The EU is entering the next phase with the Renewable Energy bill

Roughly one month after the U.S.A. signed their Energy Independence and Security Act (EISA) into law, the Commission’s proposal for a Directive on Renewable Energy Sources has seen the light of day. It aims at further promoting all renewable energy sectors in the EU since they have a positive impact on the environment, security of supply and economic growth in the EU. But is this proposal also the right way forward for the European bioethanol industry? eBIO will take a closer look on the pros and cons of the proposed Directive.

Center piece – the 10% binding target
The introduction of a minimum binding 10% biofuels target per energy content in 2020 is obviously very good news for the industry. By affirming what has already been agreed upon at the highest political level of the EU in March 2007 the Commission acknowledges one important thing: Biofuels are for the time being the only well-know, easy to use and reliable domestic energy source that additionally curbs greenhouse gas (GHG) emissions from the transport sector. As we could witness in the U.S.A. and Brazil an obligation has a positive effect on the growth of the sector. Finally, it grants part of the investment security needed in Europe to bring this young industry forward.
However, the Commission only went half way and failed to define intermediate targets for biofuels – as it did for the other sectors. The experience with the current biofuels directive shows that most of the Member States tend to wait a long time with the measures necessary to promote biofuels. Intermediate targets are thus needed to prevent a rude awakening in 2019 and to step-wise attain the 10% target.

Stimulate development of 2nd generation
Comparable to the U.S. law (EISA) the European proposal grants so-called second generation biofuels a higher market value by letting them count double towards the quota. This seems to be a good incentive and will make producing these types of biofuel more attractive. However, the proposal is not very clear in explaining all the feedstock that can be used. For example wastes and residues can be used but it doesn’t define these raw materials. To avoid ambiguity a clear definition of those raw materials are necessary. The extra credit is a major step towards the commercialization of advanced biofuels but it is not yet enough. The EU finally needs to put the money where its mouth is and back the legislative initiative by increased expenditure for research and development – as the American example shows.

Securing Europe’s mobility while reducing GHG emissions
Why do we need a binding target for biofuels? The answer is very simple: Biofuels have two unique characteristics, which make them indispensable. They are to date the only mean to a) decrease the EU’s heavy dependence on fossil fuel imports from politically unstable regions and b) to reduce ever-growing GHG emissions from road transport. In the EU however those two goals are not on equal footing. Due to a growing number of very vocal pressure groups political Brussels seems to loose the energy security aspect out of sight. Unlike in the U.S.A. the public debate in the EU runs circles around the sustainability issue while downplaying the necessity of domestic biofuels production to secure Europe’s mobility.
The proposal reflects this in several ways. To give an example: Despite the fact that energy security is mentioned in the recitals of the Directive no legal measure is inserted to make it happen. Also the pivotal question of trade is simply been pushed back to 2012. But to ensure energy security those issues need to be addressed as soon as possible.
In contrast to the stony silence in this aspect, the proposal incorporates three articles and one annex about sustainability. Regardless this imbalance, the EU bioethanol fuel industry still supports most of the proposed criteria.

Making sustainable transport fuels
However, the cut-off value for GHG savings, which is set at 35% needs further consideration. To start with, the fossil fuel reference value is much too low and does not reflect reality. Biofuels replace the marginal oil, which is the one that is most costly and energy-intensive to retrieve, such as oil from Canadian tar sands or deep-sea drilling. Actually, this should thus be used as a reference.
Secondly, the default values for GHG savings are kept very low on purpose. This forces most of the producers to provide evidence that they can do better than these default values, which means a bureaucratic hassle. Additionally, picking relatively low default values compared to typical values harms the image of the whole industry.
Thirdly, the proposal foresees that all plants coming on-stream after 1 January 2008 need to comply immediately with the 35% cut-off value. This is like changing the rules during the game: By the time companies decided to build a plant, which takes on average 18 months, there was no discussion on sustainability criteria let alone a provision in place. Plants having been operational before have a grandfather until 1 April 2013. This probably is an April fool’s joke! If one assumes a depreciation time of about 10 years and knowing that most of the present plants were not operating in 2003 but about two years later 1 April 2015 is a much more reasonable date.
Another unanswered question is why sustainability criteria only apply to biofuels. Biofuel feedstock only makes up a small part of global agricultural production. In order to hedge effectively against negative impacts of agricultural activity sustainability criteria need to apply to all biomass regardless its end use including foodstuff. Also fossil fuels should be subject to sustainability criteria to create a true level-playing field.

Keep on track
The Commission proposal is on the right track. Especially the 10% obligation is a crucial instrument and softening it to a voluntary exercise (as proposed by a number of NGOs and Green party politicians) will have a lot of unwanted effects. We will not reduce our road transport emissions soon, we will not reduce our dependency on imported oil, we will not create new opportunities for our farmers, we will not provide an incentive for developing producing advanced biofuels and we will not have sustainability criteria. Biofuels have a great potential and need the right legislative framework to fulfill the core objectives of EU renewable energy policy and to contribute to economic growth in the EU. The EU ethanol fuel industry is confident that the EU legislator will acknowledge the overall positive impact of domestic biofuels production by putting in place a balanced Directive as soon as possible.