Category: Energy

In a research note released this morning, analyst John Roy of W.R. Hambrecht and Co., says that U.S. farmers must plant at least 93.2 million acres of corn for the price of a bushel of corn to stay at (U.S.)$4.10. That is still a very high price — the 40–year average for bushel is around $2.40 — but, as Roy notes, prices could go higher still because of a booming demand in North America for ethanol. Right now, most ethanol in the North American market is made from corn.

Consumers, investors, and businesses will get a sense of how much corn will be planted in the U.S. on March 30 in the quarterly Grain Stocks and Prospective Plantings published by the U.S. Department of Agriculture.

If there is that much corn planted, that would represent a 19.5 per cent increase compared to what was planted last year.

Rising corn prices is affecting the price of food. In Mexico, tens of thousands have been involved in several  demonstrations protesting higher food prices. The tortilla — a corn-flour product that is a staple of the Mexican diet — has become very expensive.

The University of Illinois has published an estimate indicating that farmers must harvest 12.5 billion bushels of corn this year for prices to remain where they are.

Roy writes:

Recent warnings from two University of Minnesota economists (Runge and Senauer) about rising food costs have hit the popular press.  Due to the ethanol demand for corn (projected to be 35% of the harvest within a few years), Runge and Senauer now see corn prices up 20% by 2010 and 41% by 2020.  Just 4 years ago the same team saw grain prices falling. They cite the recent problems with tortilla prices in Mexico as a good example of the type of problem we might see.  We don't see politicians changing their views on ethanol subsidies, however, this is something to watch.  Cellulosic ethanol would seem to solve this issue.  

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Dennis Desrosiers of Desrosiers Automotive Consultants says the Vehicle Efficiency Initiative announced this week in the federal budget may be the most expensive program yet in terms of dollar per tonne of reductions of greenhouse gases:

“ Another quick back of the envelope calculation on this whole feebate fiasco: 

• $14 per litre of reduced fuel consumption
• each litre combusted emits 2.5 kgs of GHG
• 400 litres of fuel combusted results in one tonne of GHGs emitted
• 400 litres X $14/litre = $5,600 per tonne of GHG emissions reduced

     At $5,600 per tonne this policy has the dubious distinction of being even more expensive per tonne of GHG reduction than the previous record holder – the Conservatives' transit pass tax credit ($2,000 per tonne,  because about 97% of the subsidy recipients were already daily transit  riders). [in fact it’s] The most expensive environment program anywhere in the world by a wide margin.

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Suncor Energy Inc. released some of its annual disclosure documents today, including the company’s annual report for the year ended Dec. 31, 2006. It was a very good year for Suncor, which marks its 40th year in 2007 in the oil sands business in northern Alberta.

Suncor posted a profit for the year of $2.97–billion on revenues of $15.8 billion. Revenues were up 42 per cent compared to 2005. Profits were up 157 per cent compared to 2005.

Suncor’s return on capital employed, including capitalized costs related to major projects in progress, was 30.4 per cent in 2006, more than double what it was in 2005 (14.3 per cent) and much better than the five-year average of 18.2 per cent.”…we remain focused on the goal of achieving a return on capital employed of at least 15% at mid-cycle oil prices .”

Suncor produced nearly 294,000 barrels of oil a day in 2006. “Our goal: production of more than half
a million barrels per day in 2010 to 2012.” Suncor hopes to hit 350,000 bpd in 2008.

Now in 2005, the most recent year for which data is available, Suncor emitted 7,694,457.67 tonnes of the greenhouse gases that cause global warming from its facilities near Fort MacMurray, Alta. In that year, Suncor reported production of about 171,000 barrels per day of oil. 

The Pembina Institute estimates that oil sands production of oil creates between 91 and 127 kilograms of carbon dioxide per barrel.

Suncor has been closely monitoring developments of federal and provincial strategies to reduce these emissions and notes as much in its annual report.

“Suncor is laying the groundwork for growth beyond 2012. The blueprints for those plans haven’t yet been drawn, but carbon capture and storage and harnessing energy from petroleum coke gasification could play a role in shaping the economic and environmental performance of future upgrading assets.”

Canada will shortly announce its plans to cut greenhouse gas emissions and other pollutants. All indications are that Canada’s targets will be “intensity” targets. In other words, Canada will want its pollution per unit of economic output. Greenhouse gas emissions can still rise under this scenario if economic output continues to grow.

Meanwhile, the European Union has set absolute emissions targets. In other words, the EU has committed that greenhouse gas emissions must fall even if economic output stays the same or increases:

Europe yesterday claimed leadership of the global battle against climate change as it agreed to slash carbon emissions and generate one fifth of its energy from renewables including solar and wind power.

At the end of a two-day summit, and after intensive cajoling from the German Chancellor, Angela Merkel, EU leaders signed up to a series of binding targets which will mean a dramatic change in the way Europe powers its economies.

However, they also gave comfort to countries that rely heavily on nuclear power, suggesting that they may be allowed to adopt less ambitious targets for generating wind, solar or hydro-electric power.

Yesterday's agreement commits the EU to a 20 per cent reduction in carbon emissions from 1990 levels by 2020 – though that will rise to 30 per cent if other nations follow suit. It also promises that, by the same date, one-fifth of EU energy will be derived from renewables – though the effort will not be shared equally among all 27 nations.

The environmental campaigning group Greenpeace hailed the deal as “the biggest such decision since the adoption of the Kyoto Protocol”. Nevertheless, yesterday's landmark agreement is just the beginning of a period of intensive wrangling over how the burden will be shared.

Europe yesterday claimed leadership of the global battle against climate change as it agreed to slash carbon emissions and generate one fifth of its energy from renewables including solar and wind power.

At the end of a two-day summit, and after intensive cajoling from the German Chancellor, Angela Merkel, EU leaders signed up to a series of binding targets which will mean a dramatic change in the way Europe powers its economies.

However, they also gave comfort to countries that rely heavily on nuclear power, suggesting that they may be allowed to adopt less ambitious targets for generating wind, solar or hydro-electric power.

Yesterday's agreement commits the EU to a 20 per cent reduction in carbon emissions from 1990 levels by 2020 – though that will rise to 30 per cent if other nations follow suit. It also promises that, by the same date, one-fifth of EU energy will be derived from renewables – though the effort will not be shared equally among all 27 nations.

The environmental campaigning group Greenpeace hailed the deal as “the biggest such decision since the adoption of the Kyoto Protocol”. Nevertheless, yesterday's landmark agreement is just the beginning of a period of intensive wrangling over how the burden will be shared.

The issue of ‘intensity’ vs ‘absolute’  targets has been an issue for environmental activists who believe they will not be very effective cutting greenhouse gases. But forgetting about the issue of environmental suitability for a moment, the issue is also important from an economic point-of-view. After listening to presentations at various House of Commons committees by environmental activists, think tanks, politicians, and company representatives, here’s what I understand to be the reason:

New international markets are emerging to ‘trade carbon’. Companies can buy and sell carbon credits on these markets. How does this work? Let’s say a regulator says all companies must emit no more than 100 tonnes of greenhouse gases in a year. Company A invests in ways to reduce GGEs and emits 90 tonnes. It earns 10 credits. Company B forgoes investments in GGEs and emits 110 tonnes. It must buy credits of 10 tonnes to comply with the regulations. In this scenario, Company A sells its credits and earns revenue. Company B has an added expense — the ten credits it must buy.

Almost all of these international markets in carbon trading are based on jurisdictions that have set absolute targets and not intensity targets. If Canada decides to set intensity targets, it could make it difficult or impossible for Canadian companies to participate in international carbon markets.

Here in Ottawa, it’s not too hard to find federal Conservative MPs from Alberta who have been less than happy with the financial support provided by former Alberta Premier Ralph Klein to communities in northern Alberta who had been struggling to keep up with the booming commercial development in the oil sands. Despite the incredible wealth the oil sands were producing for the province, many MPs from the northern part of the province often grumbled that Klein never put enough money back into the region to build new roads, sewers, hospitals, schools and so on.

Klein’s successor, Ed Stelmach, today heads off in a new direction, announcing $396–million over three years to provide new affordable housing and some new wastewater treatment facilities in the Fort MacMurray region.

In making this announcement, Stelmach is responding, part to the final report, tabled at the end of 2006, of the Oil Sands Ministerial Strategy Committee. The report had some specific recommendations to address current and future gaps in municipal and regional services.

The Liberals in Alberta say that extra funding of what amounts to $130–million a year seems a pittance compared to the wealth the region is generating.

This morning in Toronto, Ministers Lawrence Cannon and John Baird announced some financial support — contingent up on the budget passing this spring — for initiatives to get Canadians to buy more fuel-efficient cars. Here’s the CP copy:

TORONTO – The Conservative government says it will provide up to $36 million to help consumers choose more environmentally friendly vehicles.

Transport Minister Lawrence Cannon and Environment Minister John Baird made the announcement at the Toronto International Auto Show's media day.

The funds include $21 million for a new program to encourage consumers to invest in green vehicles by providing information on fuel consumption.

Up to $15 million will go toward buying, testing and showcasing fuel-efficient technologies.

But Canadian Auto Workers president Buzz Hargrove told the Toronto Star he'd like to see Ottawa offer consumer incentives that will replace polluting vehicles with new, efficient ones.

Meanwhile, Natural Resources Canada has launched a “Personal Vehicles Initiative”. There, you can see the federal government’s list of the most fuel-efficient vehicles for each model year that you can buy in Canada. The 2007 list is just out and they are:

• – Two-seater car: Mazda MX-5;
• – Subcompact car: Toyota Yaris;
• – Compact car: Honda Civic Hybrid;
• – Mid-size car: Toyota Prius;
• – Full-size car: Hyundai Sonata;
• – Station wagon: Honda Fit;
• – Pickup truck: Ford Ranger and Mazda B2300 (co-winners);
• – Special purpose vehicle: Ford Escape Hybrid;
•  – Minivan: Toyota Sienna; and
• – Large van: Chevrolet Express Cargo and GMC Savana Cargo (co-winners).
       

Some notes and excerpts from “Preparing to Capture Carbon”, by Daniel P. Schrag in this week's edition of Science.

“Carbon sequestration from large sources of fossil fuel combustion, particularly coal, is an essential component of any serious plan to avoid catastrophic impacts of human-induced climate change. Scientific and economic challenges still exist, but none are serious enough to suggest that carbon capture and storage will not work at the scale required to offset trillions of tons of carbon dioxide emissions over the next century. The challenge is whether the technology will be ready when society decides that it is time to get going.”Carbon sequestration from large sources of fossil fuel combustion, particularly coal, is an essential component of any serious plan to avoid catastrophic impacts of human-induced climate change. Scientific and economic challenges still exist, but none are serious enough to suggest that carbon capture and storage will not work at the scale required to offset trillions of tons of carbon dioxide emissions over the next century. The challenge is whether the technology will be ready when society decides that it is time to get going.”
…unlike petroleum and natural gas, which are predicted to decline in total production well before the middle of the century, there is enough coal to last for centuries, at least at current rates of use, and that makes it cheap relative to almost every other source of energy. Today coal and petroleum each account for roughly 40 % of global CO2 emissions. But by the end of the century, coal could account for more than 80 %…
…So developing and deploying the technologies to use coal without releasing CO2 to the atmosphere may well be the most critical challenge we face, at least for the next 100 years, until the possibility of an affordable and completely nonfossil energy system can be realized.

Technorati Tags: energy, coal

Notes from an article in this week’s Science, which describes recent progress in Europe toward achieving goals for renewable energy use as well as the new Strategic Energy Package. The author, Janez Potoènik,  is the European Commissioner for Science and Research:

The strategic energy package sets a target of 20% of Europe's energy coming from renewable sources by 2020. If successful, this would mean that by 2020 the European Union (EU) would use about 13% less energy than today, saving €100 billion and around 780 metric tons of CO2 each year. For this to be realistic, significant strides need to be made, technologically speaking .  . .

The Seventh Framework Programme increases the annual funding available to energy research at the European level to €886 million a year, compared to €574 million a year in the previous program. But this is not enough: more combined effort is needed.