After a two-year investigation, the European Commission has decided that the complex issue of 'indirect land use change' (ILUC) – or displaced deforestation – can lessen carbon savings from biofuels.
In July it may announce moves to curb the least sustainable - possibly by raising an EU-wide sustainability benchmark.
"Such a factor would render the European biofuel industry no longer viable," the European Renewable Ethanol Association and European farmers' body Copa-Cogeca said on Tuesday.
"ILUC is far too complex an issue for any quick policy fix."
The EU's plans to create a $17 billion (€11.4 billion) annual market for biofuels from producers such as France, Germany, Brazil and Indonesia have been thrown into doubt by the battle over ILUC.
"It has sent a lot of signals to investors that the policy environment is uncertain," Kare Riis Nielsen, head of EU affairs at Danish enzymes producer Novozymes said. "The whole industry is suffering from that."
But the greenest 'next-generation' biofuels could benefit from the EU's review of biofuels strategy.
Window of opportunity
"What's most important now is that we come out of this with crisp, clear signals to the investment community and consumers," said Nielsen. "ILUC could create a window of opportunity."
EU sources say July's announcement by the European Commission will broadly endorse the green credentials of bioethanol but raise questions about some sources of biodiesel.
It will also create pressure to speed up the adoption of next-generation biofuels from agricultural residues such as straw, which do not create ILUC and are no longer just a dream, says Novozymes.
"It's not yet cost-competitive, but it will be," said Nielsen. "The volatility of oil prices makes it a tough guess, but probably by 2020 it can compete with gasoline."
However, the EU biofuels strategy has so far failed to help next-generation fuels take off and needs tweaking, he added.
"There is no longer a technical barrier. It is a political barrier. We need to incentivise the best performing biofuels. We need support for those that take the first-mover disadvantage."
Criticisms
Last month, the EU's current biofuels regime was heavily criticised in a North Energy report commissioned by the NGOs Action Aid and the Royal Society for the Protection of Birds.
It found that an Italian company called Nuove Iniziative Industrali was in the process of acquiring 50,000 hectares of dry woodland and scrubland in Dakatcha, Kenya, to build a Jatropha biodiesel plantation.
The project, which could evict up to 20,000 local people, would still emit between 2.5 and 6 times more greenhouse gases compared to fossil fuels, the report claimed.
According to Chris Coxon of Action Aid, this would then be largely exported to Europe to meet a market need partly created by EU targets, which oblige member states to power 10% of their transport from biofuels by 2020.
Coxon told EurActiv that the social impact of ILUC was rarely considered and that effective monitoring procedures were often evaded. "There are considerable loopholes in the current sustainable criteria," he said.
An official from the European Commission told EurActiv that member states were responsible for verification checks, and that third party auditing covered certification systems rather than individual projects.
(EurActiv with Reuters.)
