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Europe Looks Beyond Ethanol

No doubt, green autos are hot in Europe. And not everybody is turning up their noses at ethanol: Sweden, for instance, heavily subsidizes ethanol fuel and cars, and some 80% of Saab’s sales in Sweden are models that run on a mix of 85% ethanol and 15% gasoline, known as E85.

But to develop cleaner-burning cars, most of Europe is going beyond ethanol, experimenting with a variety of biofuels, including biodiesel (diesel made from plants, oils, or fats), biomass, and hydrogen—as well as compressed natural gas and engine technologies that reduce harmful carbon-dioxide emissions. That varied approach, analysts say, could hand Europeans a competitive edge in developing greener cars and fuels.
Indeed, the European Union has shied away from promoting existing biofuels as a major breakthrough. “With technologies currently available, biodiesel breaks even at oil prices around €60 ($82) per barrel, while bioethanol becomes competitive with oil prices of about €90 ($123) per barrel,” a recent EU report noted. The report instead highlights next-generation green fuels—made from wood, straw, or the entire stalks of plants, instead of just seeds and oils—as more promising and a preferred target of EU support.

For now, the EU requires blending conventional fuels with 5% biofuels at the pump, in an initial bid to help reduce carbon-dioxide emissions. That mix is set to rise to 10% by 2020. Since 50% of cars sold in Europe already are more fuel-efficient diesels, investors are pouring billions into biodiesel startups that produce fuel from a variety of plants and oils, including rapeseed and waste oil from restaurants that normally would be discarded.

Roughly 80% of the green fuel produced in Europe is biodiesel. “Biodiesel makes more sense [than ethanol],” says Al Bedwell, senior analyst at J.D. Power Automotive Forecasting in Oxford, England, who points out that ethanol requires higher subsidies to entice consumers.

Some environmental groups have criticized the switch to ethanol, saying the process of making the fuel from corn requires at least as much energy and produces as much pollution as it saves. Groups like the Union of Concerned Scientists in the U.S. have advocated ethanol, but only from higher-yield sources like switchgrass and by using more advanced production methods than the industry currently uses for corn-based ethanol.

Now, European automakers such as Volkswagen and DaimlerChrysler (DCX) are collaborating with companies such as Choren Industries in Freiberg, Germany, to explore second-generation biofuels that are made from wood, straw, or the entire stalks of plants. Second-generation biofuels should require less energy to produce and hence return 80% to 90% less CO2 to the atmosphere when burned. Choren, which is backed by oil giant Shell (RDS.B), will start producing 20,000 tons a year of “Sunfuel,” or second-generation biodiesel, in 2008.

“Corn is catastrophically bad for the whole energy equation,” says one Volkswagen official. “We hope that second-generation biofuels are available in market quantities by 2012 to 2015.”

Business Week

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