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Vinod Khosla and Tim Searchinger

Crunching the numbers on bioenergy rules
By Vinod Khosla and Tim Searchinger
November 23, 2009

Although the very term “accounting rules’’ may cause most people to
turn the page, the financial crisis has shown that when rules allow
businesses to claim profits from what are actually losses, they
distort economic incentives at our peril. The importance of sound
accounting rules applies equally to how we count emissions of carbon
dioxide as part of any law to reduce global warming. Governments
should fix a worrisome error in these carbon accounting rules and
thereby provide proper incentives for a vibrant bioenergy industry
that helps reduce global warming.

The problem: treaties and laws now treat all forms of bioenergy as
carbon neutral and therefore completely non-polluting. In reality, how
much bioenergy reduces greenhouse gases depends on the source of the
plant material. The right rules will encourage the development of fast-
growing grasses and trees that can greatly increase the amount of
carbon absorbed by plants on marginal land and thereby reduce global
warming. The wrong rules will encourage clearing of forests, which
releases carbon dioxide and may even increase greenhouse gases while
also threatening biodiversity.

Although bioenergy does not significantly change the carbon dioxide
released by tailpipes and smokestacks, bioenergy can offset these
releases by stimulating higher rates of plant growth, which absorb
carbon dioxide from the atmosphere in a recycling effect. The use of
fast-growing plants on abandoned and degraded farmland provides a
great opportunity because they can not only generate additional
biomass for energy but simultaneously restore carbon to the soils.
Such areas could produce most of the world’s biofuels. Using abundant
residues left after timber or crop harvests also provides additional
carbon to replace fossil fuels in ways that reduce carbon dioxide
because this biomass would otherwise decompose rapidly and release its
carbon to the air anyway.

Some biofuel production processes create not just energy but a
“biochar.’’ Native Amazonians showed this form of charcoal from heated
biomass can store carbon stably in soils for centuries. Counting this
way of sequestering carbon, some biofuels may reduce greenhouse gases
by more than 100 percent, and therefore provide a safer alternative to
“bioengineering’’ as a way of reversing atmospheric warming.

Yet the earth’s plants and soils store three times as much carbon as
the atmosphere holds today, and if bioenergy uses or displaces this
carbon it too adds carbon to the air. Some ways of thinning forests
may stimulate faster tree growth that rapidly replaces the lost wood
(and lost carbon), but broader clear cuts to make wood chips for
electricity will generally reduce forest carbon stocks for decades,
which reduces or eliminates the benefits of displacing coal. If
forests are cleared to plant bioenergy crops, the release of carbon
may increase greenhouse gases on a net basis for long periods. And
while growing crops for fuel on good cropland absorbs carbon, doing so
does not necessarily generate a 100 percent gain because it comes at
the expense of not growing plants and absorbing carbon in the form of
food. The extent to which this process generates carbon savings
depends on how that food is replaced.

Because of these very different consequences, treaties and laws that
place limits on carbon dioxide need to distinguish bioenergy by its
source and production process. Following a misguided accounting
convention, treaties and laws now treat all forms of bioenergy as
though they generate no pollution, and the climate bill working its
way through Congress shares this error.

If the error continues globally, it gives oil firms or electric
utilities that must reduce their greenhouse gas emissions a false
incentive to switch to those forms of bioenergy that result from
clearing forests. Several studies predict they will do so on a large
scale. By contrast, the right accounting will give entrepreneurs the
incentive to commercialize the great technical innovations in
generating more carbon from the earth’s land and converting it
efficiently into useable fuel.

The challenge of reducing global warming requires that we vigorously
pursue these promising opportunities, and getting the accounting right
is a necessary part of that effort.

Vinod Khosla, a cofounder of Sun Microsystems and founder of the
venture capital fund Khosla Ventures, invests in biofuels and other
clean technology innovations. Tim Searchinger, a research scholar at
Princeton and fellow of the German Marshall Fund of the United States,
was lead author of a paper in Science magazine discussing the
accounting error.

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