1. Sapphire has licensed the round-up gene from Monsanto and incorporated it into their algae, which gives Monsanto royalties+Roundup® revenue. It is reasonable to assume that other Monsanto genes and chemical applications will be useful in algal biofuel monoculturing. If Sapphire succeeds and scales to fuel production size, then they’ll be one of Monsanto’s biggest customers in the world. In fact, they could well become Monsanto’s biggest customer. This combination is creative, logical and accretive from a strategic partnering/investing perspective for both companies.

2. Sapphire appears to have found a way to generate near-term revenue from their pilot/demo scale operations without having to change their target product and pursue nutraceuticals, oleochemicals, or any of the other higher-value products being pursued by algae companies. Monsanto will be paying Sapphire to conduct research in screening for and testing genes in their algal biotech work that could have broader agricultural applications for Monsanto. So Sapphire will continue to pursue their biotech work and algae production work with fuels as the target product, but generate revenue through the identification/screening/testing of genes for Monsanto.

Jason Pyle, the CEO of Sapphire, said in a January interview that they’ve refused to attempt to commercialize anything but fuels, and that “once you make lipstick you become a lipstick company”. In other words, once you are generating profits in one business model and once you’ve designed your production system around those outputs, it will be difficult moving the business toward fuels, especially if further fundraising and production re-design are required. We also know from their patents that they’ve designed an extraction process that hydrolyses all of the algal biomass, freeing up the metals and other heteroatoms to be recycled to the growth media as fertilizer inputs (closed system), and hydrogenating the remaining C,H, and O content to make a crude substitute. So Sapphire really can’t target outputs other than crude oil. They get higher oil yields by converting all of the C and H in the algae to oil (as opposed to just extracting triglycerides), but they won’t be marketing co-products.

And so through this agreement, Sapphire may have found a way to stay focused on fuels, push forward with their production/technology system as currently imagined, and still generate near term revenues as they work to commercialize their business.

For a link to an article on Monsanto’s investment, click here.

Starting in 2012, participating airlines will be required to surrender one permit for each ton of CO2 released on flights to, from and within the EU. The EC will cap 2012 permits at 212.9 million tons. This cap will reduce to 208.5 million tons in 2013. Individual airline emissions will be capped as a percentage of the total cap, calculated on their CO2 emissions contribution in 2010.

The EC will allocate 82 percent of the capped permits in the form of free allowances, auction off 15 percent, and keep the remaining 3 percent of permits in a reserve fund. The percent of free allowances is expected to decline throughout the third phase of the EU ETS, increasing the burden of compliance placed on aviation. Airlines that exceed their number of free allowances may purchase additional allowances via auctions or secondary markets.

Relying on a strategy of purchasing allowances for compliance will impose significant costs on airlines; Lufthansa has projected the EU ETS will create additional costs for the airline of up to 350 million euros a year. These costs are likely to increase if the industry continues on its projected growth path. Investments in fuel efficiency gains will be important but are not expected to offset a large portion of airlines’ new costs. In this environment, we expect aviation biofuels to receive continued and growing interest and investment, since aviation biofuels are considered zero-emissions fuels under the EU ETS.

For more information on the EU ETS and aviation’s 2012 emissions cap, please click here.

A widely-recognized, credible biofuel sustainability standard is particularly important in light of the controversies surrounding land use, water use, competition with the food supply, and other aspects of biofuel production. The public – and producers themselves – are grappling with how to define sustainable biofuel production, and how to reward biofuels produced sustainably and discourage the others. Regulations have been delayed, investment has been withheld, and purchases of biofuels have been deferred as a consequence of this ambiguity.

Having participated as an RSB member and member of its Steering Board since 2009, Verno is pleased to see the RSB come to market at this important time for the biofuel industry. We trust that the adoption and ongoing improvement of this standard will serve an important clarifying function in the marketplace, ultimately helping to grow the market for biofuels, and ensuring that those biofuels are produced more sustainably.

For a link to the press release click here.

For more on this article click here.

Click here for a link to the article.