Transport biofuels are typically more expensive than petrol or diesel. However, they reduce dependence on oil and, because the plants absorb CO₂ as they grow, they can also have lower overall carbon emissions, despite the extra energy required to harvest and process them. A number of governments are giving biofuels a big push with subsidies, targets and mandates. For their efforts to succeed more technologically advanced biofuels, based on agricultural waste, will be needed.

Today’s first-generation biofuels may compete with food crops for land. The CO₂ reductions they achieve are sometimes limited. We are helping tackle this by continuing to invest in second-generation biofuels, for example through our partnerships with Choren and Iogen (see below) and by developing codes of conduct for the sustainable sourcing of biofuels (for more information see sustainable sourcing of biofuels).

Hydrogen is a longer-term option. It is a new type of fuel that would require additional infrastructure to distribute it and modified engines to use it. That would take time and require substantial investment. We were the first energy company to build demonstration hydrogen filling stations in Asia, Europe and the USA. Shell Hydrogen is also working on “mini-networks”, where hydrogen is offered at a number of regular fuelling stations, so that hydrogen vehicles can operate freely and refuel throughout a city.

Iogen: Turning straw into fuel

The challenge now for biofuels is to make them cheaper, reduce the CO₂ emitted during their production and use sources that do not compete for land with food production. That is why we have invested in Iogen Corporation, whose patented technology uses enzymes to produce ethanol from straw. The resulting “cellulose ethanol” is a fuel with 90% lower GHG emissions than conventional petrol on a lifecycle basis and no need for extra arable land. Iogen’s demonstration plant has been producing fuel from straw since 2004. Iogen’s ethanol has the potential to be cheaper to produce than most of today’s biofuels. In 2006, Goldman Sachs – the investment bank – invested in Iogen. In early 2007, Iogen was one of six companies selected to receive funding under the USA Department of Energy’s $385 million cellulose ethanol programme – a further vote of confidence in the commercial potential of this exciting technology.