An Ethanol Outlook for 2008

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.