The Renewable Energy Directive (RED) of the European Union, adopted in 2009, was put in place to ensure that all the 27 member states of the European Union achieve specified targets for use of renewable fuels and reduction of greenhouse gas (GHG) emissions across all energy sectors, with specific requirements for the subset of fuels used for transportation. A companion directive, the Fuel Quality Directive (FQD), has additional, complementary requirements for GHG reductions within the transport sector. (Note that European Union legislation takes the form of “Directives”, which are adopted centrally by the European Commission and which are binding upon all EU member states, which must then adopt national laws that conform with the provisions of the directive). I’ve described these directives in a little more detail in a companion post on my Advanced Biotechnology for Biofuels blog. In this entry here in Biofuel Policy Watch, I’ll discuss a recently proposed revision to the RED that has generated substantial controversy within the fuels community.
Background: Requirements of the Existing Directives
To briefly recap, the Renewable Energy Directive, EU Directive 2009/28/EC, addresses the adoption of renewable energy within overall energy markets in EU member states (i.e., electricity, heating and cooling, transport). The Renewable Energy Directive sets targets for adoption of renewable fuels which member states must meet, by enacting national laws consistent with the Directive. These targets are to derive 20% of overall energy consumption, across all sectors, from renewable sources by 2020, to derive 10% of energy consumption within the transport sector from renewable sources by 2020, and to achieve greenhouse gas emission reductions of at least 35%, relative to fossil fuels, by mid-2010, with this target rising to 50% in 2017 and 60% in 2018 for fuels produced in 2017 or later. Fuel production plants that were in operation as of January 2008 had until April 2013 to meet the 35% GHG reduction requirement.
The Fuel Quality Directive (FQD), EU Directive 2009/30/EC (also known as an amendment to Directive 98/70/EC), establishes the specifications (standards) for transportation fuels to be used across the EU. The Directive also requires that all fuel suppliers (e.g. oil companies) must meet a 6% reduction of GHG emissions by 2020, relative to 2010 baseline levels, across all fuel categories. This reduction in emissions could be achieved using any low-carbon fuel options, such as hydrogen or electricity, but it is generally expected that the use of biofuels will account for most of the targeted reductions.
The directives define the requirements that a fuel and its production pathway must meet in order for the fuel to be considered a “renewable fuel” that qualifies to count towards fulfillment of the targets. The RED requires that “renewable fuels” not be produced from raw materials obtained from land having a “high biodiversity status” or “high carbon content”.
Proposed Revisions to the Renewable Energy Directive
On October 17, 2012, the European Commission (EC) announced a proposed directive that would amend both the RED and the FQD. The complete text of the proposed amendment can be found here. In announcing the proposed amendment, the Commission’s press release stated:
Today, the Commission published a proposal to limit global land conversion for biofuel production, and raise the climate benefits of biofuels used in the EU. The use of food-based biofuels to meet the 10% renewable energy target of the Renewable Energy Directive will be limited to 5%. This is to stimulate the development of alternative, so-called second generation biofuels from non-food feedstock, like waste or straw, which emit substantially less greenhouse gases than fossil fuels and do not directly interfere with global food production. For the first time, the estimated global land conversion impacts – Indirect Land Use Change (ILUC) – will be considered when assessing the greenhouse gas performance of biofuels. Energy Commissioner Günther Oettinger said: “This proposal will give new incentives for best-performing biofuels. In the future, biofuels will be saving more substantial greenhouse gas emissions and reduce our fuel import bill.”
This announcement makes clear that the driving force behind the proposed revision was the growing belief by some observers in Europe that the overall carbon footprint and environmental impact of biofuels derived from food crops like corn were not favorable, and by general concern over the “food vs. fuel” issue and the impact of biofuel production on land use. The press release also stresses the desire to promote the development and use of second generation biofuels, which are presumed to have more favorable carbon intensities and environmental impacts.
The key components of the proposal are as follows.
- A proposed 5% cap on the amount of food crop-derived biofuels used to meet the EU’s goal of reducing transport energy usage by 10% by 2020. In making this proposal, the EC noted that this is approximately the share that food crop-derived biofuels currently have in the transport fuel market. Note that the proposal would not prohibit the use of food-derived fuels above the 5% limit, but only that such excess uses would not count against the 10% renewable energy target for 2020.
- Multiple counting of credits for second-generation biofuels. The proposal specifies that, when calculating a member state’s progress towards meeting the goal of 10% reduction in energy use by 2020, the contribution of certain biofuels would be counted as doubled and others counted as quadrupled (reportedly certain of these feedstocks already qualify for double counting under the version of the Directive now in effect, but in my reading of the original Directive this is not at all clear). This is obviously meant to provide the incentives cited in the EC press release for fuels having better carbon intensities and fewer issues of altered land use than is the case for corn ethanol or other food-derived fuels. The proposal includes a list of feedstocks that would count for either the 4-fold or 2-fold multiple counting. Among those that would be quadrupled are algae, straw, animal manure, sewage sludge, bagasse, and other non-food crop residues. The feedstocks that would count double are used cooking oil, certain animal fats, non-food cellulosic material, and lignocellulosic material except saw logs and veneer logs.
- A 60% greenhouse-gas-saving threshold that will apply to new biofuels production plants coming online on or after July 1, 2014. As noted above, under the current directives this threshold would not need to be met until 2018. Fuels produced from such production facilities could not be considered as “renewable” under the directives unless this requirement is met. Under the proposed amendment, facilities in operation prior to July 1, 2014 would only be required to achieve 35% greenhouse gas emission reductions until December 2017, and to achieve 50% reduction thereafter.
- A review of policy and scientific evidence on indirect land use, which will take place in 2017, coupled with a requirement for mandatory reporting by fuel producers of the indirect land use that could possibly result from their process. This portion of the proposal was quite controversial, with environmental groups and other NGOs strongly preferring a policy where indirect land use would be required to be taken into account when determining carbon intensities; and with the industry objecting to any consideration or reporting of indirect land use at all.
It’s important to note that this is only a proposed amendment. It is not yet in effect, and it would not take effect until the European Parliament and the Council of the European Commission both adopt the proposal in a co-decision procedure. In a November 2012 webinar, an EU official said that the process of obtaining these approvals might take as long as 12 months, while other EU officials have reportedly said that the proposal is unlikely to go into effect until 2015 at the earliest.
Reaction to the Proposal
Release of the proposal intensified the debate that had actually begun when aspects of the plan were first publicly floated in September 2012. Although many in the industry were pleased that the proposal did not require mandatory accounting of indirect land usage, which had been widely rumored in the weeks preceding release of the amendment, the final proposal did engender some industry opposition. Specifically, many biodiesel companies and other first generation biofuel producers opposing the measure, and there were also concerns about its adverse impact on farmers who now sell their crop to producers of first generation fuels. The proposal has created predictable battle lines within the industry, pitting first generation fuel producers (e.g. corn or beet ethanol and biodiesel) against those developing second generation fuels like cellulosic ethanol. For example, in an editorial in Ethanol Producer Magazine, the head of the European ethanol trade association ePURE, whose members are mostly first generation ethanol producers, severely criticized the proposal, on the grounds that Europe’s use of food crops for fuel production is a minuscule percentage of world agricultural output, while calling the quadruple-counting of advanced biofuels a “mathematical trick”. ePURE has vowed to “do everything in its power” to promote a more reasonable approach to this rule. A report published on November 20, 2012 featured comments on the proposal by Steen Riisgaard, the CEO of Novozymes. Riisgaard maintains that regulatory uncertainty in the EU is holding back the European market for cellulosic ethanol and other advanced biofuels, and that the proposed quadruple-counting for certain advanced fuels will not work as planned since it applies only to the mandates of the RED and not the complementary Fuel Quality Directive. However, an EC spokesperson was quoted in this article as saying that the EU mandates under the RED were similar to those of the U.S. RFS.
Reaction from environmental groups has also been somewhat predictable. A coalition of NGOs including Greenpeace, Oxfam and Friends of the Earth has issued “Joint Recommendations” critiquing the EC proposal. While praising the proposal for “acknowledging the negative social and environmental impacts that EU biofuels mandates are having,” and for taking an initial step towards capping food-derived biofuels, the document criticized the EU proposal as not going far enough. Specifically, the groups called for mandatory accounting for indirect land use changes in life cycle analyses (rather than simply requiring reporting), lowering the cap on food-based biofuels, eventually to 0%, extending this cap to non-food crops like jatropha that the groups maintain also compete for land and water resources, and applying the 60% GHG reduction threshold to all biofuel production plants (i.e., eliminating “grandfathering” for plants in operation before July 1, 2014).
It’s a bit too early to predict the impact of this amendment, or even the likelihood of its success. The process of adopting the amendment is long and could conceivably be affected by public pressure from one or both sides of the debate. It is also not clear to what extent the proposal might be revised during this process, whether to clarify ambiguities or to respond to comments from interested parties. It’s probably safe to say that the goals of the amendment – to promote the development of second generation biofuels – will probably come about through ordinary market forces whether or not the amendment is eventually adopted. For example, the movement to fuels derived from cellulosic or other non-food feedstocks is already taking place, as the technology and economics of cellulosic ethanol improve and also at least partially in response to U.S. government policies like the Renewable Fuel Standard.
There has not been much reported in the U.S. trade press about the proposal since November 2012, and so things seem to have quieted down over the holiday break. I’ll report on any new developments on this EU proposal as they arise.
D. Glass Associates, Inc. is a consulting company specializing in government and regulatory support for renewable fuels and industrial biotechnology. David Glass, Ph.D. is a veteran of over thirty years in the biotechnology industry, with expertise in industrial biotechnology regulatory affairs, U.S. and international renewable fuels regulation, patents, technology licensing, and market and technology assessments. Dr. Glass also serves as director of regulatory affairs for Joule Unlimited Technologies, Inc. More information on D. Glass Associates’ regulatory affairs consulting capabilities, and copies of some of Dr. Glass’s prior presentations on biofuels and biotechnology regulation, are available at www.slideshare.net/djglass99 and at www.dglassassociates.com. The views expressed in this blog are those of Dr. Glass and D. Glass Associates and do not represent the views of Joule Unlimited Technologies, Inc. or any other organization with which Dr. Glass is affiliated. Please visit our other blog, Advanced Biotechnology for Biofuels.