Carbon Intensity Creates Opportunities

The more proactive roles producers take in reducing carbon intensity, the more they will benefit as energy use reduction moves from an incentive to a requirement.
By Bernie Hoffman | April 05, 2016

As the carbon economy emerges, there are increasing opportunities for ethanol producers to capitalize on various value sources across the carbon accounting market. The more proactive roles producers take in reducing carbon intensity, the more they will benefit as energy use reduction moves from an incentive to a requirement.

Carbon intensity and carbon accounting have moved from simply being green kudos a few years ago to an emerging market with tangible benefits available to ethanol producers who can demonstrate and capitalize on reduced carbon intensity. California already has enacted low-carbon fuel requirements and more states are expected to follow suit.

In addition, as the energy markets, especially power generation, comply with U.S. EPA regulations and proposed CO2 limits, ethanol producers have seen and will see energy costs climb. Since 2001, average U.S. electric rates have risen 38 percent. It is estimated that nearly 400 coal-fired power plants will shut down between now and 2020 because of the EPA’s CO2 restrictions. That represents nearly 50 gigawatts of cheap electricity that will need to be replaced.

There are essentially two main areas of opportunity. First, by making modifications to produce ethanol more efficiently and with lower carbon intensity, ethanol plants are more likely to qualify for the EPA’s efficient producer pathway petition process (EP3). By deploying a wide range of possible plant upgrades or modifications, ethanol producers not only gain incentives from the EP3 pathway—more than 50 plants already have applied—but also reduce dependence on traditional grid-based energy.

There are also specific market benefits in gaining access to states that have their own carbon intensity thresholds. West-facing producers need to comply with the California Low Carbon Fuel Standard to be able to deliver ethanol into the state. Reduced carbon intensity can translate to a tangible premium for LCFS-qualified ethanol and it is expected that value will continue to increase. Oregon, Washington, British Columbia and other U.S. states and Canadian provinces are taking steps to enact their own versions of LCFS.

Going forward, it will be necessary for ethanol producers to consider, calculate and capitalize on their carbon intensity, carbon accounting and the potential tangible benefits associated with the carbon economy.


Author: Bernie Hoffman
Biofuels Consultant, K-Coe Isom
316-691-3721
Bernie.hoffman@kcoe.com