Is EU biofuels policy worth the candle?

The Commission will announce next Wednesday (January 23rd) its proposals on how it intends to allocate the burden of cuts in carbon dioxide (CO2) emissions and of increased use of renewables among Member States. Its draft Directive (so far without the crucial percentage shares) reiterates the mandatory target that biofuels should account for 10 per cent of transport fuels in the EU-27 by 2020. There has been intense lobbying by industries, environment groups and member states in the run-up to this announcement. However, there is increasing scepticism that its biofuel plans make much sense in the context of its climate change targets, and environmental groups have called for the target to be abandoned.

EU leaders called for the target last year as part of a move to cut greenhouse gas emissions by 20 per cent of 1990 levels by 2020. The Spring 2007 European Council meeting adopted a binding target of a 20% share of renewable energies in overall EU energy consumption by 2020 and within this a specific target for biofuels;

a 10% binding minimum target to be achieved by all Member States for the share of biofuels in overall EU transport petrol and diesel consumption by 2020, to be introduced in a cost-efficient way. The binding character of this target is appropriate subject to production being sustainable, second-generation biofuels becoming commercially available and the Fuel Quality Directive being amended accordingly to allow for adequate levels of blending.

Two recent reports during the past few weeks have cast doubt on the climate change benefits of the biofuels target. Various environmental organisations got hold of a leaked report by the Commission’s Joint Research Centre which says there is too much uncertainty to say whether the EU ten per cent biofuel target will save greenhouse gas, adding that using the same EU resources to produce biomass for electricity generation would, in terms of greenhouse gas (GHG) reduction per hectare of land, be more efficient. The JRC report has apparently estimated that the decrease in welfare caused by imposing a biofuel target is between €33 and €65 billion between now and 2020 within an 80 per cent probability range.

Ariel Brunner, EU agriculture policy officer for BirdLife International and a colleague on this site, was quoted in response to the report:

The proposed EU biofuels policy offers hardly any climate benefits at outstanding environmental risks. Now that even the Commission’s own experts say so, it is time for the biofuels target to be set aside and for fresh thinking on how to really tackle climate change while preserving natural habitats.

The problem is that mandating a particular volume of biofuels in transport fuels is a nonsensical way of going about reducing GHG emissions, because there is no guarantee that a particular biofuel has a positive net emissions effect. The impact on net emissions of any particular biofuel can vary from increased emissions to a reduction of 80-90 per cent, depending on the feedstock used, where it is grown, and the alternative uses of the land. The new proposal and the existing policy are both based on the volume of biofuel sold, irrespective of the way the biofuel has been produced.

The Commission argues that its draft Directive will set minimum standards which must be achieved by a biofuel before it becomes eligible to be counted against the mandatory target. UK industry sources want only fuels that save at least half the greenhouse gas emitted by those they replaced to count towards the target, although the European Biodiesel Board has called for a minimum 30 per cent threshold. There are also demands to extend the standards to ensure minimum rights for workers and farmers, and monitoring of the impact on food prices. But this will only go part-way to improving the efficiency of the policy in climate change terms.

Transport is the worst performing sector in terms of GHG emissions and seriously jeopardises the achievement of the Kyoto targets. Transport CO2 emissions in the EU grew by 32% between 1990 and 2005. Other sectors reduced their emissions by 9.5% on average over the same period. It is obviously necessary to address the escalating emissions from the sector.

However, if the transport sector is to be given specific targets for carbon reduction, then the appropriate target is to require a specific reduction in overall GHGs from the production and use of transport fuel. This would create a market incentive for those fuels that do most to reduce GHGs. The way to do this is to introduce carbon pricing of transport fuel on a CO2-equivalent basis, using life cycle analysis to identify the carbon price penalty for the various categories of fuel sources and cropping practices. This is the approach adopted in California with its Low Carbon Fuel Standard which aims to reduce the carbon intensity of fuels used in passenger cars by at least 10 per cent by 2020.

The UK Royal Society also published a critical report last week which called on the European Union to reform its biofuels policy to give more support to fuels that delivered greater cuts in emissions. It suggests that greater incentives should be given for the development and use of biofuels from advanced production and conversion systems (including lignocellulose and waste biomass) as otherwise industry will try to meet the targets using familiar technologies even if they are not the most efficient.

An alternative way to reduce transport emissions is to adopt more fuel-efficient cars, but the biofuels target does not create any incentive for this to happen. An EU target to reduce average new car emissions to 120 gCO2/km was formally announced in a European Commission communication in 1995. The target has now been postponed three times. According to the European Federation for Transport and the Environment, the average CO2 emissions still amounted to 160 gCO2/km in 2006.

The EU can set targets for renewable energy use and biofuels, but it is up to the Member States to adopt the policies to achieve these policies. Member States will want to reduce transport emissions, but setting a mandatory target for the share of biofuels is an expensive and inefficient way of achieving this. Farmers may benefit from the EU’s current strategy, but taxpayers and the environment will pay heavily.

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