German airline Lufthansa has been working on establishing a biofuel investment fund to help secure an alternative fuel supply for its jets. Here Joachim Buse, vice president, aviation at the German airline, describes the process so far.
Why did you decide to launch a biofuel fund and how will it work?
Airlines need alternative sources of energy in order to gain better carbon dioxide imbalances so that is why we are searching for more climate friendly energy to be used in aircraft engines.
Biofuel production is a two-step story. Firstly there are the farming activities and creating the right business model for biomass feed stock production. Secondly there is the conversion technology which is different to refining crude oil. The fund will invest in the first step.
Lufthansa is in the process of finding a GP to manage the fund. Why is Lufthansa not going to manage the fund itself?
Because we do not have the core competencies, such as scientific knowledge or experience.
But through investment in the first step of biofuel production, we should be able to create a model where Lufthansa can guarantee itself an offtake of fuel and where investors and specialists with access to knowledge and practice can run the business.
We care about our reputational risk so we will keep an eye on the GP to ensure that sustainable practices are adhered to and to protect our brand name against any activities that might affect our reputation in a negative way.
Where will the fund operate?
For the perennial crop jatropha, a Mexican oil plant, we need a warm climate and good rainfall so Western Africa suits best. But for the annual crop camelia we are considering Eastern Europe because the arable land for farming suits perfectly for an annual oil crop that can be farmed in rotation with other crops.
Why did you choose those two crops in particular?
We did not want to choose any crops that are part of the food chain and might compete with human consumption. Crops such as palm oil could also produce fuel, however the main demand for palm oil comes from the chicken and poultry fodder and from the food industry.
Investing into African agriculture can be challenging especially in terms of land titles and foreign ownership. How have you dealt with this?
We have talked to the Prime Minister of Cameroon and various other ministers and we have also met with local chiefs and the mayor of the eastern region of Cameroon, so we are talking to both ends and the investment is highly welcome. Africa is known for corruption but the Prime Minister shared our statement that we want to play by the rules and we are working closely with the IFC to ensure we do so. But we do feel that Cameroon is very stable politically and economically.
We also support the plan to hire local Cameroonians, many of whom have been educated in Germany.
The fund management company is also planning to establish an educational programme for the local community that we hope will provide a potential pool for hiring or help the community create their own smallholdings which in turn can increase our own supply of oil crops.