Airbus urges EU to scrap biodiesel incentives for road transport
A senior Airbus executive has said that the EU should bin incentives for road-transport biodiesel or provide equal ones for the production of biokerosene used in airplanes. The target for renewable energy sources in transport for 2020 is now set at 10%, including biofuels, green electricity and other renewables. EU plans to include ILUC (Indirect Land Use Change) in their measurement of greenhouse gas emissions from biofuels were due to be published this spring, but there are problems and disagreements behind the scenes. There is competition now between aviation and road transport for biofuels, but making biokerosene costs more than making biodiesel. Aviation claims it should be given priority, as it cannot use electricity. (Neither, realistically, can road transport for the foeseeable future). Airbus wants “a level playing field or the scrapping of incentives that cover the biodiesel industry.” EU and Member States spent approximately €3.1 billion on biofuel support in 2010.
The EU should bin incentives for road-transport biodiesel or provide equal ones for the production of biokerosene used in airplanes, a senior Airbus executive has told EurActiv.
The EU initially set a target for biofuel use equivalent to 2% of the fossil fuel market by 2005 and 5.75% by the end of 2010. The target for renewable energy sources in transport for 2020 is now set at 10%, including biofuels, green electricity and other renewables.
Use of biodiesel is growing steadily across the EU, which as a whole is about halfway to meeting its 10% green fuel target by 2020. Slovakia is already on the cusp of meeting the goal, followed by Austria and France.
But this has fed controversy over the possible greenhouse gas emissions increase they may cause from Indirect Land Use Change (ILUC), when forests and wetlands are cleared to compensate for lands taken to grow biofuels elsewhere.
It is an open debate about how much good biofuels do for the environment. While they emit lower carbon emissions in transport, biofuels use for home heating are a leading contributor to sulphur dioxide, a main contributor to poor urban air quality in the EU, according to a European Environment Agency’s air quality report.
Growth in the European market mainly relies on imported plant oils that are expected to surge 21% in 2011 to a record 2.42 million metric tonnes, with Argentina accounting for much of the supply followed by Indonesia.
“We are asking for a level playing field or the scrapping of incentives that cover the biodiesel industry,” said Paul Nash, the Airbus head of environment and new energies.
EU plans to include the indirect effects of displaced land use in their measurement of greenhouse gas emissions from biofuels were due to be published this spring. But behind the scenes, they have become stuck in protracted negotiations.
Some sources say that the two key figures in the debate, Climate Action Commissioner Connie Hedegaard and Energy Commissioner Günther Oettinger have reached a consensus on the vexed question of Indirect Land Use Change (ILUC) behind the scenes.
They have done so before.
In minutes of a July 2011 meeting between Hedegaard and Oettinger, seen by EurActiv, the two agreed that “feedstock-specific factors would seem to be the most effective solution to address ILUC” and should be introduced “in 2016 if possible, or at the latest in 2018”.
A review would be initiated at the end of the current Commission’s mandate in 2014, according to the paper.
The ILUC issue would be addressed “in the short term by raising the threshold for greenhouse gas emissions savings to a more ambitious level in order to phase out the worst performing biofuels,” the minutes say.
But wrangling within the Commission over issues such as whether the proposals should be included in the Renewable Energy Directive, the Fuel Quality Directive, or both, has hampered progress.
EurActiv understands that following the involvement of Commission Secretary-General Catherine Day in the negotiations, consultations have now been launched with other Commission directorates, potentially delaying the proposal further.
Biokerosene more expensive than biodiesel
Biodiesel, which is primarily used in road transport, may eventually be deemed one of the ‘worst performing biofuels’ with leaked EU data putting its emissions on a par with those from tar sands, when ILUC effects are counted.
Last month, the US Environmental Protection Agency also ruled palm oil-based biodiesel inadmissible for its Renewable Fuel Standard Program, because it did not meet the minimum 20% lifecycle greenhouse gas emissions reduction threshold needed to qualify.
Such valuations have in turn fuelled complaints about the incentives that road-based biodiesels proportionately receive in Europe, as a result of the EU’s target to power 10% of its transport system with renewable energies by 2020.
“All of the incentives today in Europe are focused on the production of biodiesel and there are no incentives in terms of aviation,” Nash told EurActiv, referring to the increasing competition for biofuels between the two transport sectors.
Industry insiders argue airlines should be given priority access to sustainable biofuels as aviation will continue to rely on liquid fuels for decades. Road transport, by contrast, has already started its transition to electricity, something that airlines simply cannot do.
“It costs slightly more to make biokerosense than it does to make biodiesel, so if you were a refinery what would you do?” asked Nash. “It is simple economics.”
In all, the EU’s biofuels targets have resulted in a 21% saving in greenhouse gas emissions compared to that from petrol, according to an International Food Policy Research Institute report compiled for the European Commission.
But this figure masks significant variations between different biofuel crops in the study.
While the fuel from bioethanol plants such as wheat, maize, sugar cane and sugar beet, produced an average carbon saving of 56.5 grams of CO2 equivalent per MegaJoule (gCO2eq/MJ), biodiesels such as palm, soybean, sunflower and rapeseed produced a figure of -1.75 gCO2eq/MJ: a net carbon emission higher than petrol.
In response to questions from EurActiv, an EU spokesperson said: “We have been asked to look into the whole issue of ILUC and we are now preparing our impact assessment and proposals.”
- Spring 2012: EU scheduled to bring out proposals for ILUC and biofuels
- US Environment Protection Agency Notice of data concerning renewable fuels produced from palm oil
- European Commission Biofuels and other renewable energy in the transport sector
Think tanks & Academia
- International Food Policy Research Institute Report: Assessing the land use change consequences of European biofuel policies
How much is spent by the EU on subsidies to biofuels?
Report on Biofuels, from the House of Commons Library, 19.10.2011 states:
Biofuel support policies—How much is being spent in the EU?
Biofuels are supported by both European and UK policies. The EU Renewable Energy Directive included a statutory target that 10% of transport fuel by 2020 must come from renewable sources. All renewable energy sources can count towards this target, including renewable electricity and hydrogen, but it is expected to be met predominantly by first generation biofuels.
To meet the EU target the UK has adopted the Renewable Fuel Transport Obligation (RTFO). This set staggered targets for renewable fuels that fuel suppliers are required to supply—5% by the period 2013/14. The Coalition Government has said that this target will not be increased before 2014 (see below).
Biofuels also receive other forms of support, such as through research and development spending, fuel tariffs and capital funding. The Global Subsidies Initiative calculated that the EU and Member States spent approximately €3.1 billion on biofuel support in 2010. (6)
(6) Global Subsidies Initiative, Biofuel Subsidies in the European Union: 2010 Update , July 2010 http://www.iisd.org/gsi/biofuel-subsidies/biofuels-what-cost
The above reference, Global Subsidies Initiative, says:
Biofuel Subsidies in the European Union
This report finds that annual support for biofuels provided by EU governments reached € 3.7 billion in 2006. Government support is provided through a multitude of policies at the local, regional, national and Community levels. These policies include exemptions from or reductions in fuel-excise taxes; direct payments to producers in some Member States; capital grants or cheap loans for infrastructure; area payments for growing energy crops; and funding for research and development. Some Member States that have regulated minimum market shares for biofuels have started to move away from exempting them from fuel-excise taxes.
The cost-effectiveness of biofuels to meet these objectives is questionable. For example, the cost of obtaining a unit of CO2-equivalent reduction through biofuel subsidies is estimated to be € 575 to € 800 for ethanol made from sugarbeet, around € 215 for biodiesel made from used cooking oil, and over € 600 for biodiesel made from rapeseed. Governments could achieve far more reductions for the same amount of public funds by simply purchasing the reductions in the marketplace. For the price of one tonne of CO2 reduction through EU biofuel subsidies, more than 20 tonnes of CO2-equivalent offsets could be purchased on the European Climate Exchange.
Biofuel Subsidies in the European Union: 2010 Update
This report finds that, in 2008, total transfers in support of biofuels associated with the policies of the EU and its Member States amounted to € 3.01 billion. The decline in support per litre is significant: where in 2006 it was equal to € 0.74 and € 0.50 per litre of ethanol and biodiesel consumed, by 2008 it had decreased to € 0.24 and € 0.22 per litre consumed, respectively. Several factors are responsible for this change. One of the most important is that excise tax exemptions, which represent the largest share of support, have been reduced in several Member States, while mandatory blending targets gained in importance – and the latter are difficult to measure in terms of financial support.
Biofuel Subsidies in Germany
Currently, the German government plans to achieve the EU’s renewable transport target mainly through the use of mandatory blending targets applied to the mineral oil industry for the use of biofuels. This study highlights that the prevalent policy interventions in Germany—mandatory blending requirements and tax exemptions—have a number of related costs. The study provides an overview of Germany’s biofuel market and discusses current trends and developments in German biofuel support schemes. A number of issues linked to the use of blending mandates and other biofuel support measures are investigated and, where possible, an estimate of the potential costs provided.