European Climate Policy and the Bioeconomy – Missed Opportunities or Muddling Through?

September 29, 2020 |

Between politics and pandemic one could be forgiven for not closely following Europe’s bioeconomy. But as we scan the globe for bio-economy green shoots, we are noticing some interesting – and disconcerting – activity “across the pond”. Today we look to Europe and try to pluck the signal from the noise in Brussels amid promising commercial developments in the Euro bio-economy. Recent EU announcements fail to support conventional biofuels for ground transport biofuels, and we worry what that portends for the future of bio-based aviation and maritime fuels – not to mention the broader bioeconomy.

If it’s tuesday, this must be Belgium

Many Europeans take climate change very, very seriously. Across 11 countries of Central and Western Europe, 73% of voters want “a party that will make the EU a global leader in fighting climate change”. In response to this public clamoring, the politicians and bureaucrats of the European Commission (seconded by many Member States politicians) produce plans at a rate that would impress even select former U.S. Democratic candidates for president. In her recent “State of the (European) Union” speech, European Commission President von der Leyen – with the voluble support of 170 CEOs and a cacophony of “business networks” – proposed to increase the EU’s 2030 target for emissions reduction from 40% to at least 55% of their 1990 emissions as a more credible step towards the goal of Net-Zero by 2050 . This “revised ambition” joins an expanding menagerie of plans, initiatives, impact assessments, agendas, and frameworks, including the

  • European Green Deal;
  • NextGenerationEU Recovery Plan for Europe;
  • Renewable Energy Finance Mechanism;
  • Emissions Trading Scheme (ETS);
  • National Energy and Climate Plans;
  • Just Transition Mechanism; and
  • Renewable Energy Directive.

Corporate Clarion calls

Given the European public and political enthusiasm for a Green Deal to drive a Green Recovery, including the €750 Billion Recovery Plan, European producers of biofuels and bio-based products have (understandably) not been shy when pressing Brussels to support growth of the European bioeconomy. The Bio-Based Industries Consortium pointed out 1) that the bioeconomy represents 11% of the EU economy, 2) that bio-based industries “improve food security, foster circularity, stimulate rural development and maintain green jobs in EU regions”, and 3) naturally, bio-based industries should be “key to the EU’s green recovery”. The European Bioeconomy Alliance emphasized that the “bioeconomy has a pivotal role to play in the transition to a more circular, sustainable and resource-efficient society”. And the newly formed BioAdvantage Europe made it perfectly clear that a “thriving bioeconomy will be crucial for meeting the goals of the European Green Deal and the Paris Accord on climate” and that “[t]ime is short, and the bioeconomy can make an impact now”. Serious people from across the European bioeconomy, from Avril to UPM recognized the importance of the Green Deal moment and took the time to make their case. Certainly, jockeying for resources from the EU Green Recovery was a priority for these leaders of the EU bioeconomy, but we suspect another driver of their engagement.

An electrifying future

Brussels responded to industry’s strong, clear arguments, with an unimpressed shrug, as the Commission did not immediately signal increased support for the entire Bioeconomy. Fuels Europe succinctly pointed out the Commission’s uneven approach: “FuelsEurope supports the EU’s ambition for climate neutrality by 2050, however limiting the role of renewable and low-carbon liquid fuels to aviation and maritime transport overlooks the potential of these fuels and risks jeopardizing optimal conditions for investments at scale in the short-term.” Instead of promoting bio-based solutions currently available, Brussels seems more interested in the next generation of bio-based fuels and products. We fear that future support for these advanced fuels will wither just as the support for conventional biofuels has.

Clearly, policymakers are facing enormous economic pressures from long-standing structural unemployment and rising debt. Unfortunately, EU Policy towards the bioeconomy does not appear to emerge from a well-reasoned set of priorities and balanced trade-offs, but instead reflects a superstition that the immediate productive use of biomass is not commensurate with sustainable de-carbonization. Instead, policymakers in Brussels prefer to incentivize green power (and electric vehicles) as opposed to a balanced approach to economy-wide de-carbonization.

Redoing REDII already?

The United States and Europe started their current federal biofuels policies at roughly the same time. The EU Renewable Energy Directive was put in place in 2009 and is still the EU’s policy governing the production and promotion of energy from renewable sources. In 2018, after two years of vociferous debate (that were dominated by concerns over indirect land use change) the EU approved its second RED, i.e. REDII, for the decade 2021 – 2030. Helpfully, REDII meekly incentivizes advanced biofuels, namely those fuels produced from wastes and biomass residues (i.e. cellulosic biomass from agriculture and forestry). Unhelpfully, REDII clumped all fuels from “food-based feedstocks” (their words not ours) into one disfavored category that was capped at 7% of transportation energy use. As Fuels Europe pointed out, the EU Green Deal would entrench the preference for advanced biofuels over conventional.

The history of European disdain for conventional biofuels is definitely a story for another day, but the central issue is that the 2009 RED turned Europe’s diesel automobile fleet into a massive export market for Indonesian palm oil. Subsequent burning of Indonesia’s tropical forest, land clearing to establish more palm oil plantations, and the resulting CO2 emissions and biodiversity loss, even if not caused directly by European biofuel demand, has brutalized all biofuels’ reputation in Europe.

To add insult to injury, the REDII is not out of the woods, yet. To support the rapid advance of the European Green Deal (the outlines of which were agreed upon in December) the Commission is now reviewing all existing renewable energy regulations, including REDII that has not yet come into effect. The review will 1) assess how far EU renewable energy rules can contribute to a higher EU climate ambition, and 2) explore how to accelerate the transition to a more integrated energy system as outlined in the EU’s strategies for energy system integration and hydrogen. Sure, these assessments are important, but the potential revision of a hard-fought policy set to start in 3 months has Europe’s bioeconomy CEO’s eager for policy stability and regulatory certainty.

Green shoots II

Meanwhile, from the Finnish forests to the Iberian Peninsula, serious companies are bringing real bio-based fuels and products to market, delivering value, and forging genuine de-carbonization pathways.  These are just a few examples of what is hitting the headlines:

  • Air bp and Neste are going to increase the volume of sustainable aviation fuel in Europe five-fold. Neste anticipates producing 1.5 million tonnes of SAF by 2023.
  • France, Norway, Spain, and Sweden are enabling national SAF development with roadmaps and targets.
  • Haldor Topsøe joined a consortium project near Copenhagen that will combine green hydrogen with carbon from direct air capture and Bioenergy Carbon Capture and Storage (BECCS) to produce sustainable fuels, like ammonia, methanol, and SAF.
  • INEOS and UPM are collaborating to bring sustainable bio-based polymers to market and using RSB certification to help them tell their green story.
  • Neste and Shell agreed to increase the supply of sustainable aviation fuel.
  • Repsol produced the Spanish market’s first batch of SAF at its Puertollano Industrial Complex.

O Brussels, where art thou?

To the naïve American observer, the European Commission is a funny thing. What is Ursula von der Leyen actually the President of? Given that each EU Member State must translate the guidance from the Commission into its own set of national laws, there is ample space for national determination and, shall we say, adjustment. But the reality remains that policy matters. The Nordic bioeconomy thrives with national support. Genuine leadership from Brussels would likely percolate into national policies that would genuinely help grow an industry that would drive the Green Recovery, incentivize rural jobs, and bring about the Energy Transition and Circular Carbon Economy that so many are claiming to want.

Despite Brussels’ too-numerous-to-count pronouncements dramatic change to the European economy is not likely to occur any time soon. Next year Germany is having major elections and France the year after. The yellow vests (gilets jaunes) have re-appeared in Paris highlighting that “kitchen table” issues may eventually trump climate concerns. The economy of Eastern Europe relies on coal, and vehicle manufacturers will struggle to meet the ever-increasing ambition to de-carbonize personal transport. The very real and very pressing economic challenges of a lingering pandemic may focus politicians’ perspectives back from 2050 climate goals to the present need for economic recovery. As much as anyone, we hope for a Green Recovery, but we hope that Green Stimulus properly accelerates growth of the bioeconomy as well as the intertwined Circular Carbon Economy.

We commend those companies that are forging the European bioeconomy, and we wonder, what would be possible if the European public’s clear enthusiasm for sustainable products could be harnessed through genuine political leadership. The bioeconomy needs the support of consumers and voters for it to succeed. Brussels trendy preference for electrification – at the expense of economy-wide solutions – does the people of Europe and Europe’s creative bioeconomy a great disservice.

Does Europe’s experience hold any lessons for the United States?  We think, yes. Making progress on both climate and economic growth requires a balanced suite of solutions: biofuels and bio-based products in parallel and synergy with more electrification, for a green and sustainable future.

Leatherstocking LLC creates growth opportunities for clean-technology companies and investors through bespoke advisory services.  We assist clients with policy analysis and advocacy, international market analysis, communications, sustainable investing, and strategic planning.


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