SR9074 - Evaluation of the Economic and Sustainability Implications of a Lignocellulosic Ethanol Industry for Ontario: An Augmented Life Cycle Assessment

Researcher:

Dr. Heather L. MacLean, Dept. of Civil Engineering, University of Toronto

Objectives:

1. Determine the conditions under which Ontario would find it attractive to adopt a lignocellulosic ethanol industry and associated personal transportation system.

2. Analyze the implications of the ethanol industry and transportation system for Ontario's economy, environment, and sustainability.

3. Develop an augmented Life Cycle Assessment (LCA) method and associated software for evaluating the economy-wide environmental, sustainability, and economic implications of the production and use of ethanol from lignocellulosic agricultural sources.

4. Clearly communicate project results to industry and other stakeholders.

Expected Benefits:

Provide insights for informed decision making regarding long-term feasibility, R&D priorities and commercialization of ethanol systems; information necessary for Ontario t make an efficient transition to more profitable and sustainable agricultural, energy and transportation sectors.

Summary of Research Results:

Many of the benefits of a lignocellulosic ethanol industry would accrue to the agricultural sector and rural communities producing the feedstock and ethanol. Utilizing various assumptions of agricultural land availability, in the near term, between 250,000 and 560,000 hectares (ha) (0.2% to 0.5%) of Ontario's area could be converted to growing grasses, attractive "energy crop" feedstocks for lignocellulosic ethanol. These energy crops require less fertilizer and pesticides than conventional crops and can have other positive impacts on the environment, leading to more sustainable agricultural systems. Current crop production in Ontario also provides an opportunity to initiate a lignocellulosic ethanol industry through the use of crop residues either alone or supplemented with energy crops. It is important to note that scenarios examined in the project are not predictions of the future, but rather are explorations of the implications of factors such as oil price, increases in carbon dioxide emissions restrictions, feedstock and ethanol availability, and technology developments.

Assuming 25 to 30% of the residues produced when growing corn, wheat, and barley could be utilized as feedstock for ethanol production, about 640 Mega (million) litres (ML) of ethanol could be produced annually, replacing 3.5% of the current gasoline used in the Province with a domestically produced renewable fuel. Under these scenarios, soil quality issues are considered as well as there is some consideration of current high valued uses for wheat and barley straw in the Province. Utilizing both the crop residues and grass feedstocks, could result in annual production of up to 3.3 million Megagrams (Mg) of biomass in the near term (year 2010) and 6 million Mg in the midterm (year 2020).

Ontario currently uses 14.9 billion litres of gasoline, the majority of this in light-duty vehicles, resulting in tremendous nonrenewable resource depletion and emissions of greenhouse gases. The almost entire reliance of the transport sector on nonrenewable fuels and the resulting greenhouse gas emissions highlight its unsustainability and the necessity of revolutionary change in the next decades. The use of lignocellulosic ethanol in a light-duty vehicle (in a blend of E85, 85% ethanol, 15% gasoline or E10, 10% ethanol 90% gasoline) has the potential to substantially decrease greenhouse gas emissions compared to those from gasoline vehicles since ethanol is a renewable fuel and could be produced with little fossil fuel input. Reductions in the near term would be 60% and 6% for E85 and E10, respectively (considering the fuel production and its use in the vehicle). In the midterm, with the assumption of process improvements, vehicle efficiency improvements, and use of ethanol in its production (ethanol fueled tractors for example), about 25% additional reduction in greenhouse gas emissions could be experienced.

Under the various land and crop residue availability scenarios examined, from 348 ML to 1360 ML in the near term and 2610 ML of ethanol in the midterm could be produced in the Province. This lignocellulosic ethanol could displace up to 6% of gasoline used in the near term and 12% in the midterm (assuming current gasoline use). If the crude oil that would have fueled the light-duty fleet could be sold at the world price in early 2004 ($33/barrel US), this would bring export earnings under the near term scenarios of between $49 million and $190 million (US) and in the midterm, $370 million (US). Under various scenarios examined, emissions of greenhouse gases from transportation fuel production and use could be reduced from between 0.5 million and 3.6 million Mg by 2010, between 1% and 9% (baseline greenhouse gas emissions resulting from gasoline vehicles were calculated based on life cycle results for low sulfur reformulated gasoline due to the expectation of use of this fuel in the nearterm). These scenarios assume that the Province's prime agricultural land will continue to be used for food and that marginal crop land and pasture land might be converted to energy crops.

Near term (year 2010) ethanol cost including feedstock and producer premiums is estimated to be $0.50 to $0.70/L of ethanol from grasses and $0.40 to $0.50/L from crop residues. Midterm estimates based on expected feedstock and conversion cost reductions range from $0.30 to $0.50/L from grasses and $0.30 to $0.40/L from residues. Lower and upper bound estimates are due to examining expected ranges of feedstock and conversion costs based on published values. Taking into account that a litre of ethanol has only two-thirds of the energy of a litre of gasoline, and utilizing the gasoline price early in 2004 net of taxes and retail margin, in the near term, ethanol is expected to be about twice as expensive as gasoline when produced from grasses and 1.5 times when produced from crop residues, assuming these costs. If oil reached $50 to $66/barrel (US), ethanol could be potentially attractive from an economic perspective in Ontario. It is not expected in the near term that ethanol would be lower cost than gasoline, unless perhaps social costs were included. However, due to the infancy of the industry, the potential for process improvements, and the cost reductions of the corn ethanol industry over the past 20 years ($1.55/L in 1980 to $0.40/L currently), significant cost reductions in the lignocellulosic ethanol industry are reasonable. In the midterm with projected feedstock and processing cost reductions and/or increases in gasoline price, ethanol could be competitive or lower cost than gasoline.

Although lignocellulosic E85 vehicles have tremendous potential for greenhouse gas emissions reductions, in the near term these come at high cost. Even midterm greenhouse gas abatement costs are generally high; from $110 to $430/metric tonne of carbon for grass derived ethanol, and somewhat lower, from $0 to $230/metric tonne of carbon, for residue derived ethanol. These costs would lower with increases in the price of gasoline and/or reductions in the cost of ethanol. Although the majority of these results are high compared to many abatement measures, it is important to consider that once cheaper (primarily stationary source) greenhouse gas emissions abatement measures have been exhausted, substantial abatement will remain in order to progress toward the eventual goal of stabilizing atmospheric carbon dioxide, and perhaps even to meet the Kyoto Protocol. In addition, political considerations will dictate that the transportation sector assume its fair share of reductions, and since there are few options for significant GHG emissions abatement from this sector, if abatement methods are not the most cost-effective but are reasonable they are likely to be utilized. Revisiting the expected differences in ethanol and gasoline costs, if the government is willing to forego some revenue, ethanol could be offered at a price that does not impact the consumer at the pump.

While a lignocellulosic ethanol industry has potential for substantial economic, environmental and social benefits for the province of Ontario, the industry is not an immediate, nor complete solution to the Province's sustainability issues associated with its agricultural and transport sectors. The industry requires further investment in R&D to show proof of concept prior to its implementation on a reasonable commercial scale. Based on the discussion earlier in this Section, under the following scenarios the industry could be attractive to the Province:

• Scenario 1. The Province takes serious steps toward greenhouse gas emissions abatement.
  

• Scenario 2. A substantial increase in the prices of gasoline and diesel fuels.
  

• Scenario 3. A substantial reduction in the cost of producing lignocellulosic ethanol.
  

• Scenario 4. The World Trade Organization or other regulatory body's actions result in substantial reduction in agricultural subsidies/safety net programs resulting in lowering the profitability of conventional crops.