Verenium expects cellulosic to garner CO2 credits
Wed Feb 20, 2008 3:59pm EST
NEW YORK, Feb 20 (Reuters) - U.S. biofuels company Verenium Corp (VRNM.O: Quote, Profile, Research) expects producers of a new ethanol made from non-food sources will earn carbon credits that will provide the industry with an additional revenue stream, an executive said on Wednesday.
Biofuel companies are racing to make commercial amounts of ethanol from cellulose -- the tough woody bits of feedstocks like switchgrass and crop waste -- as oil hits record highs and concerns about global warming rise.
Cellulosic ethanol currently costs about twice as much as alternative fuel made from corn, now the main source of U.S. ethanol. But backers say costs will fall as the industry matures and that cellulosic's potential to earn carbon credits gives the industry an advantage over fuel made from corn.
"The carbon footprint for a cellulosic ethanol production facility is substantially better" than corn ethanol production, John McCarthy, Verenium's chief financial officer, said on the sidelines of a renewable energy conference.
"Anybody that's producing a facility using cellulosic biomass is likely going to accrue carbon credits they can then sell to utilities that need them," said McCarthy. Verenium is building a U.S. cellulosic plant it expects will produce about 30 million gallons per year by late 2010 or early 2011, and hopes to manage three such plants soon after that.
The United States does not regulate greenhouse gases, but Congress is mulling several bills that would, and the leading candidates for the U.S. presidential election in November have said they would support limits on the gases.
Investments in clean energy projects can earn carbon credits under mechanisms in mandatory greenhouse markets but investors first have to prove that the projects are "additional" or would not have happened otherwise.
McCarthy declined to estimate how much revenue a cellulosic plant might make from carbon credits. But he said with carbon prices in Europe trading at about $30 per tonne, that the profits could "represent a significant piece of incremental profitability to a facility."
Even so, there could be multiple hurdles in developing a widespread new U.S. fuel system. Gary Smith, a vice president at corn ethanol producer The Andersons Inc (ANDE.O: Quote, Profile, Research), said that the U.S. transport system for moving grains like corn around the country by rail and barge is mature and complete, while there is no such system yet for transporting materials like switchgrass.
McCarthy countered that cellulosic may one day be cheaper than corn ethanol because its feedstocks are cheaper than grains such as corn, which is trading near $5 a bushel, and they need fewer inputs like fertilizer.
In addition, many of the cellulosic feedstocks like switchgrass are perennial crops, while corn is an annual that needs to be tilled more often. (Reporting by Timothy Gardner, editing by Matthew Lewis)
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