Biofuels, Trade and Sustainability

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The lack of internationally-agreed criteria for sustainable biofuels production and the muddle of different government measures aimed at sheltering domestic markets are holding back growth in the global biofuels trade and could stunt EU progress towards its goal of gradually replacing oil for transport.

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Overview

Europe relies on oil for 98% of its transport needs and the two most important liquid biofuels currently available are ethanol and biodiesel, made from agricultural crops such as corn, sugar cane, palm oil and rapeseed. But there is increasing concern that a surge in the production of such fuels within the EU would have serious negative implications for the environment, including biodiversity loss and food and water shortages. 

Despite a report by the European Commission's Agricultural Department highlighting the "relatively modest" impact of the 10% biofuel target on land use in the EU (EurActiv 30/07/07), the Commission acknowledges that reliance on domestic agriculture alone is unlikely to meet the objective and that an increase in biofuel imports will be needed. 

Currently, 90% of world biofuel production is consumed domestically. But international trade in biofuels is beginning to grow, as industrialised countries find they lack the capacity to meet growing demand and turn towards the likes of Brazil, Indonesia or Malaysia to fill the gap.

Although increased trade levels are expected to drive the deployment of new, potentially greener fuels, there remain strong concerns that current trade regimes are not yet fit to maximise the positive contributions of biofuels or to minimise the risks.

Concerned about the environmental impact of biofuels, the EU has committed to 'second-generation' biofuels as a cleaner alternative and has been busy drawing up sustainability criteria that also apply to imported biofuels.

The sustainability criteria were incorporated in the EU's new directive on renewable energies, agreed in December 2008 by EU leaders during a summit in Brussels (EurActiv 05/12/08). Under the deal, the EU agreed satisfy 10% of its transport fuel needs from renewable sources, including biofuels, hydrogen and green electricity, by 2020.

The new directive obliges the bloc to ensure that biofuels offer at least 35% carbon emission savings compared to fossil fuels. The figure rises to 50% as of 2017 and 60% as of 2018.

But there are concerns that the EU's sustainability criteria for biofuels are too strict and could lead to tensions with large producer countries, such as Brazil, which threatened during the negotiations to challenge the directive before the World Trade Organisation (WTO).

As the directive has now been adopted, the general framework is clear. However, many issues remain to be settled, which could still expose it to a challenge before the WTO.

For example, the EU will have to define the geographical range of concepts such as "highly biodiverse grassland" and "severely degraded land". Moreover, the Commission will have to report on how and if it intends to tackle the impact of indirect land-use change on greenhouse gas emissions by the end of 2010.

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