Decoding Decarbonization

November 15, 2024

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by Katie Schroeder (Ethanol Producer Magazine) With myriad technologies and decarbonization strategies to explore, and a growing list of compliance and carbon credit markets to access, ethanol producers have many decisions in front of them. The various lifecycle carbon analysis models, as well as each plant’s unique characteristics, present producers with a significant challenge in choosing the right technology or strategy to leverage their plant’s individual qualities, reduce their carbon intensity (CI) and maximize their profit margin.

In October, EcoEngineers held a webinar series outlining the pros and cons of pursuing various decarbonization strategies, presenting ethanol producers with data and principles to help them reduce greenhouse gas (GHG) emissions and improve their CI scores. In the first webinar, titled “Ethanol Scope 1&2: Decarbonizing Production,” Jim Ramm, vice president of U.S. biofuels and cofounder of EcoEngineers, and Chelsa Oren, account manager for RNG and U.S. biofuels, explained the challenges and opportunities found in a variety of carbon credit options available to ethanol producers. The second webinar, “Ethanol Scope 3: Decarbonizing Feedstock,” featured Ramm and Juan Vargas Ramirez, a biosystems engineer and account manager for U.S. biofuels with EcoEngineers.

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Markets and Economics
Producers need to be aware of their options and decide which combination of compliance, carbon credits or tax incentives best fits their plant. Not all the programs are stackable, explained Ramm. For example, the Inflation Reduction Act tax credits, including 45Z and 45Q, cannot be leveraged simultaneously, and if a producer is selling into Canada under the nation’s Clean Fuel Regulation, they will not generate U.S.-linked renewable identification numbers (RINs).

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45Z offers higher potential returns than 45Q, according to Oren.

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California has an established carbon credit market, but the timeline associated with adding any unique inputs into the application, such as CCS, increases the amount of time needed for approval. Oren also discussed the length of the timelines associated with qualifying a plant under a Tier 1 or Tier 2 pathway under the California Low Carbon Fuel Standard and the potential for CCS under the LCFS. The California Air Resources Board handles applications for the LCFS program. The timeline for getting approved for a Tier 1 application is typically eight to 12 months, while the Tier 2 application approval timeline is generally lengthier and more uncertain. “It could be 28 months [or] 36, but what you can do—if you’re a producer waiting for an LCFS pathway application to be approved—is look toward the voluntary market where you can get approved quicker than the LCFS market,” Oren said.

Tier 2 applications are needed for any process that is not a conventional, first-gen starch-to-ethanol setup, thus making CCS a Tier 2 application. Because of the shorter process, plants could generate credits on the voluntary market—at least one already is—while they wait for an answer from CARB.

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Technology Choices
As producers await 45Z guidance, Oren recommends establishing a baseline CI score under Argonne’s GREET model to assess the plant’s current Scope 1 and 2 emissions and strategize how to reduce that score.

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Any plant looking to use renewable energy such as wind, solar or renewable natural gas, must ensure that those energy sources are tied into the plant behind the meter.

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Another caveat for producers to consider is that the production of RNG from a coproduct stream such as thin stillage, does not always translate into a lower CI.

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She also recommends that producers check their RFS pathway when integrating RNG production into their process, making sure that existing pathways are not impacted.

Although CCS has the largest potential benefit to CI reduction, getting approval under California’s LCFS program is a time-consuming endeavor, and no producer has yet been approved. Carbon capture is new to CARB, Oren said.

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Producers typically face organizational challenges when implementing their chosen decarbonization strategy.

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Feedstock and Fiber
Climate-smart agriculture (CSA) is now a top-tier strategy to reduce ethanol’s Scope 3 emissions. With the emissions associated with farm practices constituting roughly 28 CI points of ethanol’s total score, finding ways to reduce that number makes an impact.

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As producers anticipate the long-awaited guidance for 45Z, Ramm shared EcoEngineers’ recommendation for a system that would pay the farmer and allow the ethanol producer to take advantage of the CI reduction associated with CSA. The firm recommends a “book-and-claim” system in which the physical corn and the credits are separated from each other.

“By ‘book-and-claim,’ I mean that a farmer with 600 acres of cover crops, strip-till, feeder cattle and manure in eastern Iowa can take that corn commodity to the local elevator and separate and sell the CSA—environmental attributes—to a renewable fuel producer in South Dakota that can use them,” Ramm said. “That will allow for broad adoption of many CSA practices. It will help to maximize on-farm revenue, which is something that’s really needed. There’s a farm economy that has been suffering for some time—that’s readily apparent in watching the number of farms reduce year over year. This will minimize commodity transport and simplify requirements for monitoring, reporting and verification.”

This system would work with the involvement of a data aggregator that collects data from satellites, machines and farmers for verification. Ramm recommends that the aggregator should be the credit generator, minimizing the number of regulated parties and optimizing the use of machine learning and AI.

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A recent ASTM standardization for analytical methodology that verifies the amount of cellulosic ethanol produced through in situ corn fiber ethanol processes has made this option more viable for producers.

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“The opportunity here is to convert that low-value fiber component into high-value cellulosic ethanol, and in doing so, this could lead to additional benefits such as increases in corn oil recovery, protein content and overall plant efficiency.”

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Guidance on 45Z is also needed to bring clarity on how ethanol credits will be allocated. “Will credits be allocated to the overall ethanol production at a facility? Could they be allocated to the fiber ethanol portion, separate from the starch ethanol? " READ MORE

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tax policy tax incentives tax credits RINs (Renewable Identification Numbers) Renewable Natural Gas (RNG) Regulations-Federal markets/sales LCFS (Low Carbon Fuel Standard) GREET Greenhouse Gases Regulated Emissions and Energy Use in Transportation Model GHG (Greenhouse Gas Emissions) Intensity GHG (Greenhouse Gas Emissions) ethanol/bioethanol ESG (Environmental Social Governance) defossilization D-3 (cellulosic) RINs corn/maize corn fiber corn ethanol climate smart/conservation agriculture cellulosic feedstock Cellulosic ethanol carbon markets Carbon Intensity (CI)/Carbon Footprint carbon credit markets carbon credit Canada California Air Resources Board (CARB) California book-and-claim BioRefineries/Renewable Fuel Production ASTM aggregation 45Z Clean Fuel Production Tax Credit 45Q Carbon Oxide Sequestration Tax Credit Treasury Department monitoring/measuring reporting verifiction (MRV) Sustainability What You Can Do

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