Think of it as a watercooler moment. Only the water in the balloon drum is not particularly cool. And its definitely not drinkable. For a start, the liquid is green. For another, its teeming with carbon dioxide. And for a third, its growing something slimy but precious that could promise a breakthrough in the quest for a sustainable, carbon-free motor fuel of the future: algae.

Call it algae alchemy, and if its not a subject of conversation at a watercooler near you, then its certainly become a talking point in laboratories and research centers of a dozen or more countries. This inauspicious organism is oily, feeds on carbon dioxide, and, unlike other crops cultivated for fuel, can take just a few days to grow. Its even the right color for a green revolution.

“It takes a matter of days to produce our harvest. With first-generation biofuel crops like corn, soy, and sugar cane it takes months,” says Andy Beck, a former U.S. Energy Department public affairs chief who is now a vice president of the company PetroAlgae. At an eighteen-acre “farm” in Florida, PetroAlgae staff nurture the blooms through their brief life cycle: from green indoor tubes to watercooler-style drums and then on into small outdoor pools where the water is circulated by large paddles so the algae gets the right amount of light. The hope is that algae can be far more productive than edible crops for producing fueland use much less arable land. Beck sees a “very bright” future for this kind of renewable fuel.

Zip eastward across the Atlantic to a laboratory at Cambridge University, and Dr. Paul Dupree is no less enthusiastic about something equally unprepossessing: grass. Well, miscanthus grass, to be exact, a thick, hardy crop that could well end up in your tank someday. Dupree and his team are striving for an alchemy of their own: how to unlock the sugars in grasses and willow, which can then be fermented into ethanol.

The potential advantages, he says, are compelling: you dont need high-
quality land, you dont need to use a lot of fuel to grow the crop, and you arent using foodstuffs that might otherwise be used for human consumption. “You can harvest it each winter, you dont need to fertilize it, and you get good yields,” he says.

A third promising type of crop being looked at is jatropha, a tropical bush whose seeds contain oil. It promises much because it can survive in harsh terrain not normally used for edible crops, and needs little fertilizer. Commercial plantations are springing up in the tropics on marginal land. In December last year, Air New Zealand successfully flew a Boeing 747 on a blend of jatropha and kerosene in one of the planes engines.

Another and more controversial feedstock for second-generation biofuels involves forestry. Wood fibers are rich in cellulosic materialsas much as 50 percent in some casesand companies in the U.S. and South America are already working on creating a biofuel feedstock from trees grown for that purpose. Not surprisingly, environmentalists are aghast at the idea, even though forestry use is likely to be subject to stringent sustainability criteria. “Genetically modified trees grown in huge monocultures in the Souththis is where the money is going,” says Adrian Bebb, a biofuels expert with Friends of the Earth in Germany. “This is one second-generation fuel that would get little support from us.”

On balance, though, these speculative technologies could be crucial to global efforts to cut carbon emissions. One thing is certain: the current mix of fuels derived from crops like corn, soy, and palm oil have been discredited to the extent that almost no one now believes they are the solution. The new aim is to come up with a second generation of fuels that could be mass produced without tearing up forests, depleting traditional food crops, driving up grocery costs, or upsetting delicate social and economic balances. In short, the hunt is on for a new-generation elixir that can restore the tarnished reputation of biofuels.

E very green technology has grappled with an image problem as it struggles to become established. Wind farms? Noisy, unsightly, unreliable. Solar? Expensive, cumbersome. Tidal and wave power? Unproven, treacherous for wildlife. But none has suffered quite as badly as biofuels over the past two years. Once upon a time these were the sweet organic juices that were going to sanitize exhausts and save the planet. It wasnt as if they were some outlandish new idea. After all, Henry Ford originally envisaged powering his Model T with ethanol, and Brazil has been running on ethanol for decades. The beauty of biofuels was that they appeared truly renewable. Sow, grow, harvest, ferment (for ethanol), press (for biodiesel), refine, distribute. All that solar energy locked up in the self-replenishing natural worldand at last a way of harnessing it. Government mandates and quotas made it an attractive business. So did high oil prices. But that was then. A perfect storm has since shredded the first-generation biofuels model.

First, there was the suspicion that all that energy-intensive sowing, harvesting, fertilizing, and distributing was generating almost as much carbon as was being saved.

Second, a sudden spike in food prices led to damning (and sometimes hasty) conclusions: all the land being diverted to corn or palm oil for biofuel usage was reducing acreage for traditional farming, restricting global food supplies. The hungry got hungrier. “Full tanks but empty stomachs,” was the cry, as environmentalists went on the attack, even though some official estimates show that biofuels, which take up around 1 percent of cropped land globally, were not the major cause of the price spike.

Last, and perhaps most egregiously, there was a growing awareness that in order to produce biofuels, large tracts of forests were being sacrificed, particularly in Southeast Asia. The volume of carbon being stored in forestsaround 640 gigatonsis estimated to be larger than that in the atmosphere. The folly of laying waste to forests in the name of a technology that promised to cut carbon emissions was breathtakingly exposed.

T he controversy has raised serious questions about government policies toward biofuels. In order to support green fuels, which cost around twice as much as gasoline to produce, governments across the world have adopted mandates requiring a certain proportion of motor fuel to contain a bio-fuels component.

Brazil had already shown the world how to do it, when the military regime introduced tax breaks for cars using ethanol in the 1970s. The Proalcool, or national alcohol program, resulted in around 80 percent of cars running on ethanol produced from Brazil sugar cane by the mid-1980s. The result is that today ethanol is big business in Brazil. Take a drive through Brazils answer to Californiaplaces such as Ribeiro Preto, in the interior of So Paulo stateand the signs of the wealth created by this biofuel boom are everywhere: in the luxury condominiums, private schools, and vast golf courses constructed for the huge influx of foreign investors, and in the seemingly endless fields of sugar cane that stretch across this region of southeastern Brazil.

Brazilian ethanol is usually cited as one of the greenest and most efficient first-generation biofuels. But even here there are dissenting voices concerned about the rapacious use of land. Authorities insist that the sugar cane plantations that produce billions of liters of ethanol annually are hundreds of miles from the Amazon rainforest. But according to environmental campaigner Mario Menezes, cane production is beginning to encroach, as several Amazon states, including Amazonas, Par, and Roraima, are now home to plantations.

Even when sugar cane is planted far from the Amazon it can impact the rainforest. As sugar cane takes up more and more land in Brazils south, cattle ranchers are forced into the Amazon rainforest, where the land is cheaper. Once there, they decimate the forest, replacing dense jungle with pasture. Three of every four cows born in Brazil today are born in the Amazon, Menezes claims.

Elsewhere, biofuels quotas and mandates have become as controversial as the technology itself. The European Union had to overcome fierce resistance from environmentalists and some of its own legislators to push through a target last year stipulating that 10 percent of transport fuel should come from renewable sources by 2020. The United Kingdom has watered down its own quota, which currently requires fuel companies to add 325 liters of biofuel to every 10,000 liters of gasoline.

In the United States, former President George W. Bushs “Twenty in Ten” pledge to wean Americans off gasoline and ramp up biofuels usage accelerated a dash for ethanol, with production more than doubling from 2006 to 2008 and making the U.S. the worlds number one ethanol producer. Concerns have multiplied that the surge into corn has had a serious effect not just on food prices but on agriculture around the world. As U.S. farmers switch out of soy and into corn, farmers in other countries have scrambled to fill the gap in the market, often clearing forested land to make room for soy plantations.

“The disruption that we have created in the world with these mandates in terms of diverting grain from food supply to produce fuel has been extraordinarily costly,” says Lester Brown, president of the Earth Policy Institute. “Government intervention and subsidies are counterproductive,” says John Constable, director of research and policy at Britains Renewable Energy Foundation think tank, arguing that they skew markets and truncate innovation.

In an effort to address concerns about biofuels, the Obama administration has called for a review of the emissions caused by the industry and has required that new biofuels emit less than the fossil fuels they replace. The administration wants biofuels to be at least 20 percent cleaner than gasoline and diesel. But President Obama has persisted with the Bush-era mandate, which calls for thirty-six billion gallons of plant-based fuels in the mix by 2022. The majority of thistwenty-one billion gallons, according to the latest Environmental Protection Agency proposalsshould come from the kind of second-generation biofuels that people like Beck and Dupree are working on.

The sun bombards the earth with more energy than man could possibly use or need; much is locked away in the natural world, not just in edible crops but in the cell walls of many plants of limited practical use to mankind. So for scientists like Dupree, the key is to unlock the energy coiled up in sugary compounds known as cellulose, which comprises about 33 percent of all plant matter.

The raw data hints at the potential. Corn ethanol delivers only about 1.3 times the energy used to produce it; with Brazilian sugar cane ethanol its about eight to ten times. With cellulosic plants, the yield could be as much as thirty times. Algae could be even more productive. The greenhouse gas emissions savings are impressive too: corn cuts emissions by around 20 percent, cane ethanol by around 50 percent, and cellulose potentially by around 90 percent.

And the benefits dont stop there. Algae, for example, thrives on carbon dioxide, so a firm like PetroAlgae can actually go to polluters and take the unwanted gas away. Once the oils from the algae have been retrieved, the algae also yields up a rich protein meal that can be used as animal feed. “With petroalgae we can achieve twenty-five to one hundred times the productivity of macrocrops like corn, soy, or sugar cane,” Beck enthuses.

B ut if the potential of these second-generation biofuels seems impressive, the obstacles remain challenging. One problem with algae has to do with scale. Beck says that an acre of land can produce one liter of biodiesel in about two and a half hoursor about a gallon a day. This sounds like a lot until you consider the annual renewable target set by the U.S. of thirty-six billion gallons, which would require an area of almost one hundred million acres. Petro-Algae is pursuing licensing deals as a way of scaling up its activities.

Another issue is the time it takes to get a crop. Dr. Angela Karp, a British agricultural scientist who is involved in a government-funded $40 million program to develop second-generation biofuels, says that even if there were a eureka moment tomorrow in Duprees lab, it would take years to grow enough plants to create large volumes of biofuels for cars. “You are looking at a five-year run-up to it going on a significant scale,” she says. Jatropha can grow on marginal land and needs little water, but, says Giles Clark, editor of Biofuel Review, “the time from farming to production is about four years.”

As for cost, the International Energy Agency estimates that second-generation biofuels currently average out at around $130 a barrelexpensive, given the current oil price. PetroAlgaes Beck would not be drawn on how cheaply his firm can produce a liter of biodiesel. Dupree says that when oil prices were up at $150 a barrel, the ethanols he works on would have been commercially viable. But now they are not. “Demonstration plants are being built and will be producing on a large scale in two to three years. They may not be commercial, though. It will depend on the crude price.”

Despite such obstacles, second-generation biofuels remain the great hope of the next decade. Hydrogen cars still belong to the land of make-believe. Electric cars may look like a serious challenger, but battery ranges remain modest, and you have to generate electricity to power the battery. Besides, engineers reckon that hauling of heavy loads will still favor liquid fuels for the foreseeable future.

The biofuels industry has a long way to go to convince skeptics that it can produce clean, sustainable fuels cheaply, in sufficient volume, and without destabilizing global agriculture. But it still looks like the best alternative to come to grips with emissions in a world in which driving is only getting more popular. Much will depend on the success of ventures like PetroAlgae, and of scientists like Dupree.

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