Biofuels

Biofuels currently provide 1% of the world’s road transport fuels. Petrol and gasoline supply nearly all the rest. We believe biofuels could grow to as much as 7–10% of the fuel mix in a few decades. For this reason, because they could deliver substantial reductions in CO2 and because of their close fit with our fuels business, transport biofuels will increasingly be the priority area for our renewable energy spending.

We are serious about trying to build a substantial business in biofuels. This involves both building capacity in sustainable current generation biofuels and investing in technologies that, if they turned out to be commercial, could help overcome the remaining hurdles to large-scale use of more advanced biofuels.

Building capacity in today’s biofuels will help us meet current government mandates and develop the know-how and market leadership that would be needed to introduce more advanced fuels. To help provide today’s biofuels responsibly, we are building social and environmental safeguards into contracts with our biofuels suppliers and working to raise sourcing standards across the industry (see below). As part of our advocacy work (see Calling for change), we are calling for government policies that promote the lowest CO2 and most sustainable biofuels currently available, instead of only setting targets for the total amount of biofuels sold. Ethanol from Brazilian sugar cane, for example, can already reduce CO2 emissions by up to 90% on a “well-to-wheel” basis, compared to petrol.

Advanced biofuels, made from things like straw and algae, do not compete with food or threaten rainforests. And, unlike some of today’s sources such as corn-based ethanol, they can offer significant CO2 savings on a “well-to-wheel” basis compared to petrol or diesel. In 2008, we increased our stake in the Canadian company Iogen Energy to 50%. It uses enzymes to turn straw into ethanol, which can be blended into gasoline. Like Brazilian sugarcane, Iogen’s technology offers “well-to-wheel” CO2 emission reductions of up to 90% compared with conventional diesel or petrol. In early 2009 we deepened our collaboration with technology company Codexis to develop better enzymes for use in advanced biofuels. As part of the agreement, Codexis will work closely with Iogen.

We are also working with Codexis and Virent on ways to convert biomass directly into fuels similar to gasoline and diesel. Work continued through a joint venture called Cellana in Hawaii to turn marine algae into a biofuel feedstock.

We are also involved with six academic institutions, including universities in China and Brazil, both on advanced biofuels and on better ways to make today’s biofuels.

SOURCING TODAY’S BIOFUELS MORE SUSTAINABLY

We have become one of the world’s largest distributors of biofuels, mainly to fulfil a growing number of governments’ requirements that transport fuels include a certain share of biofuels. We buy from approximately 100 suppliers worldwide, who in turn rely on a large network of growers, processors and traders. In September 2007 we introduced a sustainable sourcing policy to help us provide these fuels responsibly. It includes environmental and social safeguards. They require suppliers, for example, to ensure that production is not taking place in areas of high biodiversity or knowingly linked to human rights violations. We are gradually adding these safeguards when we sign or renew contracts. We are also working with suppliers to build the needed commitment and skills to follow the requirements fully. By end 2008, more than 50% of our volumes came from suppliers who had agreed to all these safeguards (see chart). We have started a global assurance programme which will include both measures to build suppliers’ capacity and checks by independent, external auditors on the sustainability performance of certain supply chains. We are also advocating international standards for sustainable sourcing. We are participating in voluntary initiatives like the Roundtable on Sustainable Biofuels to provide industry guidelines and raise standards across this complicated supply chain.