REA sets out its concerns over EU biofuels proposals

The European Commission (EC) has now formally announced the changes it intends to make to existing Europe-wide biofuels legislation. Draft versions of the proposals have been leaked to the press over the past month and while the proposals are not as damaging as the leaked versions had suggested, there are still several issues which threaten jobs and investment in this budding sector of the green economy.

The proposals present five main areas of concern for the REA.

The proposal to limit crop biofuels to no more than half the 10% target for renewable transport with immediate effect. The market for agricultural feedstocks for biofuels has stimulated huge investment in agricultural productivity in the UK. Furthermore, crop-based biofuels provide as much high protein animal feed as low-carbon biofuels. This feed replaces imported feed often associated with high carbon emissions. Limiting crop-based biofuels will result in less food being grown in the UK and not more.

The removal of all subsidies for crop-based biofuels post-2020. Plants have been constructed, or are under development, based on the expectation of a post-2020 framework, and there is a clear need for market transition to second generation biofuels which will be based on the existing the biorefineries infrastructure. The shifting of the goalposts will derail current and committed investment estimated at hundreds of millions of pounds in the UK alone and provide no longevity for future investments.

The published proposals differ from the leaked versions in that they have not imposed mandatory ILUC factors in the Fuel Quality Directive (FQD) after all. The REA supports the broad application of ILUC factors to all non-food land-based industries (not just biofuels, but cosmetics, cotton and detergents, for example), but agrees with the commonly held view that more and better research needs to be conducted into ILUC before these numbers are implemented.

The leaked proposals suggested a retrospective application of the 60% greenhouse gas saving requirement, backdated to July 2012. We are pleased to see that in the published version of the proposals, this requirement is no longer backdated but will actually apply to new installations from July 2014. We support these strict greenhouse gas saving requirements, which the UK industry is well-placed to meet, but to have moved the goalposts once the game is already underway would have broken the golden rule of fostering investor confidence.

The proposal to quadruple count advanced biofuels under the RED will not mean four times the carbon savings. On the contrary, with investment in first generation biofuels under threat from this proposal, it is commercially illogical to expect investors to have the confidence to embrace the more expensive, technologically complex advanced biofuels, such as biofuels derived from waste. This proposal will entirely derail a workable forward development trajectory for the UK industry – and puts the UK’s renewable energy and climate targets in a perilous position as the shortfall will most likely be met by the cheapest alternative – fossil fuels.

“We are pleased to see that the European Commission has listened to industry’s concerns, which we have had to articulate under great pressure in a very short time frame” said Clare Wenner, the REA Head of Renewable Transport. “The decision not to implement mandatory ILUC factors until sufficient research has been carried out is welcome. However, the proposals to cap crop-based biofuels at 5% of transport and to withdraw support altogether after 2020 remain. These proposals constitute a wholesale withdrawal of political support from the Commission, and will deter the very investors that the Commission wants to invest in innovations for non-food advanced biofuels.

To date, nearly £1 billion has been invested in the UK in the production of sustainable biofuels, and although our industry now supports 200 companies and 3,500 jobs across the supply chain, it remains small by EU standards.

The biofuels sector is the only fuels sector where mandatory sustainability standards are legally enforceable. Targets set under the RED have ensured that Government and industry can robustly differentiate between sustainable and unsustainable biofuels. The UK industry has been particularly innovative in meeting these requirements, achieving average greenhouse gas (GHG) savings from UK-produced biofuels of 77% while increasing co-production of animal feeds. The Government’s ‘Bioenergy Strategy’ recognises the role of biofuels in meeting carbon targets over the next 20 years [7].

“The UK biofuels industry is among the best performing in the world, both in terms of sustainability and innovation” Wenner added. “The Commission’s heavy handed approach risks alienating investors with the result that transport will remain a haven for fossil fuels. The fact is that first-generation biofuels are absolutely essential to meeting our climate and renewable energy targets for as long as the internal combustion engine remains the norm – consumer acceptance of electric vehicles (and the clean grid they need to be low carbon) are still a long way off. If investors cannot do business in the lower risk first generation market, they are unlikely to put millions more pounds into the costlier, riskier second generation market. The facts around the impact of biofuels on climate and global food prices are very poorly represented in the public debate. What we need is policy-making which differentiates between good biofuels and bad biofuels, and this is what we will be communicating to MEPs over the months to come.”