The beginning of a new year traditionally animates to take stock of the outgoing
year and to reflect on chances and challenges the coming year might bring. This
is also true for the European bioethanol fuel industry turning the page of a turbulent
year 2007: After a head start in form of the encouraging decision of the European
Spring Council to introduce a 10% obligation for biofuel use, high hopes have been
slightly dampened by soaring raw material prices that put much pressure on this
young industry and even forced some players to temporarily halt their production.
This is particular sour in a time that the crude oil price almost reached US*$ 100
bbl.
So what will the year 2008 bring for our industry? Let’s have a look at the most
pressing issues.
Legislation
To start with, legislation plays an important role in the development of the EU
bioethanol fuel market. 2008 awaits the industry with two major pieces of legislation:
Firstly, the Commission is to publish its proposal on a Renewable Energies Directive
that will replace the existing Biofuels Directive on January 23. Key element is
the (likely) introduction of a binding biofuels target of 10% by energy content
by 2020. Such a decision would mark a strong signal to bioethanol producers, car
manufactures and road fuel distributors to prepare for a partly bio-fueled transport
sector in the near future.
Secondly, the Fuel
Quality Directive is under scrutiny by the European Parliament and the Council.
This Directive sets technical standards for transport fuels and needs to be amended
in order to allow for higher biofuel blends. The EU decisionmaking bodies Council
of Ministers and European Parliament have expressed the will to agree on a common
text before mid 2008. However, this could proof difficult as the responsible Parliamentary
Committee has proposed a complex and far reaching system on sustainability for road
transport fuels. It seems that sustainability is so popular that we might have 2
sets of criteria in 2 different Directives.
Sustainability
After all, sustainability is also linked to the introduction of a binding
10% biofuels target. The requirement of sustainable production of biomass for biofuels
will be enforced by a certification scheme. The up-coming Renewable Energies Directive
will define the criteria, which will most likely include land use change, preservation
of biodiversity and thresholds on greenhouse gas (GHG) emissions savings to be achieved.
Europe’s ethanol industry fully supports this move provided sustainability criteria
will apply to all biomass production regardless its origine and end-use. However,
one needs to bear in mind that European farmers already today comply with the most
rigorous standards on sustainable farming globally. eBIO is confident that this
will be acknowledged by applying cross-compliance rules to verify the fulfillment
of the land use change and biodiversity criteria. When it comes to the GHG saving
calculation tool we will keep a sharp eye on whether it will be workable and fair.
Furthermore, eBIO will underline strongly the contribution home-grown biofuels can
deliver in raising energy independence and security. Biofuels should not be just
a tool to deliver GHG savings.
Trade
In 2007 the EU will have imported roughly 800 mln litres* of ethanol for the fuel
stream – that equals more than one third of total EU-production* from Brazil only.
And the trend is still pointing up-wards. The number shows, that Europe is already
today the continent, which is very open to biofuel imports if not the most open
one in the world. The EU allows duty free ethanol access from the least developed
countries (LDC), countries belonging to the African, Caribbean and Pacific group
of states (ACP) and states falling under the Generalised System of Preferences (GSP+).
A total suppression of import duties is thus not only unnecessary, but would even
harm the development of those regions as well as the European agricultural and industrial
sector. Replacing all our fuel ethanol needs by imports would undermine the security
of supply goal as well as sustainability objectives. Unrestrained expansion from
production in Third countries could after all result in unwanted environmental effects.
eBIO therefore would like to see a coherent European import policy in 2008 to close
existing loopholes and thus to pave the way for a strong domestic industry. Part
of this policy needs to be the introduction of a single tariff line for all ethanol
imported for fuel use.
Feedstock availability
The year 2007 was marked by high grain prices caused by strong increased demand
in Asia, very poor weather conditions in many grain exporting countries and a strong
increase in speculation with soft commodities. These higher prices also triggered
an emotional debate on the impact of biofuel product and food availability and prices.
Ironically, the first that fell victim of these high grain prices was the biofuel
industry itself as it squeezed profitability margins in the bioethanol sector substantially.
As a reaction on this price development the European Union decided to abolish for
at least one year the set aside obligation, which until the early Nineties subsidized
non-production. The expected extra yield of certainly more than 10 mio tonnes will
have a positive effect on the overheated cereals market in 2008 and is going to
ease the situation of many European ethanol producers. Furthermore, eBIO expects
that the promotion of bioethanol will give a new incentive to European farmers to
adapt their production to the new market realities. Increased yields, rationalized
production processes and a market-based agricultural business will secure food and
fuel supply for the decades to come.
For additional information contact:
European Bioethanol Fuel Association (eBIO)
Ms Gloria Gaupmann, Assistant Secretary General