EU’s biofuels policy damages investor confidence, farmers claim

Bioethanol industry: "EU institutions have 'hurt' Europe." [Sarantis Michalopoulos]

This article is part of our special report Rural Renaissance.

The European Commission’s “unstable” policy on biofuels has created uncertainty among investors and undermines the market as a whole, the head of the EU farmers’ lobby told EURACTIV.com.

The European Commission last November presented its draft proposal to review the Renewable Energy Directive (RED) for the post-2020 period as part of a Clean Energy Package.

The EU executive proposed to reduce the contribution of conventional biofuels in transport from a maximum of 7% in 2021 to 3.8% in 2030. It also set an obligation to raise the share of other ‘low emissions fuels’ such as renewable electricity and advanced biofuels in transport to 6.8%.

EU biofuels policy: What is the impact on rural development?

EU farmers are “very concerned” about the impact of the European Commission’s change of heart on biofuels, claiming the EU’s restrictive policy is putting thousands of rural jobs at risk.

The first Renewable Energy Directive set a target of 10% of renewable energy sources in the transport sector, including first generation biofuels made from food crops. But this directive was amended in 2015 and the contribution of conventional biofuels from October 2017 will be limited to 7% of energy consumption in land transport, a figure that will be lowered to 3.8% in 2030 under the latest Commission proposals. At the same time, the EU executive also set an obligation to raise the share of other ‘low emissions fuels’ such as renewable electricity and advanced biofuels in transport to 6.8% by 2030.

Pekka Pesonen, the secretary-general of Copa-Cogeca, the association of European farmers and agri-cooperatives, told EURACTIV.com that the constant change of direction by the Commission has triggered uncertainty for investors.

“While we welcome the clear support for advanced biofuels in the Commission’s proposals, the proposed vision of developing an advanced biofuels industry by sacrificing the conventional biofuels industry actually damages investor confidence and bankability,” Pesonen said.

As a consequence, confidence in the biofuels market as a whole has been undermined, while having a negative impact on the EU’s 2030 objectives for climate and energy, Pesonen claimed.

Commission under fire over post-2020 biofuels targets

The European Commission came under heavy criticism yesterday (30 November) after proposing to phase-out conventional biofuels by 2030.

An unstable policy

For Copa-Cogeca, a stable EU policy framework is a prerequisite to support investment.

“The EU biofuels policy is unstable and does not create a favourable climate for the setting up of new biofuel commercial plants,” Pesonen said, underlining that the gradual phase-out and exclusion of conventional biofuels from the mandatory blending obligations on fuel suppliers are “simply not compatible with the market conditions and biofuel blend standardisation”.

Pesonen explained that instead of setting up new advanced biofuels plants, the executive’s decision could assist the closure of existing conventional plants.

“The development of advanced biofuels also depends on the strength of the conventional biofuels market,” the Copa-Cogeca leader said, adding that a different approach should be adopted to strengthen the role of agricultural and forest biomass in all bioenergy sectors.

“The support given by this proposal to waste-based fossil fuels (based on the circular economy principle) must be eliminated because it makes fossil fuels more competitive and contradicts the EU climate and energy goals,” Pesonen concluded.

Moving away from food-based biofuels

Green NGO Transport & Environment (T&E) does not share such a view. It believes first generation biofuels have benefitted from a high level of public support without encouraging better alternatives, such as biofuels from waste and residues or renewable electricity used in transport.

In an interview with EURACTIV, Laura Buffet, an expert on oil and biofuels at T&E, said, “We had commissioned a study on the question of investments which showed for example that 95% of investments in biodiesel installations would be paid back by the end of 2017. So it’s time to shift the policy support to better alternatives.”

Expert: Clear sustainability framework needed for advanced biofuels

If the EU wants to avoid a U-turn on advanced biofuels, then it has come up with a “clear and robust” sustainability framework that will provide policy certainty and investment security, biofuel expert Laura Buffet said in an interview with EURACTIV.com.

For Buffet, looking at the climate and environmental impacts of current EU biofuels policies, it became clear that investments in alternative energy for transport need to move away from food-based biofuels towards better alternatives such as sustainable advanced biofuels.

“One important element to keep in mind is the huge amount of palm oil imports that go into EU biofuels. Around one-third of current EU biodiesel is made out of palm, mostly imported from South East Asia. It is clear that this doesn’t benefit rural development in Europe,” Buffet said.

EU institutions have “hurt” Europe

The bioethanol industry claims that the EU’s constantly changing policy on biofuels has discouraged and above all, caused economic damage to investors.

“In the first five years of this century in Europe, investors were building hundreds of millions of euros of biofuels assets per year, and in the next five years, this increased to billions of euros per year,”  Eric Sievers, director of investments at Ethanol Europe, told EURACTIV.

“The RED, sadly, turned that back into hundreds of millions of euros, and then the Commission’s various policy U-turns since 2012 have decreased truly private investment into new assets to zero,” he said.

Ethanol makers criticise the EU’s ‘biased’ transport decarbonisation goals

The European Commission is in denial concerning the contribution of conventional ethanol to the EU’s transport decarbonisation goals post-2020, according to European ethanol producers.

According to Sievers, the industry is still interested in investing; however, the EU institutions need to recognise that “it is precisely the risk emanating from them, and not technology risks, or the price of oil that makes biofuels today in Europe an impossible asset class for investors”.

“Once the EU institutions admit that they’ve massively hurt Europe by failing to provide a stable legislative framework, then we’ll be on the right track because then the logical next question is what investors would need in order to invest,” he added.

RED proposal is a non-sense

Luc Vernet, a senior advisor at Farm Europe, a think tank specialising in EU agricultural affairs, believes that the RED proposal is based on a wrong vision of our agricultural sector and its integration into the wider farming industry.

He stressed that it’s a matter of serious concern that the Commission’s proposal lacks scientific background and objectivity, which is contrary to the usual approach of the EU executive.

Referring to a Farm Europe study, Vernet noted that opposing first and second generation biofuels  – based on EU sustainably sourced material  – was a non-sense in the context of the circular economy and climate goals.

EU risks missing climate goals without ‘sustainable’ biofuels, experts warn

The European Commission’s proposal to gradually phase out “sustainable” first generation biofuels will prevent the EU from meeting its 2030 climate goals, experts claim.

“The EU’s sustainably sourced biofuels (biofuels from EU Rapeseed, sunflower, wheat, beet, and corn) have a clear positive impact on the environment and climate change,” he said, adding that thanks to the production of first generation biofuels in the EU, more than ten billion tonnes of EU protein meals are produced annually instead of being imported.

The French agri-food expert went further, saying that the RED proposal would not only be detrimental to the emergence of second generation biofuels – which will still require some years to develop – but also would result in more use of fossil fuels and more imports of protein meals by the EU.

“It will mobilise extra lands in third countries, and this will harm our answer to the challenge of global food security,” he warned.

According to Vernet, “The RED proposal has important implications for the farming sector, as farmers and agri-policy are deeply involved in the process of providing biomass – conventional or advanced – for renewable energy.

“It’s time to go back to facts, to restore a fact-based perspective on EU sourced sustainable biofuels and to highlight the key contribution of conventional biofuels to the agricultural economy, environment and rural development in the European Union,” Vernet concluded.

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