Biofuels Law Conference: Discussion of International Biofuel Policies

On May 2, 2014, I presented a talk at the Energy Bioscience Institute (EBI) 6th Annual Biofuels Law and Regulation Conference at the University of Illinois, summarizing a number of key legal, policy and regulatory issues affecting the development of the biofuels industry in the U.S. and internationally. The slides from that presentation can be found here. In this series of posts in Biofuel Policy Watch, I’m elaborating on the issues I discussed in the presentation.  These posts are not meant to provide comprehensive summaries of the issues at hand, but instead to highlight some key aspects of my presentation and other discussions at the EBI conference. For most of these policy issues, you can find background information in other posts on this blog and my Advanced Biotechnology for Biofuels blog, and I’ll provide links such previous posts where possible.

In today’s post, I’ll briefly cover some of the international issues I discussed in the EBI presentation. I’ll also provide some brief updates on important international developments that have occurred in the weeks since that presentation. The two issues I highlighted in my talk were the EU Renewable Energy Directive and its importance in promoting the use of biofuels, particularly advanced biofuels, in the EU, and the need for consistent, broader, enforceable mandates for ethanol and biodiesel use in countries around the world. My talk also touched on issues relating to international trade harmonization.

European Union Renewable Energy Directive.  As I’ve described in several previous blog posts, the EU Renewable Energy Directive (along with its companion legislation the Fuel Quality Directive) is the major regulatory policy promoting the use of renewable fuels in the EU. As discussed last year in Advanced Biotechnology for Biofuels, the EU RED was put in place in 2009 to establish the goal for all EU member states to derive 20% of their overall energy consumption from renewable sources by 2020, including 10% of energy consumption within the transportation sector by the same year. This would be accompanied by concomitant reductions in greenhouse gas emissions as these targets are met. Companies selling transportation fuels to the public would be required to utilize fuels certified as renewable in order to meet these goals, while developers or producers of fuels had certain requirements to meet in order to demonstrate that the fuel is indeed produced renewably and sustainably.

As is the case with all EU directives, the 28 EU member states are obligated to adopt national laws containing all the provisions of the RED, and so the directive is enforced at the national level in all EU states. Compliance to date has therefore varied considerably from country to country, although it seems clear that the directive has led to increased adoption of renewable transportation fuels across the EU, and a number of renewable fuel producers have had their fuels certified as complying with the requirements of the directive.

However, most of the renewable fuels used to date in the EU have been first-generation fuels such as corn or sugar beet derived ethanol, or biodiesel or other renewable diesel fuels largely derived from vegetable oils or oilseed crops, so the mandates of the RED have become entangled with the politics of the “food vs. fuel” debates that are prominent in Europe. This led to the proposal, in October 2012, of an amendment to the RED that was aimed at discouraging the use of food-derived biofuels and encouraging the use of advanced biofuels not produced from food crops. The main feature of this proposal, which was originally described in a January 2013 post on this blog, was to establish a ceiling on the amounts of food-derived fuels that could be included in the volume of renewable fuel that each EU member state would count towards meeting its volume obligations. As originally proposed, this ceiling was 5%, meaning that, regardless of how much food-based biofuel was used in any country, the amount that could be applied towards the overall goals of renewable fuel use would be limited to 5% of the total transport fuel usage in the country.

In the months that followed, this proposal was debated at various levels within the EU, including by several different committees of the EU Parliament. On September 11, 2013, the full EU Parliament adopted a proposal which would set a limit of 6% for food-derived fuels, while setting separate targets for the use of advanced biofuels in the overall transport sector at 0.5% by 2016 and 2.5% by 2020. However, in meetings in December 2013, the Energy Ministers from EU nations failed to reach agreement on the path forward for these amendments, after considering compromise language that would have raised the limit on crop-based biofuels to 7% but would also have required mandatory reporting of indirect land use change (ILUC), the latter generally being opposed by the industry.

This stalemate persisted until only recently. In May 2014, a group of EU diplomats proposed a revised version of a proposed amendment which was agreed to by the Energy Council of the European Council in June 2014. The key provisions of this policy are a 7% cap on food-based biofuels as of the 2020 target date, an invitation to member states to promote the adoption of second and third generation biofuels by setting a national target for advanced biofuels of 0.5% of total fuel usage, among several other provisions. This proposal apparently still needs to be ratified by the Parliament, but the general reaction to this development was that the logjam was broken and that these are the changes that will be adopted as policy.

During my talk at the EBI conference, I didn’t come out in favor of any particular proposed amendment to the RED. However, I did stress the importance of maintaining the RED and the incentives it creates for biofuel usage, and, if amendments are to be adopted to the Directive, to be sure that they adequately address the goal of promoting the use of advanced (second or third generation) biofuels. It seems like the recent developments (which came after my talk at the conference in early May) are taking the policy in the right direction, although the final word will be written by the ultimate action by the EU Parliament.

International Trade Harmonization. The other broad international issue I touched upon in my talk is the issue of international trade policies. There have been recent developments relatating to some of the ongoing trade disputes between the EU and different regions of the world, several of which I’ve reported on in previous blog entries. One development has to do with the anti-dumping duties imposed in February 2013 by the EU on ethanol imported from the U.S. Apparently, companies were getting around this requirement by shipping U.S. ethanol to Norway, for subsequent importation into the EU. As a result of an investigation into this practice, on June 4, 2014, the European Commission decided to apply the duties on U.S.-originated ethanol coming into the EU from Norway. This action had been requested by the European trade association ePURE, which welcomed the news of the new duties. According to Ethanol Producer Magazine, a compliant in EU court filed in May 2013 by the Renewable Fuels Association and Growth Energy challenging the decision to impose an anti-dumping duty is still ongoing.

Other recent developments relate to EU anti-dumping duties on biodiesel coming from Argentina and Indonesia. These sanctions were imposed by the EU in 2013, a decision which Argentina had already challenged in December 2013. In June 2014, it was announced that Indonesia had also begun to challenge these duties, by filing a notice with the World Trade Organization, requesting consultations with the EU about these anti-dumping measures. Even more recently, the European Commission announced that it may renew for another five years anti-dumping tariffs already in place against U.S. biodiesel exporters. These duties were to have expired on July 11, but in announcing its intent to launch two new inquiries to see how the situation may have changed since 2009, the tariffs will remain in effect for as long as the investigations last.

Although I don’t have any unusual perspective into these trade controversies, during my talk at the EBI conference I highlighted the need to resolve international trade disputes so that renewable fuels produced anywhere in the world could be imported to any other region of the world where there might be a market. I acknowledge each nation’s right to protect its domestic industries from cheaper foreign imports, but climate change and energy security are global issues facing all countries, which demand global solutions, and it seems to me that these frequent disputes only serve as roadblocks to accomplishing those goals.

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. More information on D. Glass Associates’ government and regulatory 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 any other organization with which Dr. Glass is affiliated. Please visit our other blog, Advanced Biotechnology for Biofuels