1 00:00:00,240 --> 00:00:03,199 Speaker 1: Hi, this is Dana Perkins and you're listening to Switched 2 00:00:03,240 --> 00:00:05,920 Speaker 1: on the Banna Of podcast. Now today we're going to 3 00:00:06,000 --> 00:00:09,280 Speaker 1: talk about biofuels and electric vehicles in the same breath, 4 00:00:09,400 --> 00:00:13,000 Speaker 1: because really we're thinking about road transport. The first part 5 00:00:13,039 --> 00:00:14,960 Speaker 1: of the show, we're really going to focus on some 6 00:00:15,040 --> 00:00:18,239 Speaker 1: of the main dynamics of biofuels, what they are, where 7 00:00:18,239 --> 00:00:20,599 Speaker 1: they come from, what some of the policy and incentives are. 8 00:00:20,920 --> 00:00:24,280 Speaker 1: We have two analysts on our team from different teams actually, 9 00:00:24,280 --> 00:00:26,920 Speaker 1: that are going to be able to really develop this 10 00:00:27,000 --> 00:00:30,040 Speaker 1: for you because one of them is Ryan Fisher, he 11 00:00:30,360 --> 00:00:33,920 Speaker 1: is our lead Charging infrastructure analyst, and the other is 12 00:00:34,040 --> 00:00:37,080 Speaker 1: Jade Patterson and he is a senior associate focused on 13 00:00:37,159 --> 00:00:40,320 Speaker 1: renewable fuels, and they both come at this from a 14 00:00:40,560 --> 00:00:44,159 Speaker 1: very different side, but have been able to collaborate on 15 00:00:44,200 --> 00:00:46,919 Speaker 1: a number of different research notes and tools on our 16 00:00:46,960 --> 00:00:49,960 Speaker 1: side that it gives them a new understanding on what 17 00:00:50,040 --> 00:00:53,040 Speaker 1: that future of road transport really looks like in the 18 00:00:53,120 --> 00:00:55,320 Speaker 1: longer term. Now, they're going to throw out some really 19 00:00:55,360 --> 00:01:00,280 Speaker 1: interesting things around various policy incentives and credits release to 20 00:01:00,320 --> 00:01:02,480 Speaker 1: be at the center of this. Now they get into 21 00:01:02,480 --> 00:01:05,000 Speaker 1: some detail on different types of credit schemes, and it 22 00:01:05,040 --> 00:01:08,199 Speaker 1: may be worth just quickly simplifying this for you. So 23 00:01:08,400 --> 00:01:11,240 Speaker 1: there really are two main mechanisms that they get into. 24 00:01:11,560 --> 00:01:14,360 Speaker 1: One has to do with volume targets and another one 25 00:01:14,400 --> 00:01:17,440 Speaker 1: has to do with carbon reductions regardless of fuel source. 26 00:01:17,920 --> 00:01:21,440 Speaker 1: So let's think now about what the future of biofuels 27 00:01:21,920 --> 00:01:25,080 Speaker 1: and how it interplaces with the electric vehicle industry, what 28 00:01:25,280 --> 00:01:28,560 Speaker 1: that all really looks like. As a quick reminder, BNP 29 00:01:28,720 --> 00:01:31,480 Speaker 1: does not provide investment or strategy advice, and we have 30 00:01:31,600 --> 00:01:33,680 Speaker 1: a full disclaimer that can be found at the end 31 00:01:33,680 --> 00:01:36,640 Speaker 1: of the show and now on When Energy Too to 32 00:01:36,840 --> 00:01:45,399 Speaker 1: Jade and Run. So today we're going to talk about biofuels, 33 00:01:45,440 --> 00:01:47,760 Speaker 1: but it's going to be mixed in with a conversation 34 00:01:47,920 --> 00:01:50,720 Speaker 1: around transportation, one of the things that biofuels is so 35 00:01:51,000 --> 00:01:55,520 Speaker 1: very good for, or maybe inferior, depending upon who you're asking. 36 00:01:55,600 --> 00:01:57,840 Speaker 1: In any case, we've got two of our analysts on 37 00:01:57,920 --> 00:02:00,640 Speaker 1: today to really talk about how this is playing out, 38 00:02:00,640 --> 00:02:05,400 Speaker 1: how biofuels is playing into the competitively potentially ev market. 39 00:02:05,760 --> 00:02:09,000 Speaker 1: And I'm joined today by Jade Hey Danna. It's good 40 00:02:09,000 --> 00:02:10,600 Speaker 1: to be here with you, Thanks for having me, and 41 00:02:10,680 --> 00:02:14,040 Speaker 1: also with Ryan Hey Dana will we spe here, so 42 00:02:14,080 --> 00:02:15,960 Speaker 1: one of the things we actually do at our summits. 43 00:02:16,000 --> 00:02:18,560 Speaker 1: And just back a little bit earlier. In February of 44 00:02:18,639 --> 00:02:22,360 Speaker 1: this year, we had our Transportation Focus Summit in San Francisco, 45 00:02:22,440 --> 00:02:24,520 Speaker 1: and we did end up having one of our BNF 46 00:02:24,520 --> 00:02:26,600 Speaker 1: debates where we get two of our analysts on stage 47 00:02:26,600 --> 00:02:29,400 Speaker 1: to kind of argue differing points. Now we'll see how 48 00:02:29,400 --> 00:02:32,440 Speaker 1: many things Jade and Ryan actually disagree with each other 49 00:02:32,560 --> 00:02:35,760 Speaker 1: on today when we get into this. But Jade is 50 00:02:35,800 --> 00:02:38,440 Speaker 1: more focused on the biofuel side of things and Ryan 51 00:02:38,760 --> 00:02:42,000 Speaker 1: is focused on the electric vehicle side of things, So 52 00:02:42,400 --> 00:02:44,440 Speaker 1: there will be some places where I'm sure you guys 53 00:02:44,440 --> 00:02:47,160 Speaker 1: are looking at things through slightly different prism as we 54 00:02:47,240 --> 00:02:50,839 Speaker 1: think about the transportation transition how this all plays out. 55 00:02:51,480 --> 00:02:55,320 Speaker 1: So while we get started on this topic, I'd like 56 00:02:55,480 --> 00:02:59,160 Speaker 1: to first ask why are we talking about biofuels, Jade, 57 00:02:59,160 --> 00:03:02,799 Speaker 1: I mean some respect, I'm asking you to explain what 58 00:03:02,880 --> 00:03:04,960 Speaker 1: your role is in the business and what you research. 59 00:03:05,160 --> 00:03:08,920 Speaker 1: Because when I think back to when I first got 60 00:03:08,960 --> 00:03:12,520 Speaker 1: involved with bin ef to begin with, this could be 61 00:03:12,639 --> 00:03:14,880 Speaker 1: either a long time or not very long ago, depending 62 00:03:14,919 --> 00:03:18,640 Speaker 1: upon who you're asking. But let's say ten plus years ago, 63 00:03:18,960 --> 00:03:21,280 Speaker 1: there was a lot of conversation around wind, solar and 64 00:03:21,360 --> 00:03:26,400 Speaker 1: biofuels and less on some of the other complexity around 65 00:03:26,720 --> 00:03:30,400 Speaker 1: the industry, and now biofuels is very much back in 66 00:03:30,440 --> 00:03:34,200 Speaker 1: the conversation. So maybe you could also explain why this 67 00:03:34,280 --> 00:03:36,000 Speaker 1: is the right time for us to be having a 68 00:03:36,040 --> 00:03:40,840 Speaker 1: conversation about biofuels. Yeah, thanks, Dana, that's a really great question, 69 00:03:41,280 --> 00:03:43,840 Speaker 1: and it's kind of worth noting that. Yeah, you're right, 70 00:03:43,840 --> 00:03:46,560 Speaker 1: biofuels were really popular and kind of the the early two 71 00:03:46,600 --> 00:03:49,880 Speaker 1: thousands up to the kind of twenty tens when they 72 00:03:49,920 --> 00:03:52,840 Speaker 1: sort of started to plateau. And part of the reason 73 00:03:52,880 --> 00:03:55,640 Speaker 1: that biofuels sort of dropped off the radar was a 74 00:03:55,680 --> 00:03:58,320 Speaker 1: lot of the conventional biofuels that we talk about, so 75 00:03:58,520 --> 00:04:01,920 Speaker 1: sanol and biodiesel, they actually need to be blended within 76 00:04:02,360 --> 00:04:05,880 Speaker 1: gasoline for ethanols case, and diesel for biodesels case. And 77 00:04:06,080 --> 00:04:09,040 Speaker 1: most of those blend rates are typically for ethanol up 78 00:04:09,080 --> 00:04:12,280 Speaker 1: to around ten percent due to engine performance issues of 79 00:04:12,360 --> 00:04:14,720 Speaker 1: going any higher, and for biody so it's typically around 80 00:04:14,760 --> 00:04:17,760 Speaker 1: five percent. So that's really sort of capped the growth 81 00:04:17,760 --> 00:04:21,640 Speaker 1: of those biofuels that across the world in recent years. However, 82 00:04:21,760 --> 00:04:25,479 Speaker 1: with the new growth of different types of biofuels. So 83 00:04:25,480 --> 00:04:27,200 Speaker 1: one of the main ones that we've been talking about 84 00:04:27,279 --> 00:04:31,200 Speaker 1: lately is renewable diesel. In what's different about renewable diesel 85 00:04:31,240 --> 00:04:35,200 Speaker 1: compared to say, biodesel, is it's chemically similar with existing 86 00:04:35,279 --> 00:04:37,560 Speaker 1: diesel from crude oil. And so what that means is 87 00:04:37,560 --> 00:04:39,760 Speaker 1: you don't have to blend renewable diesel like you do 88 00:04:39,880 --> 00:04:43,440 Speaker 1: bio diesel. And so this allows for the market to 89 00:04:43,520 --> 00:04:47,120 Speaker 1: grow beyond those blending limits of say five percent, and 90 00:04:47,200 --> 00:04:49,960 Speaker 1: go up as high as one hundred percent theoretically now, 91 00:04:50,040 --> 00:04:52,040 Speaker 1: as we can kind of get into later. Probably a 92 00:04:52,080 --> 00:04:54,800 Speaker 1: lot of the limitations now are around the feedstocks used 93 00:04:54,800 --> 00:04:57,640 Speaker 1: to make biofuels, which rely on energy, crops and other 94 00:04:57,760 --> 00:05:00,440 Speaker 1: sources to be produced. So that's what it's been really 95 00:05:00,520 --> 00:05:03,440 Speaker 1: driving that growth lately, is this kind of renaissance, this 96 00:05:03,520 --> 00:05:07,080 Speaker 1: growth of new types of biofuels like renewable diesel, and 97 00:05:07,320 --> 00:05:10,520 Speaker 1: we expect the capacity to really grow drastically from around 98 00:05:10,880 --> 00:05:14,320 Speaker 1: four or five billion gallons per year globally for renewable 99 00:05:14,320 --> 00:05:17,880 Speaker 1: diesel up to around sixteen billion gallons, So a pretty 100 00:05:17,920 --> 00:05:20,679 Speaker 1: big jump in capacity expected in the next few years. 101 00:05:20,880 --> 00:05:22,640 Speaker 1: And let's start at the beginning, or at least for 102 00:05:22,760 --> 00:05:26,720 Speaker 1: the biofuel itself, in terms of the feedstock, what feedstocks 103 00:05:26,800 --> 00:05:30,560 Speaker 1: are really popular right now and which ones maybe are 104 00:05:30,680 --> 00:05:34,960 Speaker 1: more contentious. When you talk about ethanol and biodesel, what 105 00:05:35,040 --> 00:05:38,560 Speaker 1: we call the conventional fuel is those typically come from crops. 106 00:05:38,600 --> 00:05:41,240 Speaker 1: So for ethanol in the US, and it's kind of 107 00:05:41,240 --> 00:05:44,080 Speaker 1: worth noting that the US is the largest biofuel producer 108 00:05:44,080 --> 00:05:46,600 Speaker 1: in the world. Second is Brazil, and that EU is 109 00:05:46,640 --> 00:05:49,240 Speaker 1: in third, and so most of ethanol in the US 110 00:05:49,440 --> 00:05:52,720 Speaker 1: is produced from corn, around almost one hundred percent. In Brazil, 111 00:05:52,800 --> 00:05:54,839 Speaker 1: a lot of that comes from sugarcane, and in the 112 00:05:54,839 --> 00:05:57,960 Speaker 1: EU it's kind of an even mixed really of wheat, sugarcane, 113 00:05:58,040 --> 00:06:00,440 Speaker 1: and ethanol. And when you look over to the biodies aside, 114 00:06:00,640 --> 00:06:03,680 Speaker 1: the majority of those feedstocks are composed of what we 115 00:06:03,680 --> 00:06:06,640 Speaker 1: call vegetable oils, so that's things like rape seed oil 116 00:06:06,760 --> 00:06:09,760 Speaker 1: or canola, as well as soybean oil and palm oil, 117 00:06:09,800 --> 00:06:13,160 Speaker 1: which was historically another kind of major source. So those 118 00:06:13,160 --> 00:06:17,039 Speaker 1: are the main kind of historical feedstocks. And today one 119 00:06:17,080 --> 00:06:19,440 Speaker 1: of the big shifts that we're seeing with renewable diesel 120 00:06:19,520 --> 00:06:22,599 Speaker 1: is it's still relying on the same feedstocks that we're 121 00:06:22,760 --> 00:06:26,640 Speaker 1: used for biodiesel, so again you're vegetable oils, but it's 122 00:06:26,680 --> 00:06:30,440 Speaker 1: also trying to rebrand itself as using more waste oils. 123 00:06:30,440 --> 00:06:33,680 Speaker 1: So that's things like use cooking oil, animal fats from 124 00:06:33,720 --> 00:06:36,760 Speaker 1: meat processing facilities, as well as things like corn oil, 125 00:06:36,800 --> 00:06:39,240 Speaker 1: which comes from making us at all. Actually, and so 126 00:06:39,560 --> 00:06:41,960 Speaker 1: you see the shift of kind of renewable fuels starting 127 00:06:41,960 --> 00:06:45,480 Speaker 1: to use more kind of waste oils. And that's really 128 00:06:45,520 --> 00:06:47,599 Speaker 1: what I think the goal is for a lot of 129 00:06:47,600 --> 00:06:50,960 Speaker 1: these projects is to leverage more waste instead of creating 130 00:06:51,000 --> 00:06:54,039 Speaker 1: more energy crops, which creates land use change and that 131 00:06:54,080 --> 00:06:56,080 Speaker 1: sort of thing. And so let's say, in theory where 132 00:06:56,120 --> 00:07:00,520 Speaker 1: we are using more waste products to create the bio fuels, 133 00:07:00,920 --> 00:07:05,760 Speaker 1: are they considered still quite sustainable, because if we are 134 00:07:05,839 --> 00:07:08,200 Speaker 1: thinking back to two thousand or even to twenty ten, 135 00:07:08,400 --> 00:07:10,440 Speaker 1: the view was that they burn cleaner. I could draw 136 00:07:10,440 --> 00:07:13,840 Speaker 1: a parallel here with natural gas. But because it burns cleaner, 137 00:07:13,880 --> 00:07:16,960 Speaker 1: it is more sustainable. Is that still very much the 138 00:07:17,040 --> 00:07:19,160 Speaker 1: view of them or are they seen as sort of 139 00:07:19,200 --> 00:07:23,840 Speaker 1: a bit inferior to perhaps electrifying certain parts of the grid. 140 00:07:23,840 --> 00:07:25,600 Speaker 1: And I think this will end up taking us into 141 00:07:25,680 --> 00:07:29,320 Speaker 1: the electric vehicle conversation in some respects because when you 142 00:07:29,360 --> 00:07:32,000 Speaker 1: think about batteries and then the upfront emissions, but then 143 00:07:32,280 --> 00:07:36,080 Speaker 1: tailpipe emissions reduce dramatically. Yeah, you make a good point there. 144 00:07:36,400 --> 00:07:38,520 Speaker 1: So you know, when you burn biofuels, as you do 145 00:07:38,560 --> 00:07:41,920 Speaker 1: with hydrocarbons from fossil fuels, you still have tailpipe emissions. 146 00:07:41,920 --> 00:07:44,600 Speaker 1: You can't really get away from that with biofuels. But 147 00:07:44,720 --> 00:07:48,760 Speaker 1: biofuels do typically have a lower life cycle carbon emissions 148 00:07:48,800 --> 00:07:52,280 Speaker 1: profile then say conventional fuel, And it really does range 149 00:07:52,280 --> 00:07:55,360 Speaker 1: depending on the feedstock and depending on the process that's 150 00:07:55,480 --> 00:07:58,920 Speaker 1: utilized to make that fuel. And so let's take the extremes. 151 00:07:58,920 --> 00:08:01,760 Speaker 1: If you look at ethanol right made from corn, it 152 00:08:01,800 --> 00:08:05,400 Speaker 1: typically has a higher carbon emissions profile than say, using 153 00:08:05,720 --> 00:08:08,400 Speaker 1: US cooking oil. And the main driver behind that is 154 00:08:08,440 --> 00:08:11,360 Speaker 1: because when you look at the life cycle analysis of 155 00:08:11,440 --> 00:08:14,680 Speaker 1: making corn ethanol, you have to also factor in the 156 00:08:14,760 --> 00:08:18,080 Speaker 1: process of making the corn need fertilizer, you need gasoline 157 00:08:18,120 --> 00:08:21,560 Speaker 1: or diesel to power your tractor to actually harvest that product, 158 00:08:21,640 --> 00:08:24,480 Speaker 1: and then to make the biofuel itself converting it from 159 00:08:24,640 --> 00:08:27,480 Speaker 1: corn and start into an alcohol. And so you have 160 00:08:27,520 --> 00:08:30,320 Speaker 1: all these kind of process emissions that go along with that. 161 00:08:30,760 --> 00:08:32,959 Speaker 1: Was with a waste oil like say use cooking oil. 162 00:08:33,000 --> 00:08:35,080 Speaker 1: Because it's a waste you don't have to account for 163 00:08:35,120 --> 00:08:38,679 Speaker 1: all the upstream emissions for producing that molecule. You kind 164 00:08:38,679 --> 00:08:41,240 Speaker 1: of start at the point of processing it and converting 165 00:08:41,280 --> 00:08:42,959 Speaker 1: it in. So all that to say is you can 166 00:08:42,960 --> 00:08:46,760 Speaker 1: see for biofuels it's typically around either like a forty 167 00:08:46,760 --> 00:08:50,240 Speaker 1: percent reduction for ethanol's case, and then all the way 168 00:08:50,280 --> 00:08:52,880 Speaker 1: up to an eighty percent reduction and carbon emissions for 169 00:08:52,960 --> 00:08:55,120 Speaker 1: say like a used cooking oil. And while we're still 170 00:08:55,120 --> 00:08:57,840 Speaker 1: getting our feet under us, I think of biofuels and 171 00:08:57,880 --> 00:09:02,000 Speaker 1: I think of Brazil, what other regions in the world 172 00:09:02,240 --> 00:09:06,079 Speaker 1: are also biofuels producers in a big way? And then additionally, 173 00:09:06,120 --> 00:09:08,600 Speaker 1: let's take it a step further, and what is the 174 00:09:08,600 --> 00:09:11,320 Speaker 1: policy environment right now? Yeah, I mean I think that 175 00:09:11,400 --> 00:09:13,719 Speaker 1: the policy environment is all over the map if we 176 00:09:13,800 --> 00:09:16,040 Speaker 1: take a step back and I think about why these 177 00:09:16,040 --> 00:09:19,840 Speaker 1: biofield policies were enacted originally. Take the US for example, 178 00:09:20,000 --> 00:09:23,200 Speaker 1: the reason for this biofield policy was more driven and 179 00:09:23,240 --> 00:09:26,320 Speaker 1: today still is by energy security. So when you look 180 00:09:26,360 --> 00:09:29,640 Speaker 1: back before the shale boom, and you know early two thousands, 181 00:09:29,679 --> 00:09:32,520 Speaker 1: the US was only around the third largest producer of 182 00:09:32,559 --> 00:09:35,280 Speaker 1: oil in the world and relied heavily on foreign oil 183 00:09:35,360 --> 00:09:38,520 Speaker 1: from Russia and Saudi Arabia and other Middle Eastern countries. 184 00:09:38,559 --> 00:09:40,480 Speaker 1: And that was a big problem, right, you know, did 185 00:09:40,520 --> 00:09:43,520 Speaker 1: a lot of tententious oil trade issues and that sort 186 00:09:43,520 --> 00:09:46,880 Speaker 1: of thing which sent oil prices really made them really volatile, really, 187 00:09:46,920 --> 00:09:49,440 Speaker 1: and so these biolefields policies were meant to kind of 188 00:09:49,480 --> 00:09:54,360 Speaker 1: combat that concern around energy security and not really focused 189 00:09:54,400 --> 00:09:56,719 Speaker 1: on reducing carbon emissions. And so I think that's one 190 00:09:56,720 --> 00:09:59,520 Speaker 1: of the big problems with the existing policy. Like say, 191 00:09:59,559 --> 00:10:01,959 Speaker 1: there were new fuel standard in the US, which is 192 00:10:02,000 --> 00:10:04,480 Speaker 1: the federal policy, and you have other policies now that 193 00:10:04,480 --> 00:10:07,880 Speaker 1: are kind of being enacted that are helping to incentivize 194 00:10:07,920 --> 00:10:11,400 Speaker 1: more carbon emissions reductions, like the California Low Carbon Fuel Standard, 195 00:10:11,400 --> 00:10:15,640 Speaker 1: for example, which basically credits biofuels or any even electric 196 00:10:15,679 --> 00:10:19,760 Speaker 1: vehicles to reduce carbon emissions and be rewarded for that 197 00:10:19,840 --> 00:10:23,040 Speaker 1: emissions reduction rather than say just a blanket kind of 198 00:10:23,240 --> 00:10:27,560 Speaker 1: quota or mandate for a certain biofuel. Now, for a 199 00:10:27,640 --> 00:10:31,560 Speaker 1: very short break, stay with us, and then just coming 200 00:10:31,600 --> 00:10:34,560 Speaker 1: back to the question around other parts of the world. 201 00:10:34,720 --> 00:10:39,080 Speaker 1: Is Brazil really the center of the biofuels industry? Brazil 202 00:10:39,200 --> 00:10:42,440 Speaker 1: in terms of supply is second behind the US in 203 00:10:42,520 --> 00:10:46,320 Speaker 1: terms of total output. All amazing good, I had it wrong. 204 00:10:46,400 --> 00:10:50,959 Speaker 1: I need to associate it with my home country exactly. Yeah. 205 00:10:51,000 --> 00:10:54,000 Speaker 1: So if you put the US, Brazil and EU together 206 00:10:54,080 --> 00:10:57,240 Speaker 1: that there accounts for around eighty percent of biofuel supply 207 00:10:57,320 --> 00:10:59,679 Speaker 1: in the world. So those are the top three regions 208 00:10:59,720 --> 00:11:03,480 Speaker 1: really that when we talk about biofuels competing with evs 209 00:11:03,520 --> 00:11:05,840 Speaker 1: and being used to decarbonize, those are the markets that 210 00:11:05,880 --> 00:11:09,080 Speaker 1: we're looking at. And the US and the EU particularly 211 00:11:09,080 --> 00:11:11,640 Speaker 1: are with the Inflation Reduction Act and the EU with 212 00:11:11,760 --> 00:11:14,880 Speaker 1: the Red three the Directive and other EU Fit for 213 00:11:14,960 --> 00:11:19,160 Speaker 1: fifty five discussions. That's really what's bringing biofuels back to 214 00:11:19,200 --> 00:11:21,480 Speaker 1: the forefront to figure out how are we going to 215 00:11:21,840 --> 00:11:25,640 Speaker 1: actually decarbonize our transportation sector, which I think accounts for 216 00:11:25,679 --> 00:11:28,640 Speaker 1: around a quarter of global emissions, So it's a big problem. 217 00:11:28,720 --> 00:11:31,160 Speaker 1: And trying to figure out where these where biofuels and 218 00:11:31,160 --> 00:11:33,520 Speaker 1: where evs fit in and how they kind of work 219 00:11:33,600 --> 00:11:36,199 Speaker 1: together is the big question that I think Ryan trying 220 00:11:36,240 --> 00:11:40,280 Speaker 1: to help understand our biofuels posed to win in a 221 00:11:40,280 --> 00:11:43,640 Speaker 1: big way with the US Inflation Reduction Act. There's a 222 00:11:43,640 --> 00:11:45,600 Speaker 1: few changes that have been made. It's mostly kind of 223 00:11:45,600 --> 00:11:49,480 Speaker 1: been an extension of existing policies. The biggest change really 224 00:11:49,480 --> 00:11:51,960 Speaker 1: in terms of biofuels has actually been the addition of 225 00:11:51,960 --> 00:11:55,920 Speaker 1: a sustainable aviation fuel tax credit, which basically has a 226 00:11:56,040 --> 00:11:59,360 Speaker 1: higher value in terms of its dollars per gallon incentive 227 00:11:59,360 --> 00:12:01,760 Speaker 1: than say a road fuel and so I think that's 228 00:12:01,760 --> 00:12:05,400 Speaker 1: actually the US's way of trying to pivot biofuels away 229 00:12:05,480 --> 00:12:08,360 Speaker 1: from just simply a road seal and using it more 230 00:12:08,360 --> 00:12:11,840 Speaker 1: for other industries like aviation, where electrification is less of 231 00:12:11,840 --> 00:12:16,360 Speaker 1: a viable solution. So you would mention sustainable aviation fuels. 232 00:12:16,640 --> 00:12:20,280 Speaker 1: And I'm thinking just generally of fuels, and we will 233 00:12:20,400 --> 00:12:22,600 Speaker 1: very much come to the electric vehicle part of things 234 00:12:22,640 --> 00:12:24,760 Speaker 1: in just a moment. But when we're thinking about fuels, 235 00:12:24,760 --> 00:12:27,520 Speaker 1: then I think oil and gas companies. Is the biofuel 236 00:12:27,559 --> 00:12:30,760 Speaker 1: space something that the oil and gas community is really 237 00:12:30,800 --> 00:12:35,559 Speaker 1: gravitating toward or are these really disconnected but cooperating industries. 238 00:12:36,600 --> 00:12:39,199 Speaker 1: That's a very great question, and I'd say it's sort 239 00:12:39,200 --> 00:12:43,520 Speaker 1: of a moving target. Historically, the biofuels industry and the 240 00:12:43,600 --> 00:12:45,960 Speaker 1: oil and gas industry have really been at odds with 241 00:12:46,000 --> 00:12:48,400 Speaker 1: one another. You know, you have the bioflowes industry that's 242 00:12:48,480 --> 00:12:52,400 Speaker 1: asking the government to ramp up the quota for more biofuels, 243 00:12:52,440 --> 00:12:55,880 Speaker 1: which obviously hurts the demand for oil and gas, and 244 00:12:55,920 --> 00:12:58,599 Speaker 1: so the oil companies are kind of against that. Additionally, 245 00:12:59,040 --> 00:13:01,720 Speaker 1: the way the policies work, at least in the US 246 00:13:01,920 --> 00:13:04,920 Speaker 1: is the refiners are the obligated parties that have to 247 00:13:05,040 --> 00:13:07,760 Speaker 1: either blend biofuels or they have to buy these credits 248 00:13:07,920 --> 00:13:11,640 Speaker 1: to offset not using as much biofuels to meet their obligation. 249 00:13:12,160 --> 00:13:14,360 Speaker 1: And so what that means it hurts the margins, It 250 00:13:14,480 --> 00:13:17,640 Speaker 1: hurts the profits for these oil and gas companies, and 251 00:13:17,720 --> 00:13:19,760 Speaker 1: so historically a lot of oil and gas companies were 252 00:13:19,800 --> 00:13:23,280 Speaker 1: against the use of biofuels. However, I think that narrative 253 00:13:23,280 --> 00:13:25,600 Speaker 1: has started to shift over the last let's say five 254 00:13:25,679 --> 00:13:28,520 Speaker 1: years or so, and I think what's happening is actually 255 00:13:28,520 --> 00:13:31,560 Speaker 1: a lot of the oil and gas companies, instead of say, 256 00:13:31,600 --> 00:13:36,000 Speaker 1: buying these credits from another energy producer, have decided to 257 00:13:36,040 --> 00:13:40,000 Speaker 1: just own those biofuel production facilities themselves. Valero is a 258 00:13:40,040 --> 00:13:42,200 Speaker 1: great example of that. They and I think around ten 259 00:13:42,280 --> 00:13:44,600 Speaker 1: percent of ethanol production in the US. Now there are 260 00:13:44,679 --> 00:13:47,760 Speaker 1: major US refiner of companies like Chevron and VP also 261 00:13:47,840 --> 00:13:50,920 Speaker 1: kind of making entrances into this space. Chevron just bought 262 00:13:50,960 --> 00:13:55,080 Speaker 1: Renewable Energy Group last year, which is a major diesel producer, 263 00:13:55,160 --> 00:13:56,920 Speaker 1: And so you're starting to kind of see these oil 264 00:13:56,920 --> 00:14:00,280 Speaker 1: companies start to invest in the biofuel space to have 265 00:14:00,360 --> 00:14:03,240 Speaker 1: to buy those credits and be beholden to those swings 266 00:14:03,240 --> 00:14:06,199 Speaker 1: in credit prices and actually generate the credits themselves. So 267 00:14:06,200 --> 00:14:08,679 Speaker 1: I think that's actually been the shift, the oil companies 268 00:14:08,679 --> 00:14:11,760 Speaker 1: really starting to take part in the biofuel space. So, 269 00:14:12,000 --> 00:14:15,680 Speaker 1: as promised, let's switch into EVS and let's give Ryan 270 00:14:15,720 --> 00:14:20,160 Speaker 1: a chance to be a participant to our lovely conversation here. 271 00:14:20,520 --> 00:14:23,680 Speaker 1: When we're thinking about road transport, vehicles are very much 272 00:14:24,040 --> 00:14:29,920 Speaker 1: omnipresent in this debate about how we decarbonize cities and 273 00:14:30,360 --> 00:14:33,520 Speaker 1: entire countries when they're looking at transport related emissions. But 274 00:14:33,920 --> 00:14:37,520 Speaker 1: biofuels certainly play an important role. As you've outlined, there 275 00:14:37,600 --> 00:14:40,680 Speaker 1: are important policy incentives which do give them an edge. 276 00:14:40,760 --> 00:14:44,600 Speaker 1: Where are we finding cooperation and perhaps conflict between the 277 00:14:44,680 --> 00:14:48,640 Speaker 1: electric vehicle space and perhaps how these policies interplay with 278 00:14:48,800 --> 00:14:52,440 Speaker 1: electric vehicles and biofuels together. Yeah, it's a really interesting 279 00:14:52,480 --> 00:14:54,160 Speaker 1: one and it's great to hear kind of all Jade's 280 00:14:54,160 --> 00:14:56,880 Speaker 1: answers as well. So I'll come at this very much 281 00:14:56,920 --> 00:14:59,680 Speaker 1: from the EV side, maybe not knowing much about both 282 00:14:59,760 --> 00:15:02,000 Speaker 1: fuel at all, and people really want to know how 283 00:15:02,040 --> 00:15:03,960 Speaker 1: do you make money out of EV charging and these 284 00:15:04,200 --> 00:15:07,960 Speaker 1: carbon credits that you can create by delivering electricity to evs. 285 00:15:07,960 --> 00:15:09,880 Speaker 1: And I'm like, Okay, this is a cool topic. Let's 286 00:15:09,880 --> 00:15:12,440 Speaker 1: explore this a little bit further. And these credits can 287 00:15:12,440 --> 00:15:14,440 Speaker 1: account for the ten percent of the revenues for some 288 00:15:14,480 --> 00:15:17,040 Speaker 1: of these public charging companies. So we started doing some 289 00:15:17,120 --> 00:15:19,000 Speaker 1: research on that, and as I get further, I start 290 00:15:19,040 --> 00:15:23,240 Speaker 1: to realize there's this kind of friction between biofuels and 291 00:15:23,320 --> 00:15:26,440 Speaker 1: evs when you get to the subsidies and what's going 292 00:15:26,440 --> 00:15:29,600 Speaker 1: on in these systems. Then Labe Jade described a little 293 00:15:29,600 --> 00:15:31,680 Speaker 1: bit the funds going out there, and really what was 294 00:15:31,720 --> 00:15:34,640 Speaker 1: the political aim of those funds. The one in the US, 295 00:15:34,480 --> 00:15:37,680 Speaker 1: there's kind of forty billion scheme the Realable Fuel Standards 296 00:15:37,760 --> 00:15:41,680 Speaker 1: a year aiming to produce biofuels. But then on a 297 00:15:41,800 --> 00:15:44,520 Speaker 1: country or even global scale. Now everything's about evs and 298 00:15:44,560 --> 00:15:48,560 Speaker 1: the OEM's having evs, so setting kind of volumes of 299 00:15:48,640 --> 00:15:51,440 Speaker 1: biofuels largely, to be honest, when you look at some 300 00:15:51,440 --> 00:15:53,920 Speaker 1: of these schemes, seems a bit strange when really the 301 00:15:54,000 --> 00:15:57,160 Speaker 1: aim should be carbon reduction, and arguably that the biggest 302 00:15:57,160 --> 00:16:00,800 Speaker 1: carbon reduction can be attrieved by moving to electrics. You 303 00:16:00,920 --> 00:16:03,440 Speaker 1: sort of see different regions and different ways, but the 304 00:16:03,520 --> 00:16:06,600 Speaker 1: low carbon Fuel Standard is one that's now rolling out everywhere. 305 00:16:06,600 --> 00:16:08,160 Speaker 1: So what they do is they set a target for 306 00:16:08,200 --> 00:16:10,920 Speaker 1: the emissions of fuels and if you're above that target, 307 00:16:10,920 --> 00:16:13,680 Speaker 1: which largely gasoline and diesel are, you generate deficits, and 308 00:16:13,760 --> 00:16:16,880 Speaker 1: if you're below then you generate credits. The credits so 309 00:16:16,920 --> 00:16:19,760 Speaker 1: far have been heavily dominated really for maybe in the 310 00:16:19,800 --> 00:16:23,320 Speaker 1: past ten years by biofuels and fuels like that. But 311 00:16:23,400 --> 00:16:25,720 Speaker 1: slowly evs are obviously coming on to the market and 312 00:16:25,720 --> 00:16:27,600 Speaker 1: becoming a bigger part of the fleet, and they're now 313 00:16:27,760 --> 00:16:30,720 Speaker 1: like edging up to fifteen twenty percent of those credits, 314 00:16:30,720 --> 00:16:33,280 Speaker 1: so you see this issue. What that's actually done is 315 00:16:33,280 --> 00:16:35,200 Speaker 1: tank the credit price in a way, because you've now 316 00:16:35,200 --> 00:16:37,280 Speaker 1: got this big supply of removable diesel that Jake kind 317 00:16:37,320 --> 00:16:39,200 Speaker 1: of talks about and then you've got this bigg supply 318 00:16:39,280 --> 00:16:42,720 Speaker 1: of electricity credits and with that tanking the credit price, 319 00:16:43,200 --> 00:16:45,840 Speaker 1: then nobody kind of wins because you might not meet 320 00:16:45,880 --> 00:16:48,800 Speaker 1: your aims. So from a perspective one outside you look, 321 00:16:49,200 --> 00:16:51,520 Speaker 1: what do you actually want to do? From a political perspective, 322 00:16:51,880 --> 00:16:54,160 Speaker 1: and a lot of the biofuels being Jade pointed on 323 00:16:54,240 --> 00:16:58,400 Speaker 1: it that they're produced by food crops Jade called energy crops, 324 00:16:58,440 --> 00:17:00,800 Speaker 1: which I don't really like the phrase, and it's the 325 00:17:00,840 --> 00:17:03,240 Speaker 1: same as like renewable diesel. It gives people an aspect 326 00:17:03,320 --> 00:17:05,600 Speaker 1: that this is really a good thing. But I do 327 00:17:05,760 --> 00:17:07,480 Speaker 1: come to the question of how good is it. The 328 00:17:07,520 --> 00:17:09,879 Speaker 1: biofuels in Europe thing it was seventy five percent of 329 00:17:09,920 --> 00:17:13,920 Speaker 1: those currently made from food. The biofuels in America, you've 330 00:17:13,960 --> 00:17:18,280 Speaker 1: got corn monocropped across huge waves of the US. I 331 00:17:18,359 --> 00:17:20,240 Speaker 1: think it worked out and it was nearly the whole 332 00:17:20,280 --> 00:17:22,600 Speaker 1: size of the UK would be taken up just by 333 00:17:22,640 --> 00:17:25,920 Speaker 1: corn that is going into this fuel. From a policy 334 00:17:25,960 --> 00:17:28,119 Speaker 1: making standpoint, it does bring the question as to what 335 00:17:28,280 --> 00:17:31,520 Speaker 1: really is sustainable and what isn't. But there's clearly some 336 00:17:31,640 --> 00:17:35,640 Speaker 1: hard to abate sectors that might need biofuels, aviation, shipping. 337 00:17:36,040 --> 00:17:39,159 Speaker 1: How do you then have this market that's available without 338 00:17:39,160 --> 00:17:41,200 Speaker 1: giving it the kind of stepping stone to get there. 339 00:17:41,240 --> 00:17:44,000 Speaker 1: So I think there is some arguments so use road transport, 340 00:17:44,040 --> 00:17:46,680 Speaker 1: scale some of these systems up and move. But I'm 341 00:17:46,680 --> 00:17:49,439 Speaker 1: a bit pessimistic that you can actually make these fuels 342 00:17:49,440 --> 00:17:52,280 Speaker 1: with waste on the scales that are really needed. Having 343 00:17:52,320 --> 00:17:54,480 Speaker 1: looked at this in any kind of detail, you brought 344 00:17:54,560 --> 00:17:57,640 Speaker 1: up a couple of things. But firstly, Jade, you've been challenged. 345 00:17:57,800 --> 00:17:59,640 Speaker 1: So I think you sort of at this point need 346 00:17:59,720 --> 00:18:04,560 Speaker 1: to defend biofuels and their sustainability credentials. Yeah, you know, 347 00:18:04,840 --> 00:18:07,240 Speaker 1: I think this is a tricky one to tackle, right. 348 00:18:07,760 --> 00:18:11,440 Speaker 1: There is certainly a lot of questions around sinability of biofuels. 349 00:18:11,480 --> 00:18:14,879 Speaker 1: You know, you can ask ten people what's sustinability of 350 00:18:14,960 --> 00:18:17,439 Speaker 1: corn ethanol and you're gonna get ten different answers. And 351 00:18:17,560 --> 00:18:19,680 Speaker 1: I think Ryan's right, like a lot of these energy 352 00:18:19,720 --> 00:18:23,240 Speaker 1: crops that I call them do compete with food that actually, 353 00:18:23,359 --> 00:18:25,280 Speaker 1: you know, when you get down to the nuances of it, 354 00:18:25,359 --> 00:18:27,720 Speaker 1: For example, corn, a lot of it that's grown to 355 00:18:27,800 --> 00:18:30,680 Speaker 1: make us and all actually isn't used for food consumption 356 00:18:30,800 --> 00:18:34,919 Speaker 1: for humans. It can produce byproducts such as different grains 357 00:18:34,920 --> 00:18:36,679 Speaker 1: that can go into like animal feed, but a lot 358 00:18:36,720 --> 00:18:40,600 Speaker 1: of it actually isn't specifically for human consumption. But isn't 359 00:18:40,600 --> 00:18:43,920 Speaker 1: it not for human consumption because they're planting the crawl 360 00:18:44,000 --> 00:18:46,840 Speaker 1: that is more valuable because of these systems to put 361 00:18:46,880 --> 00:18:48,879 Speaker 1: it in a car like it could be anything that 362 00:18:49,000 --> 00:18:51,920 Speaker 1: they's planted exactly. I think that's the argument comes in 363 00:18:51,920 --> 00:18:55,199 Speaker 1: that by planting this field corn or corn that is 364 00:18:55,240 --> 00:18:57,760 Speaker 1: strictly just made for making fuel, you're you're disposing line 365 00:18:57,800 --> 00:19:00,840 Speaker 1: that could be used for the growing corn human consumption 366 00:19:01,160 --> 00:19:03,280 Speaker 1: or other crops for food. So it's really I think 367 00:19:03,280 --> 00:19:06,919 Speaker 1: on the land use competition that you really have to 368 00:19:07,080 --> 00:19:09,919 Speaker 1: think about what's best for society. Is it to make 369 00:19:09,960 --> 00:19:12,240 Speaker 1: it for fuel or is it to grow for food? 370 00:19:12,240 --> 00:19:15,600 Speaker 1: And that's I think where the debate it's interesting. Well. Additionally, 371 00:19:15,640 --> 00:19:17,320 Speaker 1: when you're bringing up the credits, I mean, one of 372 00:19:17,359 --> 00:19:21,600 Speaker 1: my questions is are the I guess life cycle emissions 373 00:19:21,720 --> 00:19:25,080 Speaker 1: actually brought into consideration in this sort of debate. I'm 374 00:19:25,080 --> 00:19:27,040 Speaker 1: going to guess that the answer is no, and that 375 00:19:27,200 --> 00:19:28,800 Speaker 1: I'm going to take us down a rabbit hole to 376 00:19:28,800 --> 00:19:30,800 Speaker 1: which we have no answer. But what I mean by 377 00:19:30,840 --> 00:19:34,080 Speaker 1: this is when we think about electric vehicles taken a look, 378 00:19:34,200 --> 00:19:37,600 Speaker 1: depending upon where your battery is actually made, and if 379 00:19:37,640 --> 00:19:40,040 Speaker 1: it's made on a dirty grid, in theory, you have 380 00:19:40,119 --> 00:19:42,159 Speaker 1: quite a bit of carbon that you essentially need to 381 00:19:42,200 --> 00:19:45,240 Speaker 1: pay off overtime by driving. You know, if you drive 382 00:19:45,240 --> 00:19:47,160 Speaker 1: it a certain number of miles but you have zero 383 00:19:47,200 --> 00:19:50,119 Speaker 1: tailpipe emissions, there comes a break even point, and that 384 00:19:50,200 --> 00:19:53,840 Speaker 1: break even point always pays off within the lifetime of 385 00:19:53,920 --> 00:19:58,080 Speaker 1: that car, so they are better from an emission standpoint. 386 00:19:58,119 --> 00:20:00,560 Speaker 1: This is research we've done. We know that. And then 387 00:20:00,600 --> 00:20:03,440 Speaker 1: on the other side, you think about agricultural emissions, things 388 00:20:03,480 --> 00:20:07,200 Speaker 1: coming from fertilizer and agricultural practices in many different ways, 389 00:20:07,200 --> 00:20:09,240 Speaker 1: and something that we at B and F are actually 390 00:20:09,280 --> 00:20:12,480 Speaker 1: looking into even more with our newest research team, which 391 00:20:12,520 --> 00:20:15,680 Speaker 1: is focused on agriculture and land use. Within these kind 392 00:20:15,720 --> 00:20:19,480 Speaker 1: of two other parts of the biofuels and electric vehicle 393 00:20:19,520 --> 00:20:23,800 Speaker 1: space and these other emissions. Are those being discussed more 394 00:20:24,200 --> 00:20:27,560 Speaker 1: or is the focus really much further down the line 395 00:20:27,880 --> 00:20:30,919 Speaker 1: when people like you and I are interacting with taking 396 00:20:30,920 --> 00:20:33,159 Speaker 1: a flight or hopping in a car, I think the 397 00:20:33,160 --> 00:20:35,720 Speaker 1: emissions and jade will be the expert on how they 398 00:20:35,760 --> 00:20:38,480 Speaker 1: do biofuels, but they take into acout life cycle emissions 399 00:20:38,520 --> 00:20:40,120 Speaker 1: and land uice and things like that to come out 400 00:20:40,119 --> 00:20:42,640 Speaker 1: with a school which is basically like how many grounds 401 00:20:42,640 --> 00:20:45,080 Speaker 1: of COO to equivalent. They call it a produced per 402 00:20:45,160 --> 00:20:48,119 Speaker 1: mega dule of fuel burned and they can kind of 403 00:20:48,200 --> 00:20:51,040 Speaker 1: say either fuel burned or electricity that's delivered. So they 404 00:20:51,119 --> 00:20:53,720 Speaker 1: have a methodology and you can argue that this will 405 00:20:53,720 --> 00:20:57,000 Speaker 1: be improved over time. When you think about evs, you're 406 00:20:57,080 --> 00:20:59,159 Speaker 1: right about the battery bit. They include the grid, so 407 00:20:59,200 --> 00:21:01,760 Speaker 1: they're saying what you're charging with coal or are you're 408 00:21:01,840 --> 00:21:04,959 Speaker 1: charging with for example, solar, and the grids that are 409 00:21:04,960 --> 00:21:07,800 Speaker 1: cleaner basically will generate more credits. Well that's done. Is 410 00:21:07,840 --> 00:21:11,280 Speaker 1: good because that's pushed EV charging firms to basically sign 411 00:21:11,359 --> 00:21:15,200 Speaker 1: power purchase agreements with developers because then they can prove 412 00:21:15,280 --> 00:21:17,800 Speaker 1: that they're using green energy and they can get a 413 00:21:17,800 --> 00:21:20,040 Speaker 1: bigger carbon saving and that means they get more credits 414 00:21:20,040 --> 00:21:22,280 Speaker 1: and then get more money and the money can be big. 415 00:21:22,320 --> 00:21:25,280 Speaker 1: So in Germany we're kind of estimating you can get 416 00:21:25,359 --> 00:21:28,320 Speaker 1: somewhere around forty euro cents fifty euro cents per killer 417 00:21:28,359 --> 00:21:30,920 Speaker 1: what hours more than the price of electricity if you've 418 00:21:30,960 --> 00:21:34,040 Speaker 1: got these ppa kind of deals and getting green credits, 419 00:21:34,240 --> 00:21:36,960 Speaker 1: so that's a good incentive. I don't think they're fully 420 00:21:37,000 --> 00:21:40,520 Speaker 1: baking in the battery emissions. However, if you do run 421 00:21:40,560 --> 00:21:43,200 Speaker 1: them into the model, it doesn't actually make a great 422 00:21:43,200 --> 00:21:46,480 Speaker 1: deal of difference. Evs are still significantly more clean on 423 00:21:46,520 --> 00:21:50,480 Speaker 1: the carbon basis than biofuels in most conceivable grid emissions, 424 00:21:50,640 --> 00:21:53,320 Speaker 1: and this is not understood everywhere. Like one of the 425 00:21:53,359 --> 00:21:55,840 Speaker 1: things it comes down to is that evs are about 426 00:21:55,920 --> 00:21:58,960 Speaker 1: three to four times more efficient than an internal combustion 427 00:21:59,040 --> 00:22:02,280 Speaker 1: engine vehicle. For every mega jewel of energy, you'll go 428 00:22:02,320 --> 00:22:05,160 Speaker 1: in like three to full times further basically, And that 429 00:22:05,240 --> 00:22:08,000 Speaker 1: becomes a bit confused, I think when you start to 430 00:22:08,040 --> 00:22:10,760 Speaker 1: see the calculations and people go through, and I think 431 00:22:10,760 --> 00:22:13,479 Speaker 1: the policymakers have got confused at times, particularly in Europe. 432 00:22:13,640 --> 00:22:16,119 Speaker 1: But I don't know whether jade obviously boo fuels. I 433 00:22:16,160 --> 00:22:19,280 Speaker 1: don't quite know how they calculate there. Yeah, I'll chime 434 00:22:19,320 --> 00:22:22,040 Speaker 1: in on the biofuels side, and yeah, to your point, Danta, 435 00:22:22,320 --> 00:22:25,320 Speaker 1: they do actually factor in kind of the full life 436 00:22:25,320 --> 00:22:29,359 Speaker 1: cycle emissions from from producing a feedstock and making it 437 00:22:29,359 --> 00:22:31,639 Speaker 1: into a fuel all the way to the tailpipe. The 438 00:22:31,680 --> 00:22:35,640 Speaker 1: way it works is they measure the emissions associated with farming, 439 00:22:35,920 --> 00:22:39,159 Speaker 1: like you said, the fertilizers, transportation of the feedstock to 440 00:22:39,280 --> 00:22:42,640 Speaker 1: the production facility and then again to the fielding stations. 441 00:22:42,880 --> 00:22:45,000 Speaker 1: So I'll think it's accounted into it as well as 442 00:22:45,080 --> 00:22:49,200 Speaker 1: the land use change that causes. So thanks to policies 443 00:22:49,280 --> 00:22:52,480 Speaker 1: like California is Low Carbon Fuel Standard and basically policies 444 00:22:52,520 --> 00:22:56,320 Speaker 1: that reward fuels for having a lower carbon emissions profile. 445 00:22:56,640 --> 00:22:58,840 Speaker 1: What that does It tells the producer like, hey, I 446 00:22:58,840 --> 00:23:01,920 Speaker 1: need to buy power purchase agreements to buy crean power 447 00:23:02,000 --> 00:23:04,679 Speaker 1: to offset my emissions from the electricity use to produce 448 00:23:04,720 --> 00:23:07,600 Speaker 1: this fuel. I need to buy coin that source from 449 00:23:07,600 --> 00:23:10,840 Speaker 1: a farmer who uses sustainable farming practices. So it's another 450 00:23:10,880 --> 00:23:14,440 Speaker 1: big big thing is, for example, using practices like no till, 451 00:23:14,520 --> 00:23:18,320 Speaker 1: which basically reduces less carbon C or two from the 452 00:23:18,359 --> 00:23:21,680 Speaker 1: soil when the crops are planted. So all these different 453 00:23:21,680 --> 00:23:24,240 Speaker 1: practices can actually stack up to make a pretty big 454 00:23:24,320 --> 00:23:27,720 Speaker 1: difference in terms of the fuels life cycle emissions. For example, 455 00:23:27,760 --> 00:23:31,639 Speaker 1: with ethanol in California, the emissions profiles actually dropped around 456 00:23:31,680 --> 00:23:34,280 Speaker 1: thirty percent over the last ten years thanks to a 457 00:23:34,280 --> 00:23:37,720 Speaker 1: lot of those practices of starting to reduce the emissions 458 00:23:37,720 --> 00:23:41,359 Speaker 1: from electricity and better more sustainable farming practices, and also 459 00:23:41,480 --> 00:23:44,159 Speaker 1: carbon capture on a lot of these ethanol plants. So 460 00:23:44,200 --> 00:23:47,560 Speaker 1: that's really driving down and sentivizing these producers to reduce 461 00:23:47,680 --> 00:23:51,080 Speaker 1: the emissions from biofuels. Now for a very short break, 462 00:23:51,160 --> 00:23:55,280 Speaker 1: stay with us, So switching tracks a little bit, Let's 463 00:23:55,359 --> 00:23:57,960 Speaker 1: ask the question what does the future look like for 464 00:23:58,200 --> 00:24:01,639 Speaker 1: both biofuels, and then I think to set the stage 465 00:24:01,680 --> 00:24:04,720 Speaker 1: for that electric vehicles, some of the real world numbers 466 00:24:04,720 --> 00:24:07,120 Speaker 1: put it into perspective better than than you can kind 467 00:24:07,160 --> 00:24:09,440 Speaker 1: of say based on some of our analysis in some way. 468 00:24:09,480 --> 00:24:12,080 Speaker 1: So today we were debating the numbers coming out of 469 00:24:12,119 --> 00:24:14,280 Speaker 1: Europe and China, and it looks like about thirty percent 470 00:24:14,720 --> 00:24:17,560 Speaker 1: of vehicle sales that are kind of bevel phead. So 471 00:24:17,640 --> 00:24:20,800 Speaker 1: that gives you just like a strong sense of where 472 00:24:20,800 --> 00:24:23,679 Speaker 1: this is heading. And other regions in the US maybe behind, 473 00:24:23,840 --> 00:24:27,400 Speaker 1: but some of this new policy certainly going to tick 474 00:24:27,440 --> 00:24:30,840 Speaker 1: them over as well. No doubt government funding is playing 475 00:24:30,960 --> 00:24:33,600 Speaker 1: some level in this, but it does give you a 476 00:24:33,600 --> 00:24:36,439 Speaker 1: sign of the trajectory, saying somewhere around seventy percent of 477 00:24:36,440 --> 00:24:39,000 Speaker 1: sales going out to twenty thirty will probably be electric. 478 00:24:39,680 --> 00:24:42,000 Speaker 1: So then the follow up question is do we think 479 00:24:42,040 --> 00:24:45,080 Speaker 1: that electric vehicles will in some way really be competitive 480 00:24:45,119 --> 00:24:49,080 Speaker 1: with biofuels and eat into their market share in the future. Yes, 481 00:24:49,160 --> 00:24:50,880 Speaker 1: and I think this is the biggest worry for those 482 00:24:50,920 --> 00:24:54,040 Speaker 1: at the moment who are basically making lots of money 483 00:24:54,160 --> 00:24:58,240 Speaker 1: off incentives to produce biofuels. Now, these carbon credit schemes 484 00:24:58,280 --> 00:25:01,000 Speaker 1: are the one that I described, the LCFS olaphoria that's 485 00:25:01,040 --> 00:25:04,200 Speaker 1: moving out to many states in the US. Canada is 486 00:25:04,240 --> 00:25:07,320 Speaker 1: adopting a scheme across the whole country. British Columbia already 487 00:25:07,320 --> 00:25:09,639 Speaker 1: has one. In Europe, you've got two big schemes in 488 00:25:09,960 --> 00:25:13,520 Speaker 1: basically Germany and the Netherlands that will give money to 489 00:25:13,600 --> 00:25:17,399 Speaker 1: EV chargers. Already you can get money for biofuels as well. 490 00:25:17,800 --> 00:25:20,120 Speaker 1: But those types of credit mechanisms in the red three 491 00:25:20,160 --> 00:25:23,000 Speaker 1: that Jade was briefly discussing earlier, we'll have to roll 492 00:25:23,040 --> 00:25:25,120 Speaker 1: out across the whole of Europe by twenty twenty five. 493 00:25:25,680 --> 00:25:28,200 Speaker 1: In theory, it's in the trialogus at the moment, sort 494 00:25:28,200 --> 00:25:31,199 Speaker 1: of the negotiations between European bodies, But it looks like 495 00:25:31,200 --> 00:25:33,760 Speaker 1: it's heading that way, and what that means is, obviously, 496 00:25:34,080 --> 00:25:36,439 Speaker 1: if you can get more credits for evs, then it 497 00:25:36,440 --> 00:25:38,600 Speaker 1: eats into the share for biofuels and the money heading 498 00:25:38,640 --> 00:25:40,639 Speaker 1: that way. And what I hear when I speak to 499 00:25:40,680 --> 00:25:42,399 Speaker 1: some of those Barfield people as I'm trying to like 500 00:25:42,480 --> 00:25:45,280 Speaker 1: sense check what I'm looking at. If they want targets, 501 00:25:45,280 --> 00:25:48,400 Speaker 1: they want to set a target because this becomes economically challenging. 502 00:25:48,600 --> 00:25:50,639 Speaker 1: When we talk about bifles, there's lots of different grades, 503 00:25:50,680 --> 00:25:53,440 Speaker 1: and Jay can probably describe this. You've got renewable diesels, 504 00:25:53,440 --> 00:25:56,480 Speaker 1: the biodiesels E fuels are slightly different. This is like 505 00:25:56,520 --> 00:25:59,000 Speaker 1: fuels created with hydrogen and things like that. Well, some 506 00:25:59,040 --> 00:26:01,320 Speaker 1: of those don't seem that anomically viable I think, without 507 00:26:01,359 --> 00:26:04,320 Speaker 1: either target or some kind of money being pushed that way. 508 00:26:04,400 --> 00:26:06,280 Speaker 1: So I sense that they're a little bit fearful and 509 00:26:06,320 --> 00:26:09,080 Speaker 1: it becomes harder to sign off your investments if the 510 00:26:09,119 --> 00:26:13,719 Speaker 1: credit mechanisms become overtaken basically by evs. So they're definitely 511 00:26:13,720 --> 00:26:16,320 Speaker 1: cautious about it. The one thing you look at these mechanisms, 512 00:26:16,320 --> 00:26:19,080 Speaker 1: and has happened in other credit mechanisms before, is if 513 00:26:19,080 --> 00:26:21,320 Speaker 1: you have too much supply then the price tanks and 514 00:26:21,359 --> 00:26:23,800 Speaker 1: then the kind of overriding system doesn't work. So I 515 00:26:23,800 --> 00:26:26,600 Speaker 1: think policy makers are also trying to figure out if 516 00:26:26,600 --> 00:26:29,800 Speaker 1: we let evse fully work in these systems, does then 517 00:26:29,840 --> 00:26:33,560 Speaker 1: the policy become pointless because supply exceed the man. But 518 00:26:33,640 --> 00:26:35,960 Speaker 1: there's a few things they can do. They can basically 519 00:26:36,000 --> 00:26:38,680 Speaker 1: increase the target. So in California, the credit price is 520 00:26:38,680 --> 00:26:40,720 Speaker 1: tanked and jays always reporting on this. So it used 521 00:26:40,720 --> 00:26:42,720 Speaker 1: to be like two hundred dollars a ton. I think 522 00:26:42,720 --> 00:26:46,159 Speaker 1: it's eighty dollars a ton now and there's a massive 523 00:26:46,200 --> 00:26:49,720 Speaker 1: access in supply of credits and I think that's getting bigger, 524 00:26:49,720 --> 00:26:52,320 Speaker 1: and some of that renewable diesel. It's what they can 525 00:26:52,359 --> 00:26:54,280 Speaker 1: do is say, well, actually we don't want, say, for example, 526 00:26:54,320 --> 00:26:57,000 Speaker 1: and our renewable diesel anymore, and we want the target 527 00:26:57,119 --> 00:26:59,600 Speaker 1: of emission reductions to be higher, and that then kind 528 00:26:59,640 --> 00:27:02,600 Speaker 1: of set this balance. It means the credit price can stabilize. 529 00:27:02,720 --> 00:27:04,840 Speaker 1: So yeah, I think there's a big story on bo 530 00:27:04,920 --> 00:27:07,240 Speaker 1: fuels versus EV chalging, and this friction is kind of 531 00:27:07,280 --> 00:27:10,480 Speaker 1: only just stalling to occur. So I think as we 532 00:27:10,720 --> 00:27:14,400 Speaker 1: look out into the future for biofuels, As Ryan mentioned, right, 533 00:27:14,440 --> 00:27:17,400 Speaker 1: EV adoption is definitely going to be a huge part 534 00:27:17,400 --> 00:27:20,680 Speaker 1: of the road transportation sector, not so much forraviation where 535 00:27:20,720 --> 00:27:23,320 Speaker 1: you can't really put batteries and airplanes and hydrogen is 536 00:27:23,320 --> 00:27:25,520 Speaker 1: still long ways out. But within the road field sector, 537 00:27:25,560 --> 00:27:28,359 Speaker 1: I think long term out to twenty fifty, the story 538 00:27:28,440 --> 00:27:31,000 Speaker 1: is pretty grim for biofields. I think it's there, especially 539 00:27:31,040 --> 00:27:33,520 Speaker 1: for the ones that are need to be blended, like 540 00:27:33,560 --> 00:27:36,560 Speaker 1: ethanol and biodesel. Those are going to fall with the 541 00:27:36,600 --> 00:27:40,240 Speaker 1: adoption of electric vehicles and a subsequent decline of gasoline 542 00:27:40,240 --> 00:27:43,119 Speaker 1: and diesel. But we might see some places in the 543 00:27:43,119 --> 00:27:46,320 Speaker 1: short term, some countries where electric vehicles are maybe too 544 00:27:46,320 --> 00:27:49,359 Speaker 1: expensive or not being adopted as quickly as in the 545 00:27:49,480 --> 00:27:52,000 Speaker 1: US or wealthy European countries, and so what we could 546 00:27:52,040 --> 00:27:55,000 Speaker 1: see happen is actually biofields potentially grow in the short 547 00:27:55,080 --> 00:27:58,240 Speaker 1: term in some of those markets to meet those targets 548 00:27:58,240 --> 00:28:00,919 Speaker 1: that have been set by the EU. So the growth 549 00:28:00,920 --> 00:28:03,719 Speaker 1: of biofuels and the electro biofuels and the short term 550 00:28:03,720 --> 00:28:05,800 Speaker 1: medium term is kind of going to vary from region 551 00:28:05,840 --> 00:28:08,439 Speaker 1: to region. But I think the long term story is 552 00:28:08,480 --> 00:28:11,560 Speaker 1: that really biofuels are not really the long term solution 553 00:28:11,760 --> 00:28:14,640 Speaker 1: within the road transportation sector and have a much larger 554 00:28:14,720 --> 00:28:17,719 Speaker 1: role to play in places like aviation and potentially shifting. 555 00:28:18,280 --> 00:28:21,360 Speaker 1: But I mean, there's so much vested interest in these sectors. 556 00:28:21,359 --> 00:28:23,280 Speaker 1: He starts to realize that when you get involved like 557 00:28:23,520 --> 00:28:25,640 Speaker 1: that steam the ruble fuel standard is not the same 558 00:28:25,720 --> 00:28:28,200 Speaker 1: as like the low carbon fuel standard that we were describing. 559 00:28:28,400 --> 00:28:31,040 Speaker 1: That one just literally is setting volumes of biofuels to 560 00:28:31,080 --> 00:28:33,560 Speaker 1: go in and the ring thing is a benefit, right 561 00:28:33,560 --> 00:28:35,840 Speaker 1: that they're adding it in. It's like it's some money 562 00:28:35,880 --> 00:28:38,760 Speaker 1: going to the electric vehicle industry. But the reality is 563 00:28:38,800 --> 00:28:42,000 Speaker 1: the fundamental policy is in my opinion, flawed. So you've 564 00:28:42,040 --> 00:28:45,600 Speaker 1: got like this forty billion scheme that's just plowing in biofuels, 565 00:28:45,640 --> 00:28:49,080 Speaker 1: but the carbon reduction element is not there. And you 566 00:28:49,200 --> 00:28:52,200 Speaker 1: see this lobby effect also happening in the EU legislation. 567 00:28:52,400 --> 00:28:55,840 Speaker 1: So I described how like the low carbon fuel standard 568 00:28:55,840 --> 00:28:58,600 Speaker 1: you have in California is moving over to Europe, and 569 00:28:58,680 --> 00:29:01,760 Speaker 1: in the methodology of that, they basically just totally discount 570 00:29:01,880 --> 00:29:05,040 Speaker 1: the carbon savings of electric vehicles to the extent that 571 00:29:05,120 --> 00:29:07,960 Speaker 1: they're sort of like thirty percent of or forty percent 572 00:29:08,080 --> 00:29:10,160 Speaker 1: of the value of what we actually think is the 573 00:29:10,280 --> 00:29:14,720 Speaker 1: value that they should be achieving, and that obviously favors biofuels, 574 00:29:14,840 --> 00:29:16,880 Speaker 1: and you get back to this conversation you started with, 575 00:29:16,920 --> 00:29:18,680 Speaker 1: which is like where do oil and gas really sit 576 00:29:18,760 --> 00:29:22,000 Speaker 1: on this? And a lot of those obviously now spending 577 00:29:22,000 --> 00:29:24,360 Speaker 1: more and more money buying ev charging firms. But then 578 00:29:24,400 --> 00:29:27,200 Speaker 1: at the same time that they're getting refineries, they're getting 579 00:29:27,240 --> 00:29:29,920 Speaker 1: more heavily involved within what maybe was the enemy before 580 00:29:29,960 --> 00:29:33,800 Speaker 1: in biofuels by getting renewable diesel refineries and things like that. 581 00:29:34,200 --> 00:29:36,960 Speaker 1: And then some of the policy targets and what they're 582 00:29:36,960 --> 00:29:39,960 Speaker 1: talking don't add up. So you've got policy makers, the 583 00:29:40,000 --> 00:29:42,720 Speaker 1: German Environment minister saying, we don't want to have any 584 00:29:42,760 --> 00:29:45,440 Speaker 1: food crops in our biofuels. We don't want to destroy 585 00:29:45,480 --> 00:29:47,800 Speaker 1: for us. This is not what we're aiming for. But 586 00:29:47,840 --> 00:29:50,720 Speaker 1: then at the same time, it appears that these wastes 587 00:29:50,800 --> 00:29:53,160 Speaker 1: that they want to put in biofuels are just not 588 00:29:53,320 --> 00:29:56,360 Speaker 1: coming in the kind of volumes that are needed to 589 00:29:56,400 --> 00:30:01,360 Speaker 1: suffice the industries. So, yeah, you've got progress, but I 590 00:30:01,400 --> 00:30:04,640 Speaker 1: think that this challenges that remain. Yeah. So yeah, I 591 00:30:04,720 --> 00:30:06,000 Speaker 1: was just going to say, I mean, I think you're 592 00:30:06,080 --> 00:30:08,560 Speaker 1: right Ryan in terms of how the policies differ. I 593 00:30:08,560 --> 00:30:11,520 Speaker 1: think we can all agree that the low carbon fuel 594 00:30:11,560 --> 00:30:16,560 Speaker 1: standard type program that basically rewards fuels or electricity for 595 00:30:16,680 --> 00:30:19,920 Speaker 1: achieving a lower carbon emissions profile is much better. It's 596 00:30:19,920 --> 00:30:23,120 Speaker 1: more of a technology agnostic program than the renewable fuel 597 00:30:23,160 --> 00:30:26,680 Speaker 1: standard that basically mandates certain volumes and picks winners based 598 00:30:26,680 --> 00:30:28,680 Speaker 1: on who lobbies the most their fuel. So I think 599 00:30:28,720 --> 00:30:31,160 Speaker 1: it is good to see more of these policies be 600 00:30:31,240 --> 00:30:34,760 Speaker 1: rewarded based on the carbon intensity. So what I want 601 00:30:34,800 --> 00:30:38,440 Speaker 1: to know is where is the opportunity for the biofuels industry, 602 00:30:38,520 --> 00:30:42,720 Speaker 1: because surely these companies who have been established for several 603 00:30:42,760 --> 00:30:45,440 Speaker 1: decades now are looking for what that next thing could be. 604 00:30:45,480 --> 00:30:48,920 Speaker 1: If maybe it's not going to be road transport growing 605 00:30:49,240 --> 00:30:52,120 Speaker 1: and that brings us to sustainable aviation fuels, I think, 606 00:30:52,120 --> 00:30:55,800 Speaker 1: but maybe there are even more things, So Jade, where 607 00:30:55,800 --> 00:30:58,280 Speaker 1: are we seeing the growth come from in this space? 608 00:30:59,280 --> 00:31:02,280 Speaker 1: That's a really good question. I think what's really exciting 609 00:31:02,320 --> 00:31:05,920 Speaker 1: about what we mentioned earlier renewable diesel is the way 610 00:31:05,960 --> 00:31:09,200 Speaker 1: these refineries are set up. Basically, they operate the same 611 00:31:09,240 --> 00:31:11,680 Speaker 1: way as say a crude oil refiner does. It's almost 612 00:31:11,720 --> 00:31:15,240 Speaker 1: the same exact equipment, same exact process really using what's 613 00:31:15,240 --> 00:31:18,640 Speaker 1: called hydro processing. So they take these fats or oils 614 00:31:18,920 --> 00:31:21,760 Speaker 1: and they hydrotreat it. So they add hydrogen atoms onto 615 00:31:21,760 --> 00:31:24,600 Speaker 1: these long carbon chains to make what's actually a renewable hydrocarbon. 616 00:31:24,680 --> 00:31:26,920 Speaker 1: And so what's really cool about this process is you 617 00:31:26,960 --> 00:31:29,520 Speaker 1: can make renewable diesel, but at the same time it 618 00:31:29,560 --> 00:31:32,600 Speaker 1: actually produces a yield of jet fuel as well. You 619 00:31:32,640 --> 00:31:35,680 Speaker 1: get this mixture typically by default it's around eighty five 620 00:31:35,680 --> 00:31:38,920 Speaker 1: percent diesel and fifteen percent jet fuel. But what these 621 00:31:39,120 --> 00:31:42,280 Speaker 1: producers can do is they can actually optimize their system 622 00:31:42,320 --> 00:31:45,360 Speaker 1: to produce even more jet fuel, so anywhere from like 623 00:31:45,400 --> 00:31:48,040 Speaker 1: fifty percent or even more. We've heard if they set 624 00:31:48,040 --> 00:31:50,840 Speaker 1: their system up properly to kind of refine the distal 625 00:31:50,880 --> 00:31:54,440 Speaker 1: it further to make it into a jet fuel type 626 00:31:54,520 --> 00:31:57,440 Speaker 1: quality fuel. And so what's really cool is these facilities 627 00:31:57,440 --> 00:31:59,320 Speaker 1: that are being built is today they might be making 628 00:31:59,320 --> 00:32:01,960 Speaker 1: renewable diesel in the US, partially because it's a higher 629 00:32:02,040 --> 00:32:04,880 Speaker 1: value in terms of its incentives and the actual commodity. 630 00:32:04,960 --> 00:32:08,480 Speaker 1: But longer term, as Ryan mentioned, as the incentives really 631 00:32:08,560 --> 00:32:11,920 Speaker 1: drop in like the LCFS program, and we start to 632 00:32:11,960 --> 00:32:15,400 Speaker 1: shift our attention from road fuels more to aviation sector. 633 00:32:15,680 --> 00:32:18,920 Speaker 1: It can start to see some of these producers make 634 00:32:19,160 --> 00:32:21,560 Speaker 1: less diesel and more jet fuel, which I think is 635 00:32:21,600 --> 00:32:24,440 Speaker 1: probably where the fuel needs to be utilized more heavily. 636 00:32:24,840 --> 00:32:28,160 Speaker 1: So in the show notes, I acknowledged a few articles 637 00:32:28,160 --> 00:32:32,720 Speaker 1: and research notes that we've written about ev chargers and biofuels. 638 00:32:32,720 --> 00:32:34,600 Speaker 1: So I guess my question is, do you guys see 639 00:32:34,640 --> 00:32:40,240 Speaker 1: yourself collaborating on more research pieces in the future. I mean, 640 00:32:40,280 --> 00:32:42,040 Speaker 1: I'm not going to claim that I created this tool, 641 00:32:42,080 --> 00:32:45,280 Speaker 1: but there's a tool that calculates the deficits and credits 642 00:32:45,680 --> 00:32:49,400 Speaker 1: across these different schemes. So we've got that for California 643 00:32:49,400 --> 00:32:51,480 Speaker 1: at the moment with them popping up out, So we 644 00:32:51,480 --> 00:32:53,560 Speaker 1: just want to do that in every region so you 645 00:32:53,600 --> 00:32:56,200 Speaker 1: can see how many credits, how many deficits, how much 646 00:32:56,200 --> 00:32:58,520 Speaker 1: money can you make on which fuels are really going 647 00:32:58,560 --> 00:33:01,040 Speaker 1: to win those I think that's really noige piece that 648 00:33:01,080 --> 00:33:04,000 Speaker 1: we can keep collaborating. I definitely agree with Ryan despite 649 00:33:04,040 --> 00:33:06,840 Speaker 1: his technology really starting to squash mine. I think there's 650 00:33:06,840 --> 00:33:09,840 Speaker 1: definitely a lot of opportunities for us to collaborate in 651 00:33:09,920 --> 00:33:13,120 Speaker 1: the medium term, particularly like you mentioned with the credits 652 00:33:13,160 --> 00:33:15,720 Speaker 1: balances and trying to understand where those markets are moving. 653 00:33:15,960 --> 00:33:18,360 Speaker 1: I think is really really valuable for our clients as 654 00:33:18,360 --> 00:33:20,360 Speaker 1: I think about making these investments. They want to know 655 00:33:20,760 --> 00:33:23,560 Speaker 1: which technologies are disrupting these markets, and so a lot 656 00:33:23,560 --> 00:33:25,920 Speaker 1: of opportunity for us to work together and see how 657 00:33:26,120 --> 00:33:30,240 Speaker 1: these two technologies are going to help decombonize the transportation sector. 658 00:33:30,280 --> 00:33:34,160 Speaker 1: In the future, we'll see how this evolves. So, Jade Ryan, 659 00:33:34,200 --> 00:33:36,520 Speaker 1: thank you very much for joining us today on Switched On. 660 00:33:36,680 --> 00:33:44,800 Speaker 1: Thanks to Lusha, Thanks Sana. Today's episode of Switched On 661 00:33:45,160 --> 00:33:48,080 Speaker 1: was edited by gray Stoke Media. Bloomberg any F is 662 00:33:48,080 --> 00:33:51,280 Speaker 1: a service provided by Bloomberg Finance LP and its affiliates. 663 00:33:51,720 --> 00:33:54,560 Speaker 1: This recording does not constitute, nor should it be construed 664 00:33:54,560 --> 00:33:59,000 Speaker 1: as investment advice, investment recommendations, or a recommendation as to 665 00:33:59,040 --> 00:34:02,440 Speaker 1: an investment or other strategy. Bloomberg any F should not 666 00:34:02,520 --> 00:34:05,600 Speaker 1: be considered as information sufficient upon which to base an 667 00:34:05,640 --> 00:34:09,239 Speaker 1: investment decision. Neither Bloomberg Finance LP nor any of its 668 00:34:09,239 --> 00:34:13,040 Speaker 1: affiliates makes any representation or warranty as to the accuracy 669 00:34:13,160 --> 00:34:16,239 Speaker 1: or completeness of the information contained in this recording, and 670 00:34:16,360 --> 00:34:20,120 Speaker 1: any liability as a result of this recording is expressly disclaimed.