trying to turn over every stone because this is so important for higher biofuel blends,” Bliley said, noting that industry groups are pursing a legal remedy through the court system, legislative action on Capitol Hill and a regulatory solution with the EPA.
“We’re going to do everything we can to provide as much certainty as we can to retailers to be able to sell these higher blends through this summer driving season, and then get a solution in place before next summer,” he said.
American Petroleum Institute Senior Vice President and Chief Legal Officer Paul Afonso commended the court’s July 2 decision, saying, “We appreciate the court’s recognition that EPA was clearly outside of its current statutory authority by extending the RVP waiver to E15 fuel.”
But Growth Energy, the National Corn Growers Association, and the RFA believe the three-judge panel presiding over the case made significant legal errors, resulting in a ruling inconsistent with the congressional intent of the Clean Air Act to promote ethanol and limit fuel volatility. E15 has more ethanol and a lower RVP than E10. They asked the full court to rehear the case, in a petition filed Aug. 16.
The DC Circuit has yet to act on the rehearing request. As such, E15 sales have not yet been halted this summer as the court withheld issuance of the mandate that puts the ruling into effect until seven days after disposition of timely filed rehearing requests.
If the rehearing request is denied, the case would mark the second recent big court win for the refining group American Fuel & Petrochemical Manufacturers. The first came in June when the US Supreme Court ruled that the EPA had broad authority to exempt small refiners from the federal biofuel mandate.
“EPA doesn’t have any different authority today than it did last month when the court ruled unanimously that the agency overstepped its bounds, and decades of precedent, by applying a Clean Air Act waiver to E15,” an AFPM spokesperson said in an email Aug. 20. “We’re confident another review of this matter will yield the same result.”
If the DC Circuit does not agree to rehear the case and the mandate is issued prior to the Sept. 15 end of the summer season for E15, Cooper said his organization has asked the EPA “to exercise enforcement discretion and not enforce against any retailers that are selling E15 through mid-September.”
Legislation has already been put forward in the House and Senate that would ensure year-round access to E15 in all fuel markets, and the massive infrastructure package and the budget reconciliation process present potential vehicles for moving that legislation.
“But if we’re going to solve this issue legislatively, it’s going to be quite a heavy lift,” Cooper said.
“You’ve got the oil- and refiners-state members of Congress lined up against this legislation, and you’ve got the farm-state legislators strongly advocating for it,” Cooper said. “Those battle lines are the same as they’ve always been,” creating “a pretty tricky path forward.”
Bliley was more optimistic about legislative prospects.
“All this does is allow retailers to sell E15 year-round. This doesn’t require anybody to sell it. This isn’t pushing anybody to sell it, so we don’t understand why people would be opposed to simply providing the ability to retailers to sell a fuel in the summer months that they can sell nine months out of the year,” Bliley said.
The regulatory path is another option but it also presents challenges, mainly from a timing perspective.
Cooper contended that the EPA could take steps to remedy the situation through its own volition by launching another rulemaking process that takes a different approach to removing the RVP barrier for E15 than the Trump-era EPA took.
“We certainly are encouraging them to do so, and we’ll continue to work with the agency to try and get something going on the regulatory side,” Cooper said. But getting a rulemaking done before next summer, when the process typically takes 1.5 to 2 years, would be a difficult feat though not impossible.
Cooper noted that the EPA under the Trump administration got the 2019 rule at issue completed in about nine months.
The one silver lining, Cooper said, was that the RVP waiver is only needed in conventional gasoline markets, so the court’s ruling does not impede year-round E15 sales in reformulated gasoline markets, though that represents only about 30% of the US gasoline market. “So regardless of how things go with this court decision, we are going to be focused on getting retailers in those markets to expand their offerings of E15,” he said.
Soil carbon is gaining popularity as a credit, but it is also facing many challenges even in key markets like Australia and the US. In…
Aug 18, 2021
Soil carbon is gaining popularity as a credit, but it is also facing many challenges even in key markets like Australia and the US.
In 2005, when Louisa and Michael Kiely began talking to farmers about soil carbon in New South Wales in Australia, they were met with incredulity.
More than 20 years later, Carbon Farmers of Australia—the advisory they founded—has licensed projects spanning 750,000 hectares with a 3,700 sq km project in South Australia.
“We persevered and are now dealing in Paris Agreement-compliant credits,” Louisa said. “Things have changed. Carbon trading now has a gold-rush feel to it.”
In a landmark deal earlier this year, Australian-owned Wilmot Cattle Co. announced the sale of $500,000 worth of soil carbon credits to Microsoft, which has pledged to become carbon negative by 2030.
Soil carbon sequestration involves removing carbon from the atmosphere and storing it in soil. The process relies primarily on land management practices like preventing overgrazing and tilling, better water management practices and composting.
A number of factors, however, impede the popularity of soil carbon as a credit. And compared to the soaring popularity of forestry and household credits, it’s hard to find registered soil carbon credits on popular standards like Verra and Gold Standard.
Climate change policy has played a huge part in Australian elections and domestic policy over the last 15 years. The Carbon Farming Initiative Act 2011 encouraged Australian farmers to earn credits by changing land use practices to store carbon and reduce greenhouse gas emissions. The Australian government invested $9.6 million in its Soil Carbon Research Programme that concluded in 2012.
In 2011, the Gillard administration passed the Clean Energy Act through which a carbon pricing mechanism came into effect. This was repealed in 2014 by the Abbott administration, which introduced the voluntary Emissions Reduction Fund in its place. A large part of the trading under the ERF comprises soil carbon credits. The Morrison administration, in its 2021–22 budget, promised to deliver $233.6 million in new funding to improve and protect Australia’s soil.
Louise Edmonds, a soil carbon project developer based in West Australia and CEO of Carbonsync, said that while policies and leadership in Australia have changed, the framework is still very much in place.
Similarly in the US, the White House has been talking of making American soil the “next frontier of carbon innovation”. In his first address before Congress in April, US President Joe Biden spoke of paying farmers to grow cover crops to reduce carbon.
Nori, a Seattle-based carbon marketplace, said that the Biden administration’s focus on carbon removal within the agricultural space has resulted in increased interest in soil carbon projects over the last few months.
“Despite the growing interest, farmers implementing these practices is still a tiny fraction,” said Radhika Moolgavkar, head of supply and methodology at Nori.
Farmers are a powerful group worldwide and while involving those who till the soil is essential, it might not be the most enticing proposition for corporates, according to market experts.
Neil Havermale, a US-based independent soil carbon consultant, said that it’s difficult to bring farmers onboard a market that is often vague and confusing. There are doubts about how lucrative carbon farming will be.
In October 2020, rigorous protocols for soil enrichment carbon credits were approved and published by two of the world’s leading offset standard-setting bodies, Verra and the Climate Action Reserve.
Verra on Aug. 10 announced the proposed Methodology for Biochar Utilization in Soil and Non-Soil Applications. The methodology will be posted for public consultation.
“These protocols unlock the industry’s potential to become an immediate part of the climate solution both by drawing down and sequestering carbon, and reducing greenhouse gas emissions, through practice changes supported by technology and data advancements,” said a spokesperson from Indigo Ag, a Boston-based agri-tech company that develops soil carbon programs.
Soil carbon projects are predominantly based in Australia and the US.
“It’s not feasible in countries in Asia and Europe where land holdings are smaller. You need larger farms. Farm sizes in the US are often 2,000 to 3,000 hectares,” Havermale said.
Carbonsync’s Edmonds said that Australia provides a similar advantage with farm sizes ranging from 1,000 hectares to 20,000 hectares.
“Scale adds to feasibility in soil carbon projects,” Edmonds said. “There are big costs involved in these projects. When costs are involved for projects less than 1,000 hectares, the viability of the project is marginal. But, when you go above 1,000 hectares, it becomes a good investment.”
Meanwhile, the voluntary market for agricultural carbon credits has been ineffective so far in incentivizing soil carbon’s specific and unique opportunities at scale.
“It has instead been made up of small projects, with a strong buyer-supplier relationship, but which have not been able to scale to the market size of forest management or industrial emissions reduction projects,” Indigo Ag’s spokesperson said. “This has left a gaping hole in the voluntary market for natural climate solutions such as agriculture. If we can scale up the potential of soil enrichment across the globe, we will be able to crack the opportunity of this industry wide open, benefiting the soil, the atmosphere, the ecosystem, the economy, and local communities, all at the same time.”
Soil carbon projects require long-term commitment and the initial costs of project initiation can be substantial. The combination is often unfeasible.
In Australia, key costs include registration of projects, detailed feasibility studies, development of farm management plans, costs of testing as well as auditing expenses. Edmonds said soil sampling across a 1,000-hectare farm can cost up to A$15,000 (US$11,000). There are no subsidies and farmers or project developers have to bear these costs.
Projects can require more than two decades of commitment to be effective, unlike a Household Devices project that can take three to five years for the entire project to run its course.
“In forestry projects, you just plant trees. But you need to think of soil projects as an infrastructure project like building a bridge to get from one side of the river to the other. It will take 25 years to get to the other side. And every day you must maintain the bridge,” Edmonds said.
Like with other carbon credits, the prices of soil carbon credits have been rising consistently.
“Interest in agriculture-based carbon credits has accelerated over the last year, and credit price is tied to quality of credits. We expect prices to continue increasing in the years ahead,” said the Indigo Ag spokesperson.
Credits generated through the Carbon by Indigo program were sold at $20/credit when the program first launched. Today, the sale price has increased to $27/credit. Growers receive 75% of the credit sale price (meaning $15 for credits generated in 2021). These numbers reflect prices in the US market where Indigo Ag is based.
The lack of transparency and standardization that hinders carbon markets globally affects the market for soil credits as well. Having standardized carbon market, making credits accessible to buyers, and addressing the right stakeholders are key to the development of soil carbon markets.
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China’s agricultural ministry forecast the country’s swine herd to fully recover from the epidemic in 2021.
According to S&P Global Platts Analytics, despite the resurgence of ASF in China, its soybean demand is forecast to remain robust in 2021 amid strong hog herd growth rate.
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The Coronavirus has sent shockwaves through the global economy. But the impact has been felt particularly in the oil markets as restrictions on movement (local and international) came into force across the globe hitting transport fuel demand.
Whilst the impact to the European Biofuels market is hard to gauge yet, the uncertainty of when life could return to normal, the potential of further lockdowns and the economic slowdown look set to cast an uncertain road ahead for our sector.
At a critical time for our sector, join S&P Global Platts online biofuels event. A part of the thought leadership series on Platts LIVE, this important discussion will address how biofuels players are adapting in this time of great uncertainty.