This article is part of our special report Rural Renaissance.
Farmers see biofuels as a crucial source of income but investors clashed with NGOs at an event organised by EURACTIV last week (12 May), over the European Commission’s post-2020 biofuels proposal and the realities of its impact on rural areas.
The Commission has proposed reducing the share of conventional biofuels used in transport from a maximum of 7% in 2021 to 3.8% in 2030 [see background].
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%.
But the impact of this reviewed policy on rural development is still unclear. Farmers and ethanol investors focused on the practical implications for rural development, such as employment and new markets outside the CAP subsidies.
On the other hand, the NGO Oxfam highlighted the global impact of EU biofuels policy and noted that a complete phase-out by 2030 should be implemented.
Without income, farming is lost
Eddie Punch, general secretary of the Irish Cattle and Sheep Farmers’ Association (ICSA) called for an approach based on science and logic in order to improve people’s lives.
He pointed out the main problems farmers are currently facing, stressing the pressure on incomes and the lack of markets to consume their products.
“If the farmer is to produce a product, there must be a logic behind this investment decision. And if this logic falls down, then we don’t have it,” Punch said.
The Irish farmer defended conventional biofuels production, saying that it is a €6.6 billion income source for farming on top of the Common Agricultural Policy’s (CAP) €59 billion. “Without the ability to make income farming goes nowhere and the next generation won’t be there,” he warned.
He also referred to protein imports, saying that 70% of the EU’s plant protein comes from South America. “Biofuels offer us the opportunity to replace some of that with the by-products of the biofuel generation,” he emphasised.
As for greenhouse gas emissions, he noted that farmers are already under pressure to deliver cuts. In the event of a setback in the transport sector, such as the phase-out of biofuels, farmers will be forced to foot the bill and reduce emissions even more in ways that are probably not doable or sustainable for the sector, Punch added.
For the head of the ICSA, indirect land use change (ILUC) emissions are not a big evil inside the EU. “ILUC comes outside the EU. Palm oil in Asia is one and the most significant causes. If we don’t have protein bio-products in Europe, we have to import protein from soya plantations in South America, which indirectly takes out rainforest down there.”
Oxfam: The Commission acted wisely
However, for Oxfam, the reality is different.
Marc-Olivier Herman, Oxfam’s head of EU Economic Justice Policy, said that the case should be seen from a global perspective, as the policies applied in Europe do not only have an impact at EU level but also globally.
“Palm oil is an example of the disastrous impact, which drives climate change and causes land conflicts in countries like Indonesia,” he said. He admitted, though, that in the case of ethanol, the market is smaller and the impacts much lighter.
“But if we replace diesel with ethanol are we going down the right policy road? That’s not the case,” he added, stressing that the policy in the US is extremely controversial, inside and outside the states, as the benefits are not equally shared.
Looking at the climate targets as part of a sustainable and long-term vision, Herman said that the Commission’s 2014 decision not to take Europe down that road after 2020 had been a very wise one.
“It’s essential to move on beyond food-based biofuels to waste and residues […] we don’t think that replacing crops with energy crops is a good idea for resolving our energy and transport issues.”
No more trust in the Commission
Eric Sievers, director of investments at Pannonia Ethanol, said that his company had believed in the RED when it was originally published. “We were exactly what that law sought to encourage, to draw new investors and new money,” he said, underlining that millions of euros had been invested all these years and that trust in the Commission now “is lost”.
According to the ethanol industry expert, Oxfam’s Herman had been to the Commission and said that it was a “moral disaster and a crime against humanity” to grow energy crops on agricultural land. He then managed to convince the executive to tell the industry that “energy crops will be used for biofuels over my dead body”, Sievers said.
Referring to the current RED proposal, he said its publishing date was the day that his company ceased to be an ethanol or biofuel investor in Europe.
“It’s a very sad story […] we are the only investors that invested private money,” he said.
As far as the food versus fuel discussion in the US is concerned, he insisted there was no indication that ethanol production increased the price of corn. “From 2003 to today the data shows that the price of food crop biofuels globally went up less than the prices of other foodstuffs, less than fertilisers, less than anything.”
He also referred to the ageing rural population and stressed that farmers should be helped to find new markets. “We must create markets for farmers outside the CAP’s subsidies,” he emphasised.
Clash over impact of biofuels
Oxfam’s Herman and Pannonia Ethanol’s Sievers clashed intensely on the impact EU biofuel policy.
Herman explained that it was not just about palm oil but also about expanding agri-business into sensitive zones as a result of a growing market for agricultural commodities that is driven by a poorly informed EU policy.
“The RED proposal addresses that efficiently, we don’t understand why after a very clear wording in the state aid guidelines for 2014-2019 the decision to stop support for conventional biofuels has not basically been made,” Herman said. “It might not be the best for investors to look into the future but this is not really my issue,” he added, in support of a complete phase-out.
As for ILUC, he said, “We would be happy to have a differentiation of feedstocks and we tried during the revision of the RED to address the ILUC problem, but unfortunately it proved to be politically impossible to have ILUC factors included in the directive.”
“The good thing is that the consequences [of the RED II] for the farming sector are not catastrophic. If you remove the huge tax credits given to the biofuels sector and the impact particularly on vegetable oil crops, there are transition and balancing effects in terms of increasing demand for other uses and exports,” he emphasised.
Sievers shot back that, five years ago, Herman had said the problem of biofuels were the tremendous price increases in agricultural commodities.
“Now he says that the great thing about biofuels is that they don’t have an agricultural price impact,” the expert said.
“In 2012, there were global impacts to EU policy. Maybe, but he [Herman] said that the global impact was with African ethanol, not a drop has ever come in […]. You convinced people that there were six million hectares of land grabs in Africa, which turned out to be zero hectares. You talked about a huge agricultural price increase, which proved to be a decrease, and about a tax credit for ethanol, which as a business person I have never received.
“It’s a complete fabrication. All the arguments against ethanol have been proven to be absolutely false,” Sievers concluded.
Both experts agreed to conduct independent research focusing on the actual impact of biofuels on corn prices.
Dr Wim Heijman, a Professor of Regional Economics at the Wageningen University, focused on the current state-of-play of EU’s rural areas, claiming that there are high unemployment levels, depopulation, schools, and shops are disappearing and young people migrate to urban areas.
“We need to stop this process and we need an engine for creating jobs. It’s much easier to create jobs in urban areas compared to rural ones. Production of biofuels like ethanol could be one of the solutions to provide jobs in rural areas,” he noted.
“Is it competing with food production? This is a false argument,” he said, adding that the capacity is there because a lot arable land is underutilized, especially in Central and Eastern Europe.
For investment, he noted that a stable institutional environment is needed as well as a robust mandate to secure private investment in the area. “Subsidies are nice, also needed probably, but it’s not a sufficient condition […] we need private investments that will come about when there is this stable institutional environment,” he said. “Now this is not the case, bioeconomy is stagnating and this due to that. The Commission has to come up with a stable solution in the biofuels sector,” he added.
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.