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E4 Capital is Chad E. Brown and William J. Birmingham. We are an independent research firm started in 2009 providing ideas to professional investment managers about cleantech. Cleantech, a recent coinage, is defined broadly as the part of the investment world that focuses on businesses that... More
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  • Biochar: Burning our way to reduced emissions? 0 comments
    Sep 2, 2009 4:01 PM
    On the face of it, that seems like an odd statement to make with respect to carbon emissions and climate change, but a growing chorus of supporters and detractors are squaring off over "biochar."

    The concept is simple and ancient: apply intense heat to biomass in the absence of oxygen (pyrolysis) and the resulting elemental carbon, or charcoal, can be used either as a fuel, along with its associated byproducts of syngas, heavy oil and heat. Or as a form of carbon sequestration when the material is buried or used as fertilizer.   Left in the ground, biochar will stay intact for years, stretching out the normal carbon cycle where plant debris decomposes, emitting carbon each season.   Not to mention the second order effects of enhanced fertilization and reduction in natural methane and nitrous oxide emissions.

    On the policy level, the idea bears exploration.  As this week's Economist reports, very preliminary modeling shows that one to two gigatons of carbon could be sequestered annually in soils (out of global emissions that are estimated to be around 9.7 gigatons - thus not insignificant) at very low cost.

    Where the debate takes hold is the issue of unintended consequences.  The ETC Group recently released a published opposition to BioChar from 147 environmental and human rights groups.  Along these lines, Biofuels Watch in the UK also voiced concern that a scaled effort in biochar could result in growing crops exclusively for char, displacing forests and food production - similar to the effects of ethanol production.  Given the potential that biochar has to produce low cost carbon offsets if included in the CDM mechanism of any future cap and trade systems, the potential for abuse is real.

    We are sympathetic to these concerns given the ethanol example, but would set the hurdle high for rejecting this solution on derivative concerns.  The potential for a low cost, large scale reduction in carbon that includes both the developed and developing world has our preliminary support.

    From a public investor's perspective, the ability to invest in biochar is limited.  As discussed on Alt Energy Stocks, efforts to commercialize the oil component of the output is being pursued by Dynamotive Energy Systems is overly risky.  As Tom Konrad correctly points out, the commodity risk in end market prices for biofuels are not connected to the input price of the biochar inputs, setting up the potential for negative spreads.  On the equipment side, the current crop of manufacturers are private (for one see, Carbonscape out of New Zealand) and barriers to entry will be low.  The Economist points to a potential breakthrough in continuous batch processing that may differentiate this group, but it is too early to tell.

    At the moment, we would look toward the resource owners who may have a new end market for their waste.

    Disclosure: None

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