EU biofuels: A lost opportunity?

By Dick Roche, former Irish Minister for Environment and EU Affairs

Special to The Digest

When the EU Commission produced its 2012 proposal to cap at 5% the contribution crop-based biofuels can make under the Renewable Energy Directive (RED), the logic of the Commission’s position was widely questioned.

Critics, including this writer, challenged the extraordinary decision by the Commission to remove the cornerstone of RED transport energy policy only three years after that legislation had been enacted as a means of enlisting private sector investment to support EU climate goals.

It was pointed out that EU Member States had huge untapped capacity to produce low ILUC bio-ethanol in an environmentally sustainable way that would contribute to meeting EU climate change targets and to cutting Europe’s dependence on imports of fossil fuel and animal feed, all while stimulating regional development, creating jobs and providing European farmers with a valuable additional income stream.

The recently released Globiom Study brings the manner in which the Commission handled the biofuels dossier back into focus and raises serious issues about the accountability of the sections in the Commission that launched the three years of agony that led to the ‘ILUC Directive’ [(EU) 2015/1513].

The Commission Approach to EU Produced Biofuels

The Commission released the study “The Land Use Change Impact of Biofuels Consumed in the EU “ on 10^th March 2016. The study was prepared by a consortium of consultancies, IIASA, Ecofys and E4Tech who used a ”tailored version of the GLOBIOM model” to measure land use impacts of EU biofuel policies. It was delivered to the Commission at least six months prior to its release, and possibly much longer since it was supposed to be released to the public over a year ago, specifically to inform public biofuels debates.

The manner in which the Commission suppressed the Globiom Study speaks to a pattern of behaviour that falls well short of the standards that citizens and Member States should have the right to expect from the EU.

More importantly, the study itself raises major questions about the manner in which the European Commission has dealt with the ‘biofuels dossier’. It, in particular, brings sharply into focus the attitudes of those within the Commission who framed and drafted the 2012 amendments.

The findings in the study support the case made by opponents of the EU Commission’s position during the debate on the “ILUC Directive”

Coming as it does at a time when the Commission is in the process of offering non EU countries 12% of the EU market for ethanol as part of the Mercosur trade talks, release of the study also raises questions at to the level of coordination across different policy areas within the Commission.

Fundamental flaws in Commission Approach

The Globiom study raises disturbing questions about the degree to which the Commission fulfilled its legal duty to base policy proposals on ‘best available science’ as was expressly required by the RED. It demonstrates that :

• Conventional ethanol feedstocks, such as sugar and starch crops, have low land use change impacts, which is consistent with previous ‘best available science’,
• Cellulosic ethanol feedstocks similarly have a low or even positive LUC impact,
• Land use change impacts and associated emissions can be much lower if
  • abandoned land in the EU is used for biofuels production
  • biofuel demand is covered by yield increases.

None of these points were recognised in the amendments to the RED which the Commission put forward in 2012. And yet, each of these points was already evident in 2012 in what was then the ‘best available science’.

Nevertheless, in 2012, the Commission falsely claimed, with no scientific evidence (and in fact with all the evidence pointing in the other direction), that conventional ethanol was no different than biodiesel and subjected it to the same regulatory treatment. Subsequent to the circulation of the 2012 proposals Commission staff indicated that – while the 2012 proposals did not have scientific foundation with respect to ethanol – they were confident that their anti-ethanol views would be vindicated in time by science.

The Globiom study, far from supporting the then view of Commission staff, validates the case made by European ethanol producers that the crude and undifferentiated approach adopted by the Commission wilfully ignored the reality that EU Member States have a huge unrealised capacity to produce low ILUC bioethanol. It also highlights the stark difference between bureaucrats who respect science and those with the hubris to believe that they can fund studies to make it appear that their particular ambitions have the support of science.

The Globiom Study identifies palm oil as a major issue (and one far removed from the world of ethanol’s impacts). Palm oil and its environmental impact were much discussed during the debate on the ‘ILUC directive’. The Globiom study sees the impact of palm oil as not attributable solely to EU biodiesel, but due to all uses, and likely much more by non-fuel uses. This is an important result as during the debate on biofuels proponents of action against ‘first generation’ biofuels sought to lay the blame for problems relating to palm oil ‘at the door’ of EU biodiesel consumption and were supported in so doing by the Commission. Indeed, the two major funders of the palm-oil centric attacks by NGOs on biofuels (not even biodiesel, but quite illogically on both biodiesel and ethanol) were Norwegian state funds and the EU Commission.

While the Globiom study may provide an argument for either limiting or banning palm oil from the EU for all uses on climate grounds, it certainly does not provide any basis at all for limiting the use of ethanol to displace fossil fuel in Europe in furtherance of climate ambitions.

Lack of Openness & Transparancy

Not only has the Commission based its approach on selective science but its behaviour on the biofuels dossier has lacked openness and transparency:

• The Commission’s 2012 proposals were nominally based on research by the International Food Policy Research Institute [the IFPRI Study], then the ‘best available science’, but in fact directly contradicted both the context and actual findings of that science,
• The ‘consultation’ process which preceded the 2012 proposals was improperly conducted; in an extraordinary departure from good administrative practice stakeholders were misled by the Commission:
• In December 2010, the Commission indicated that it was considering four options to meet the requirements in the 2008 Renewable Energy Directive.
• Late in 2012 the Commission for the first time indicated that it had decided on a fifth course of action.
• The Commission held no prior consultation on this additional course of action: the fifth option was tacked onto an impact assessment at the eleventh hour compromising the impact assessment process which is painfully anyone who cares to re-read the 2011 impact assessment at this point.
• As late as February 2012 (after that fifth option had been selected) one company which was committed to making a number of major investments in ethanol production in the EU was given a specific undertaking by DG Energy that ‘no adverse change in the regulatory environment would occur’. That undertaking proved false. That investor relying on everything that was publicly available went ahead with the investment and as a consequence suffered immense financial losses.
• The Commission’s behaviour with the Globiom study is another example of extraordinary administrative misbehaviour. The study was received by the Commission in August 2015 (a date which was in all peobability itself delayed by Commission actions ) and not released until March 2016. The study’s release came only after a number of parliamentary questions were tabled on it in the EU Parliament, after MEPs from the most negatively impacted MS wrote to Commission President Juncker requesting access to it and after a formal complaint was submitted to the Ombudsman in response to DG Energy’s nonsensical claim to a stakeholder in December that releasing the report was impossible because it would damage the Commission’s ability to conduct foreign relations. This is not the open and transparent approach promised by the current Commission at the outset of its mandate.
• In November 2015 the Commission announced its intention to “consult stakeholders and citizens on the new renewable energy directive (REDII) for the period 2020-2030”. The Consultation period ran from 10^th November 2015 to 10^th February 2016. The Commission had the Globiom Study in its possession throughout that period but refused to allow access to the study. Withholding the study, which the Commission stated was specifically intended to be used for the policy development that was the subject of the consultation from stakeholders, including MEPs, makes a mockery of the ‘consultation’ process. Again there is a pattern of maladministration here  — the ‘consultation’ on the 2012 proposals to amend the RED were also rendered moot by the fact that the Commission having “consulted” on four options for action based its legislative proposals on a fifth course of action on which there had been zero consultation.

The Negative Impact of the Commission’s 2012 Biofuels Policy Reversal.

With the right policies Europe’s farmers in partnership with local bio-ethanol producers could:

• Help cut Europe’s dependence on imported fossil fuels by producing clean renewable ‘home-grown’ energy and could do so in a way that is demonstrably ILUC free,
• Boost farm incomes and encourage the type of productivity gains in EU agriculture that have been sought for years,
• Create investment opportunities that support rural economies and reverse rural depopulation,
• Bring jobs to areas that need work and,
• Cut Europe’s need to import animal foodstuffs.

The changes brought about by the ‘ILUC Directive’ negatively impact on this potential.

The changes also impair Europe’s efforts to cut GHG emissions. Latest scientific modelling shows that ethanol emits about half the GHG emissions of petrol. Transport is short of decarbonisation measures to meet the 2 degrees global warming target; yet, inexplicably – some might say perversely – the EU Commission has set its face against a cleaner energy mix involving ethanol.

Source: ePURE (production), Globiom (iLUC) and EC (updated fossil fuel comparator)

Moreover, the ‘ILUC Directive’ is only one prong of the Commission’s crusade against ethanol. In 2013, the Commission declared state aid to bioethanol to be illegal. State aid to drill a new oil well or mine coal would be just fine. But state aid for the production of 90% GHG savings ethanol must be prevented. The only reason given when the Commission is approached is that there is too much unused ethanol production capacity in the EU, a point returned to below.

When the Commission’s 2012 proposals were under discussion the CEO of Spain’s Abengoa, one of Europe’s biggest ‘green’ power groups described the legislative wrangle in which the the Commission had landed the EU in ‘ridiculous’. He warned of the danger that the EU biofuel industry would be turned into a ‘zombie industry’.

Tragically his warnings were correct. The changes that the Commission steered through have already had a visibly chilling effect on investment in the sector, have impacted negatively on a number of European operators – including Abengoa itself – and have led to viable projects being cancelled.

Mercosur Talks – A Further Example of EU Commission ‘Silo Thinking’

The EU is currently negotiating a trade agreement with the Mercosur countries, which raises further questions as to the Commission’s behaviour.

One of the issues on the table in the negotiations is the question of ethanol imports from members of the Mercosur group into the EU. The Commission is proposing that up to 600,000t of ethanol can be brought into the EU under a trade rate quota. This figure is the equivalent of 12% of total EU ethanol production. No other agricultural product is treated similarly. For most other products, 1% of the market is a threshold.

In effect, the Commission, which has waged war against investors interested in producing ethanol within the EU because of ‘ILUC concerns’ based on deforestation (although the latest available science shows that there is no nexus between EU production of ethanol from sugar beets, maize and wheat) has adopted a negotiating position which will surrender the equivalent 12% of the entire EU ethanol market to the very type of ethanol (sugar cane ethanol) that the best available science says has a high risk of causing deforestation.

The Commission position here makes no sense and is a classic example of the ‘silo’ approach for which the Commission is so often criticised.

Conclusion

In the US the expansion of bio ethanol production has produced remarkable and positive results for farmers for rural communities and for the economy as a whole. Supported by progressive policies US farmers have been able to produce more food, more fuel and more animal feed from the same area of land while at the same time cutting back on inputs of water, energy and fertiliser – see video here.

With the right policies European farmers could replicate the positive developments that have occurred in the US. The most inconvenient aspect of the Globiom Study for the EU Commission is that it brings the high cost of contradictory policies it promotes into sharp focus.

Dick Roche was Ireland’s Minister of State for European Affairs 2002-2004 and 2007-2011, and Minister for the Environment, Heritage and Local Government 2004-2007.