Part II: Are All Carbon Emissions (And Credits) Created Equal?

by Mike Kraten and Jason Dodier

Author’s Note: On January 6, 2023, we authored an Insights post entitled Are All Carbon Emissions (And Credits) Created Equal? The Need To Consider Sources Of Energy. We concluded that post by challenging the reader to consider how a Chief Financial Officer should evaluate her options. We also promised a follow-up post that presents a case example involving biomass energy.

We keep our promise by authoring this post. Our comments (below) conclude by recommending an evaluation process that focuses on the classic Value – Risk paradigm.

If you ever find yourself gasping for breath as you dash from gate to gate in New Delhi’s Indira Gandhi International Airport, you might wish to visit India’s latest innovation in healthy breathing: the Oxy Pure Oxygen Bar.

What is an Oxygen Bar? It’s a bar that serves various “flavors” of oxygen instead of liquor or coffee. Given that New Delhi is plagued by one of the most polluted atmospheres on Earth, it’s no surprise that its entrepreneurs have developed this innovative business concept.

India’s intractable air pollution serves as an unfortunate reminder of the costs of utilizing its “dirty” energy sources. The nation is currently the world’s second largest consumer of coal (after China) and third largest consumer of oil (after the United States and China).

Fossil fuels like coal and oil impose significant environmental costs. Upstream extraction processes, for instance, lead to the destruction of mountain-tops and the atmospheric release of toxic methane gas. And downstream energy generation processes, for example, produce a wide variety of pollutants, ranging from coal ash to carbon dioxide.

And what of natural gas? Although it is a relatively cleaner energy alternative to coal and oil, its methane composition significantly damages the environment. Gas fracking is also responsible for seismic instability in regions that have never previously experienced earthquake activity.

What about alternative energy solutions that don’t produce waste substances? For instance, what about solar, wind, and hydroelectric power? Without feasible battery technologies to store power for extended periods, these solutions can frustrate energy users when the sun doesn’t shine, when the wind doesn’t blow, and when drought dries the rivers.

Biomass and Biochar

Biomass energy solutions avoid or minimize many of these problems. In addition, their production processes can generate biochar, a unique resource that provides value in a form that is lacking among other alternatives.

Biomass energy is generated from plant-based material; it is not reliant on intermittent sources like the sun, the wind, and the currents. Thus, there is no need for battery equipment – which is constructed with potentially toxic resources that are extracted from the earth – to store power during quiescent periods.

Furthermore, when biomass is exposed to high temperatures, it decomposes into a substance known as biochar. This material serves two environmentally healthy purposes: (1) it can fertilize agricultural soil, and (2) it can capture carbon in a storable physical state.

Thus, unlike the carbon ash that is produced by burning coal, the biochar carbon that is produced by biomass energy processes can improve the health of the environment. And unlike oil and/or gas based energy production processes, biochar does not produce any methane emissions or earth tremors.

Value vs. Risk

Is biomass energy the ideal choice for all energy users? Not necessarily; after all, your ideal choice is dependent on how you assess value vs. risk.

Let’s imagine that you live downstream from an area of groundwater that has been polluted by coal ash. In addition, let’s imagine that the climate is relatively temperate. For you, the value of a power source like solar or wind may lie in its total absence of any carbon generation, and in the lack of significant meteorological risk during intermittent energy shortages.

Now let’s assume that you live in an isolated and wintry Arctic climate. The value of the technological reliability of traditional oil and gas powered equipment may significantly exceed any risk of long-term damage to the environment.

For many of us, though, biomass offers an attractive mix of value and risk factors. As the economic, social, and environmental costs of climate change continue to escalate, the need to manage our carbon streams through end products like biochar will keep biomass solutions in the conversation.