Proposal on indirect land-use change: EU Council reaches agreement

June 13, 2014 | Jim Lane

Received at the Digest from the Council of the European Union:

Today’s Energy Council reached a political agreement on the draft directive on indirect land-use change (ILUC) amending the fuel quality (98/70/EC) and renewable energy (2009/28/EC) directives (10300/14 + 10300/14 COR 1).

The aim of the proposed directive is to start a transition to biofuels that deliver substantial greenhouse gas savings when provisional estimated indirect land-use change emissions are also reported, while existing investments should be protected.

In December 2013, the Energy Council examined a presidency compromise text of this draft directive. However, there were still some outstanding issues. Therefore, the Council’s preparatory bodies continued to work further on the proposal, with a view to facilitating political agreement.

The Hellenic presidency focused on two aspects in its compromise text: a stronger encouragement for advanced biofuels, while leaving flexibility for member states, and some additional elements to reflect considerations on estimated ILUC emissions and the possible impact of EU policies on biofuels as regards the environment and cross compliance in respect of agriculture and climate policies.

The agreement acknowledges and addresses the ILUC phenomenon, starts a transition to biofuels with lower ILUC risks and provides a clearer investment perspective while protecting investments made. It comprises, in particular:

– Mitigation of indirect land-use change emissions through a threshold of 7 % of the final consumption of energy in transport in 2020 for conventional biofuels to count towards the renewable energy directive target;

– encouragement of the transition to second and third generation (“advanced”) biofuels, through incentives for advanced biofuels by inviting member states to promote the consumption of such biofuels and requiring them to set national targets for advanced biofuels based on a reference value of 0.5 percentage points of the 10 % target for renewable energy in transport of the renewable energy directive. Member states can set a lower target, based on three categories of objective reasons. However, they have to justify any setting of a lower target than 0.5 percentage points and to report any reasons for non-achievement of their national target. The Commission is to publish a synthesis report on member states’ achievements towards their national advanced biofuels targets;

– new Annex IX of the renewable energy directive contains feedstocks for advanced biofuels that count double towards the targets. In addition, advanced biofuels not listed in Annex IX and used in existing installations prior to the adoption of this directive, can be counted towards the national target;

– additional incentives for advanced biofuels by extending the tool of statistical transfers of the renewables directive to cover such advanced biofuels, the double counting of the contribution of these biofuels is extended to the overall renewables energy targets;

– provision of incentives to generate electricity from renewable sources in order to reduce greenhouse gas emissions in transport. In this regard, a multiplication factor of 5 for electricity from renewable sources in electric road vehicles and of 2.5 for electrified rail transport were introduced;

– ILUC reporting on greenhouse gas emission savings from the use of biofuels will be carried out by the Commission on the basis of data reported by member states; for that purpose, provisional estimated ILUC factors are included in new Annexes to the renewables and fuel quality directives; – a review clause that includes the possibility of introducing adjusted estimated ILUC factors into the sustainability criteria

Background

The renewable energy directive established mandatory targets to be achieved by 2020 for a 20% share of renewable energy in the EU’s energy consumption and a 10% share for renewable energy in the transport sector. At the same time, an amendment to the fuel quality directive introduced a mandatory target of a 6% reduction in the greenhouse gas intensity of fuels used in road transport and non-road mobile machinery to be reached by 2020.

When these directives were adopted, the European Parliament and the Council asked the Commission to review the negative effects on greenhouse gas savings which might result from the conversion of land and, if need be, to present a legislative proposal. The draft directive was presented by the Commission in October 2012 (15189/12). The European Parliament adopted its first reading position on 11 September 2013.

Next steps

Political agreement is to be followed by the formal adoption by Council of its position at first reading.

Stakeholder reaction

Rob Vierhout, Secretary-General of ePURE, the European renewable ethanol industry association, commented: “The political agreement reached by Member States on the ILUC file is welcome progress and should pave the way towards a stable policy framework that will restore investor confidence in the sustainable biofuels market. However, more progress remains to be made:

The proposed ceiling of 7% for conventional biofuels could limit the uptake of renewable ethanol as the majority could come from existing biodiesel capacity. It is essential that the ceiling is combined with a separate renewables in petrol target as proposed by the European Parliament in its first reading position.
Low or no-ILUC risk biofuels should count towards the target above the ceiling, as a way to promote further market penetration of the best performing biofuels.
To date, the analysis on ILUC merely confirms that ethanol makes a very strong contribution to the decarbonisation of Europe’s road transport.
Truly advanced biofuels can be properly deployed in Europe only if a sub-target for them is put in place. The proposed 0,5% sub-target is a start – the post 2020 target must be higher – and any target must exclude the current system of multiple counting which just allows more fossil fuels to be used.
A 0,5% advanced biofuel target requires 3bn euros of investments. This is achievable if ambitious post 2020 targets are set, allowing for long-term investment in production facilities.

The Leaders of Sustainable Biofuels, an organization of leading advanced biofuels technology companies, noted:

“The Council of ministers have taken an important but small step forward in order to create certainty in the biofuels markets. The advanced biofuels mandate is essential to ensure investment decisions are made in Europe. We regret the fact that the targets have been diluted to non-binding but hope that the final directive will in the end ensure regulatory certainty for the sector. It has taken almost two years of discussions while the industry has been putting investments in the low carbon fuel industry on hold. Now member states have agreed on an important, but vague, compromise on the renewal of the renewable energy directive and the fuel quality directive.

“Now it is the time to move forward. The revision of the directive should be finalised during the upcoming Italian presidency, and the EU member states must agree in the October Council meeting on a progressive and binding continuation of the advanced biofuels mandate beyond 2020. The EU must agree on a clear pathway for the advanced biofuels up to 2020 and beyond. We are excited to see many member states recognize the benefits of advanced biofuels and have set, or are about to set, demanding national targets. Now it is high-time for the European union to show leadership and agree on a European-wide strategy”.