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There has been a lot of criticism of late about bio-fuels and, like many issues, the good technologies are being tarred with the same brush as the bad. And this is a terrible shame, for there are clearly good and bad bio-fuel projects, just as there are good and bad hydro projects.

The principle behind most bio-fuels is pretty simple. Many kinds of plant or other biological material, known as “feed-stock”, can be broken down in a variety of clever ways into ethanol or diesel fuel that you can then use to run a car. In the USA and Europe, the government of the day promoted subsidies and issued various mandates that required a certain proportion of bio-fuel be produced. This essentially made it perversely (to use an economist’s term) profitable to make bio-fuel and sent industry looking for the easiest, fastest way it could get it. And for many in the USA, that meant paying over-the-odds prices for corn that would otherwise be used for food, with the net effect being the price of tortillas rose by 300 percent in three years across the Southern USA and Central America.

Indeed, as Professor Ross Garnaut, the author of Australia’s emissions trading scheme, said recently when discussing bio-fuel specifically, “Bad mitigation, poorly designed mitigation, is one significant element in the world food-price problem.”

In the EU it’s been a similar story but with palm oil, plantations of which are taking over as tropical rainforests are slashed and burned to make room. The only way palm oil-based fuels can claim any sort of carbon abatement is that the emissions come indirectly through land-use-change in Cambodia or Malaysia or Indonesia or PNG, and not in Amsterdam or London or Berlin where they are burned. It’s estimated that a litre of palm-oil-derived fuel emits 24 times as much as the same litre of diesel, if you take the associated deforestation into account.

But it’s not all a complete disaster. We are starting to see bio-fuel projects that don’t require wholesale slaughter of forests or promotion of competition between fuel for the rich against food for the poor. Several newer bio-fuel projects use discarded vegetable matter that previously would simply have been burned off, composted (releasing methane that has a global warming potential of around 23 times that of carbon dioxide), or just left to rot (also releasing methane) as their basic feed-stock.

Similarly there are projects afoot that capture carbon dioxide from industrial processes and pipe it into large glass-topped vats of algae. The algae photosynthesise the CO2 and the whole stew gets rendered down into fuel. This is nice as it provides a much more sensible approach to carbon capture and storage plans than simply trying to bury fugitive carbon dioxide in old natural gas mines. Traditional (if I can use that term to describe concepts that are still pretty well sci-fi) carbon capture and storage solutions mostly seem to require that coal-fired power stations be sited adjacent to some pretty large holes in the ground that are guaranteed never to leak.

Without revenues from the sale of associated carbon credits, it would not make economic sense to gather scraps and process them into fuel – nor to invest in projects that capture carbon and metabolise it into fuel. This is the beauty of carbon credit schemes. There has been some recent hysteria over the price of fuel, with claims that adding a price on carbon will further spike the price at the pump. The reality is money from carbon credits makes bio-fuel projects economically viable earlier in their development, providing fair competition to fossil fuels (which are already heavily subsidised by we the tax-payers anyway) and should, in theory, push pump prices lower.

In theory.

Dave Sag is the co-founder of Carbon Planet, an Australian-based global carbon management company, and the first such company to be awarded Greenhouse Friendly^TM status for its range of products and services, including Carbon Audits, Carbon Trading, Ethical matching^TM and consumer retail of certified Carbon Credits.