Mercosur deal opens door to South American biofuels while palm oil biodiesel use reaches record high

A new EU trade deal with the South American Mercosur trade bloc will open the European market to more imports of ethanol and crops that are used to make high-emitting biofuels. It means that crops and ethanol produced in Argentina, Brazil, Paraguay and Uruguay could be used to meet the EU’s green transport fuel targets.

The agreement allows for a lower tariff rate on ethanol imports to be phased in over five years: a quota of 200,000 tonnes with an in-quota rate of one-third of the current high duty (up to €19/hectolitre) will be opened for fuel and other uses beyond the chemical industry, according to a European Commission briefing. Brazil is a major exporter of ethanol and its sugarcane ethanol is expected to gain increasing market share from European producers under the lower tariff rate.

The agreement also reduces or eliminates duties that Mercosur currently imposes on exports of soybean products to the EU, the Commission said. This could make soy a more attractive feedstock for biodiesel producers in Europe. The climate impact of biodiesel from soy is two times that of fossil diesel, according to the European Commission’s own research. This is due to its expansion directly driving deforestation, but also its indirect emissions by displacing other land uses, such as food crops.

T&E director William Todts said: ‘This is yet another sign that Europe’s biofuels policy is failing. What started off as a poorly thought-through plan to promote green fuels and boost European farming has ended in a nightmare. First we saw palm oil conquer the EU biodiesel market, now it looks like we’re headed for the second worst biofuel, soy. We need a complete policy reset on this.’ 

Meanwhile, new data shows Europeans are eating less and less palm oil and instead are inadvertently burning more and more in cars and trucks. Last year 65% of all the palm oil imported into the EU was used for energy. 53% of all palm imports was used to make biodiesel for cars and trucks - an all-time high - and 12% to generate electricity and heating - another record. 

Palm oil used for biodiesel grew again in 2018 - by 3% - while the use of palm oil to make food and animal feed dropped significantly, by 11%, according to OILWORLD, the industry's reference for vegetable oils markets. Overall, the EU used over 4 million tonnes of crude palm oil to make biodiesel in European biorefineries in 2018. But the bloc imported an additional 1.2 million tonnes of palm oil biodiesel refined outside the EU. Following the lifting of anti-dumping duties on Indonesian palm oil diesel and Argentine soy diesel, imports of refined biodiesel tripled from 2017 to 2018 – with palm oil and soy accounting for around 86% of all biodiesel imports.

William Todts added: ‘This is a decade-long trend that gets worse every year. The EU struck a deal to phase out palm oil biodiesel by 2030 but the world’s forests can’t afford another 10 years of bio-fueled deforestation. We need European government to completely exclude palm oil from biofuels right now.’

According to the latest Commission study on deforestation and biofuels feedstocks, 45% of global palm oil expansion has caused deforestation. The climate impact of biodiesel from palm oil is three times that of fossil diesel, according to the European Commission’s own study.