EU report: Brussels biofuels policy hikes food prices by up to 50%

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If biofuels received no EU policy support, the price of food stuffs such as vegetable oil would be 50% lower in Europe by 2020 than at present – and 15% lower elsewhere in the world – according to new research by the EU’s Joint Research Centre (JRC).

The “significantly lower” results are because global prices for vegetable oils – which are 60% palm and soy oil – are “strongly driven” by their use as food, says the paper by the JRC, the EU's official scientific and technical research laboratory.

When more soy and palm oil are used for biofuels production, less is available for food use and the resulting scarcity drives food price inflation. 

“Given that more than half of the vegetable oils are used for biodiesel production in the base (business as usual scenario) in 2020, any decrease in biodiesel production strongly affects the vegetable oil market,” the JRC study says.

Under the EU’s proposed cap on first generation biofuels, vegetable oil use for biodiesel would be 28% lower than in a business as usual scenario. And if the biofuels policy were scrapped, the decrease could reach 75%.

The resulting fall in EU food prices would be so much greater than the global price cuts because, at world level, only 17% of vegetable oils are used to produce biofuels.

The report was published on 5 September, as the European Parliament was preparing for a make-or-break plenary vote on Wednesday (11 September). That ballot could cap the amount of first generation biofuels allowed in the EU’s 2020 transport energy mix, and introduce land use factors to distinguish between the fuels that are best and worst for the environment.

If the EU maintains its current policy – with no production cap or indirect land use change (ILUC) factors – the JRC report finds that world food prices would not change significantly. Under the EU’s proposed production cap, global prices would fall by around 8%. But ending Europe’s pro-biofuels policies could cut food prices by 15%. 

The significance of EU policy on biofuels can be measured by the fact that without an EU target incentivising biofuels use, “close to 6 million hectares (0.7% of world total) less cereals, oilseeds, sugar crops and palm oil would be harvested in the world in 2020,” the report says.

This in turn would reduce the demand for arable land, with positive knock-on effects for deforestation and displaced agricultural land use.

ILUC in action

“The EU's stated goal is to decarbonise our transport fuels, but this is simply not possible if we don't count all the carbon released when new land is converted to grow fuel,” Nuša Urbančič, the clean fuels manager for green think tank Transport and Environment told EurActiv. 

“This is ILUC in action,” she added. “We urge the Parliament to vote to include ILUC factors next week.”

However, the key findings of the JRC’s paper were flatly contradicted by a study published on the same day by the Ecofys consultancy for ePURE, Europe’s bioethanol association. It found that ethanol was not currently causing major food price increases.

“It is uncertain whether EU ethanol raises or lowers the overall price of food,” the paper said. “EU ethanol has had small impacts on global starch and sugar feedstock prices; the historic impact of EU biofuels demand until 2010 increased world grain prices by about 1-2% and, without any cap on crop-based biofuel production may lead to another 1% increase through 2020.”

After a preliminary look at the JRC’s new research, Emmanuel Desplechin, ePURE’s energy director said that he thought it was in line with the Ecofys study where ethanol was concerned. He declined to comment on the vegetable oil price claims in the new paper. 

The price of ethanol

But Desplechin did say that with such biofuels reports, “it is about [establishing] what exactly you want to study and then you’ll get the result you want. There is documentation by the European Commission that is proving us right.”

He referred specifically to a progress report by the European Commission’s energy directorate last March, which also estimated that grain use for bioethanol production had only a “minor” price effect on global cereals.

Other studies, such as a ‘review of the evidence base’ by the Institute for European Environmental Policy in 2012 toted substantially higher price rises from the available studies of up to 13% for ethanol crops such as wheat, and 21% for sugar cane/beet.

In April, the UN Human Rights Council’s special rapporteur on the right to food expressed “deep concern” at the negative impacts that EU biofuels policy was having on food security in the developing world.

The new study was prepared by the JRC’s Institute for Prospective Technological Studies, using an Agro-economic Modelling Platform, for the Commission’s Agriculture directorate. 

It projected changes in land use and food prices according to baseline scenarios that applied variations of current EU targets and a counterfactual scenario with no EU targets.

Other JRC papers expected soon will examine issues including the historic impact that ILUC has had on deforestation.

Timeline: 
  • 11 September: European parliament plenary vote on EU biofuels proposal
  • 1 July 2014: New biofuels installations must meet a 60% greenhouse gas saving threshold
  • 1 Dec. 2017: Biofuels installations in operation before 1 July 2014 must meet a greenhouse gas saving threshold of 35%
  • 31 Dec. 2017: The Commission will submit a review of policy and best scientific evidence on ILUC to the European Parliament and Council
  • 1 Jan. 2018: Biofuels installations in operation before 1 July 2014 must meet a greenhouse gas saviong threshold of 50%
  • 1 Jan. 2020: Deadline for 10% of EU's transport fuels to be sourced from renewable energies.
  • 2020: European Commission will not support further subsidies to biofuels unless they can demonstrate "substantial greenhouse gas savings"
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