• Keeping EU biofuels policy alive costs society €10bn a year, study shows

    CORRECTION NOTE: On 23 August 2013, the International Institute for Sustainable Development (IISD), author of the study, corrected the estimates of the public support the EU biofuels industry received in 2011. The revised overall estimate for EU biofuels subsidies is now €5.5-6.9 (average 6.2) billion per year, and not €9.3-10.7 (average 10) billion per year, as originally published in April 2013. According to IISD, the revision is due to a calculation error on the volume of biofuels eligible for tax exemptions in certain countries. All other estimates remain the same, including those for the cost of consumption mandates which make up the largest type of public support. "The conclusions and recommendations presented in the original report also remain unchanged", IISD stated in its Addendum.

    Cash-strapped EU Member States spent €10bn in 2011, a sum as big as the Cyprus bailout, in support of the biofuels industry, a new study by the International Institute for Sustainable Development (IISD) reveals. This public support was necessary to sustain the 4.5% market share biofuels had in 2011 – slightly below the 5% freeze proposed by the European Commission half a year ago. 

    Not freezing biofuel volumes to 5% but increasing them to 8.6% by 2020, as is expected under the current policy, would, according to the study, require between €28.8bn and €33.1bn of additional cumulative public support over the 2014-2020 period.

    Earlier research has already indicated that EU biofuels policy does not reduce greenhouse gas (GHG) emissions from transport. If indirect land-use change (ILUC) emissions from biofuels were counted in, most biodiesel available in the market today would emit more GHG emissions than fossil diesel [1].

    T&E’s programme manager for fuels, Nusa Urbancic, said: “We already know that the EU’s biofuels policy does not help the climate, and this study demonstrates that it does not help our economy either. The annual €10bn of support Europe gives to biofuels equals a Cyprus bailout every year. This amount may double if countries insist on meeting the 10% target. Member States should realise that freezing biofuels at current levels, as the Commission proposes, will not only save emissions, but a lot of money too.”

    The €10bn figure is the average of a €9.3-10.7bn estimated range of public support in 2011, which represents the total annual support to the biofuels industry and includes tax exemptions (worth €5.8bn), consumption mandates (€318-736m for ethanol and €3.1-4.1bn for biodiesel) and Research and Development funding (€52m).

    The study, entitled ‘Biofuels – At What Cost? A review of costs and benefits of EU biofuels policies’, evaluates the amount of support that the biofuel industry receives compared to its turnover, and analyses what the financial impacts of meeting the 10% Renewable Energy Directive (RED) target would be between 2014 and 2020.

    The study, co-funded by IISD and environmental organisations BirdLife Europe, the European Environmental Bureau (EEB) and Transport & Environment (T&E), shows that the support rate is well over half of the turnover of the European biofuels sector, which was €13bn to €16bn in 2011.

    The annual support is also higher than the total investment in biofuel production facilities from 2004 till now, which stands at about €6.5 billion. This suggests that the current support is particularly inefficient in protecting these investments.

    EEB’s Agriculture and Bioenergy Senior Policy Officer, Faustine Defossez, said: “The industry clamours that biofuels investment must be protected at all costs, yet yearly support to keep biofuels afloat is greater than the total initial investment in production facilities. We are paying to keep this inefficient machine running despite the fact that it does not deliver the environmental and economic goods initially sought!”

    The study also highlights that tighter CO2 standards for cars are a more cost-effective and environmentally sound way to reduce GHG emissions from transport. If invested in low carbon cars, €10.7bn spent annually in support of the industry could save 40MT of CO2 and pay for itself through reduced oil imports [2].

    “This policy is just too expensive for what it delivers, as governments are already struggling to financially support an import dependent policy that does not even distinguish between biofuels,” concluded Trees Robijns, EU Agriculture and Bioenergy Policy Officer at BirdLife Europe.

    Notes to editors:

    1. ILUC is the process by which land previously used to grow crops for food is converted to grow crops for fuel. Food will have to be grown elsewhere, usually in new, unfarmed land, because demand for food will at least remain constant. This conversion of unfarmed land into new farmland results in an overall increase in GHG emissions, eroding the environmental benefits EU biofuels policy is meant to deliver. Watch a short video about biofuels at https://www.youtube.com/watch?feature=player_embedded&v=igUtLwruUjA.
    2. The amount of €10.7bn is roughly equal to the investment cost required for a limit of 80 g of CO2/km for new cars, instead of 95 g/km of CO2, by 2020 as currently proposed. Based on Figure 14 at https://www.theicct.org/mass-reduction-impacts-eu-cost-curves (± €750 per car), multiplied by historically averaged annual car sales in the EU27 of 13 million units.