The Future of Fuels

November 29, 2011
  • Eric Olson

    Former Senior Vice President, BSR

The recent public actions and debate around the proposed Keystone XL pipeline, which is designed to transport increasing amounts of fuel produced from Alberta’s oil sands into the United States, have demonstrated just how important—and complicated—the questions about our common energy future have become.

On the one hand, over the last two years we have seen both the largest oil spill and one of the deadliest nuclear accidents in our planet’s history, highlighting the huge (though often hidden) costs of satisfying our growing energy appetite with current sources and technologies. On the other hand, these catastrophes unfolded in the midst of a deep economic recession and ongoing national security concerns that serve to increase the attractiveness of any new opportunity for energy that promises local jobs and supply, whether those be in renewable sources such as wind and solar, or “unconventional” fossil fuels in the United States and Canada (from oil sands, shale gas, and “tight oil”).

As we discussed during our recent BSR Conference session on “The Future of Energy in Transportation,” these trends have created a complex set of challenges, as well as opportunities, for companies that wish to reduce their overall energy and greenhouse gas (GHG) footprint. Companies across the entire B2B transportation “value chain”—from energy and fuel producers to providers and users of transportation and logistics services—are struggling to develop smart, long-term strategies while simultaneously responding to a wide array of public policy initiatives, civil society programs, and campaigns at the international, national, and state/local levels.

Many companies are already taking significant action to reduce their overall transportation-related energy use through better routing, improved capacity utilization, and more efficient engines. There are also more efforts focused on the development and promotion of alternative/low-carbon fuels and technologies such as advanced biofuels, hybrids, and all-electric vehicles.

At the same time, forecasts for the phase-down of fossil fuels in our energy mix indicate that they will be the backbone of our energy economy for a protracted period—which means companies will need to buy and consume a substantial amount of fossil fuels as we make the long transition to lower-carbon alternatives.

In this context, how can companies establish an effective and consistent approach to fuel purchasing and use as questions continue to be raised about new energy sources and technologies? What information is available to help them navigate the shifting landscape and promote the most sustainable long-term outcomes?

Navigating Complex Terrain: The Future of Fuels Initiative

BSR’s new initiative, the “Future of Fuels,” will bring together critical players from the corporate (major retail/consumer brands, transport/logistics providers, and energy producers), NGO, and public sectors to identify opportunities to enhance the sustainability of current and emerging fuel choices.

To date, one of the biggest challenges has simply been getting these groups to talk to each other. Many work in isolation, leading to discourse that is often dominated by proponents of specific solutions who have one-sided views. To remedy this, BSR plans to conduct research and facilitated discussions throughout 2012 to develop a clear and balanced view of all issues and how they are intertwined.

Based on this, we will try to create a credible, holistic framework for understanding the total lifecycle impact (social and economic as well as environmental) of different fossil-based transportation fuels. This will clarify inevitable trade-offs related to various issues:

  • Energy prices: Sharply rising prices (particularly due to limited carbon pricing or price signals) can undermine economic prosperity and progress but potentially increase the competitiveness of alternative fuels in the long term.
  • Role of energy consumption in economic development: Energy demand growth is largely driven by developing countries seeking to achieve higher standards of living.
  • Country revenue from fossil fuel production: Many producing countries derive a significant portion of their overall GDP from oil and gas production. In some cases, this has led to positive outcomes, while in others “resource curse” issues have predominated.
  • Security of supply: In the United States and elsewhere, arguments are made for or against exploiting more domestic sources of energy, including “unconventional” (shale, sands) and other harder-to-access sources (deep water), based on their potential to reduce dependence on less stable (Middle East) supplies. But the trade-off with “unconventional” energy sources includes controversial levels of risk and environmental impact.
  • Uncertain future of international policy development: The diversity of global interests represented above renders international agreements on carbon and long-term energy policy extremely challenging.

Based on this framework, we plan to issue recommendations for industry players and partners to pursue more sustainable transportation fuels and supply chains. These recommendations will inform project participants, individually and/or collectively, on the creation of purchasing guidelines and customer-engagement practices, and they will promote industry and multisector partnerships devoted to improving the technology, infrastructure, and policy frameworks for more sustainable transportation fuels.

Getting It Done

With these objectives in mind, the Future of Fuels initiative will produce three research briefs and related conversations over a nine-month period that will frame the issues, outline the options for how companies can develop better fuel choices, and refine the approaches for engaging the value chain.

Framing the Issues (the “What”): This brief will draw on the best of a wide range of existing studies and interviews with third-party experts to examine:

  • What are the full lifecycle environmental and social impacts associated with the current and emerging transportation fuel mix? What are the broad areas of agreement or disagreement?
  • What are the current forecasts for fossil-based and alternative transportation fuels over 20-year, 30-year, and longer horizons?
  • What are the major implications for reliable and affordable energy supplies given current and emerging energy sources?
  • What major policy issues will affect how we determine more sustainable fuel choices, both “better” fossil fuels and relevant alternatives?

Understanding the Options (the “How”): This brief will look at how companies can use the information and frameworks described above to develop better fuel choices:

  • From the perspective of a buyer trying to make (and verify) better choices, is it possible to adequately “trace” the impacts in the supply chain?
  • What can buyers and producers do, individually and collectively, to effectively promote the development of more sustainable choices?
  • What potential blind spots are involved in singling out a source such as oil/gas from any one of a number of controversial countries, the Canadian oil sands, and/or conventional production in a variety of more sensitive ecological zones? In other words, what are the real current or future impacts versus pursuing other sources in other regions?
  • Based on the above, what is the most effective way to engage on specific issues such as those currently presented by the Canadian oil sands (and other likely future issues of this sort)?
  • What other stakeholders or organizations could companies work with to develop solutions that are both effective and credible?

Engaging Across the Value Chain: In our last brief, we will refine some of the most promising approaches and opportunities for collaboration to examine:

  • What activities and areas of the value chain—from investments in technology, services, and infrastructure, to the development of purchasing guidelines, to policy advocacy—offer the greatest promise for promoting near-term progress in the adoption of more sustainable transportation fuels?
  • Are there opportunities for more collaboration among energy producers, governments, civil society, and others across the value chain to promote better fuels?
  • What are some lifecycle-planning tools that can assist with lowering carbon footprints in the transportation fuel supply chain?

BSR will publish these research briefs and other relevant outcomes from the Future of Fuels on a quarterly basis, starting in the first quarter of 2012. We will also create opportunities for BSR members to engage around the content during the annual BSR Conference.

So, stay tuned, and please see the side bar for information on how to get involved sooner.

Let’s talk about how BSR can help you to transform your business and achieve your sustainability goals.

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