Navigating our way out of the biofuels quagmire

The discussion about Europe’s biofuels policy is in full swing and the biofuels industry has assembled an impressive lobbying army to spread the gospel. Hardly a day goes by without the biofuels industry organising some event to promote the benefits of biodiesel and ethanol. This is a good indication of how important EU legislation is for biofuel producers. Indeed, growing crops and then turning them into fuels to burn in combustion engines is a costly and inefficient business. The truth is the biofuels industry was created and survives on generous and sustained support in the form of mandates, tax breaks and subsidies.

This policy support was always based on the claim that biofuels are a solution to Europe’s climate and energy security problems. But it has been clear for some time there are serious problems with that claim. This is best illustrated by the ever increasing shares of palm oil in Europe’s biodiesel. Half of Europe's palm oil imports end up in our fuel tanks. Palm oil production in countries like Indonesia leads to deforestation, peatland drainage and other environmental damage which helps explain why EU biodiesel – 32% of which is now palm based – has 80% higher greenhouse gas emissions than fossil diesel. The reason for palm’s success is that palm oil is cheap. Since the EU has no instruments to distinguish between badly performing biofuels and better ones, fuel suppliers choose to blend in the cheap, bad stuff.

If things look bad now, consider what will happen once the EU has concluded trade deals with South America (Mercosur) and Indonesia and it opens its market to even larger shares of cheap palm and soy-based biodiesel. What this means is illustrated by a recent decision to lower tariffs on Argentinian biodiesel – after a WTO ruling against the EU tariffs – which will cause a ‘major increase in volumes’ and an ‘influx’ of Argentinian biodiesel, according to biodiesel lobby group EBB.

That we are as worried as the EU biodiesel lobby about this is a good illustration of what a mess Europe’s biofuels policy is. The biofuels framework is unstable, costly and controversial, it has negative environmental impacts and it is increasingly based on imports. So we have a framework that fails as a climate policy, as an energy security policy and is about to start failing as a subsidy scheme for European farmers. That’s an untenable situation for an industry that is entirely dependent on policy support.

A cynic might argue this suits us. And indeed, we have been among the most vocal critics of Europe’s biofuels craze. But we have no desire to see the entire industry collapse. Sustainable advanced biofuels can play a (limited) role in reducing transport emissions, particularly in the aviation sector. We want to see that potential realised.

But if the industry wants to continue to receive policy support in the long run, a number of things will need to happen. First of all, we need stop pretending that all biofuels are created equal. Biodiesel – particularly if based on palm and soy oil – is clearly a lot worse because of its high ILUC emissions. Industry has a fairly simple choice here: either it accepts differentiation, or it accepts that it will be capped and phased out.

The area where there would be growth (and investment certainty) is the advanced biofuels sector where the Commission has proposed a blending mandate. We would agree with Bas Eickhout, the parliament’s lead negotiator on the biofuels file, that advanced (bio)fuels need to be directed to the aviation sector.

The industry has a big army of lobbyists but I’m not sure their strategy to deny problems and pretend as if nothing happened in the last 10 years is a smart one. Perhaps they should consider the words of an old greek general: ‘one more victory like this, and we’ll be ruined’.

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William Todts's picture

Executive Director

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