European Commission Proposes Revamp Of EU Biofuels Policy

Author:Mr Duane Layton, Paulette Vander Schueren, Nikolay Mizulin, Tiffany L. Smith and Angel Alvarez Alberdi
Profession:Mayer Brown

Keywords: EU biofuels policy, renewable energy directive, RED, fuel quality directive, FQD

On October 17, 2012, the European Commission adopted a proposal for a new directive amending the two major pieces of EU legislation on biofuels: Directive 2009/28/EC on the promotion of the use of energy from renewable sources (Renewable Energy Directive or "RED") and Directive 98/70/EC relating to the quality of petrol and diesel fuels (Fuel Quality Directive or "FQD"), both in force since 2009.1

Both the RED and the FQD intend to promote the use of biofuels in the EU by establishing a 10 percent share objective for the use of renewable energy in transport by 2020, and 6 percent reduction objective for greenhouse gas (GHG) emissions associated with transporting fuel. Given the absence of carbon-neutral fully marketable alternatives such as electric cars or advanced biofuels, these EU objectives mainly rely on the use of conventional biofuels (oil based biodiesel and sugar and cereal based bioethanol).

The draft legislation intends to send a clear signal to the markets: "future increases in biofuels must come from advanced biofuels." The proposal puts forward a number of controversial measures likely to have a major impact on the existing EU biofuels industry: the introduction of a 5 percent cap by 2020 that limits the use of biofuels from "food crops," and the inclusion of high incentives for producing advanced biofuels. In a surprising move the much anticipated imposition of Indirect Land Use Change (ILUC) factors penalising the most commonly used biofuels in the EU was withdrawn as ILUC factors will now only be relevant for monitoring and reporting requirements.

Debate Over ILUC Factors

The RED establishes sustainability criteria for biofuels: it sets mandatory CO2 savings thresholds for the biofuels to count towards the 2020 10-percent target (and be eligible for state subsidies in the EU) and assigns GHG emissions to different biofuel production pathways. However, the RED only considers the effect of direct land use changes, which are those derived from the actual conversion of agricultural land for producing biofuels. On the contrary, according to a number of scientific reports commissioned by the European Commission, indirect changes happen when carbon rich ecosystems such as forests or grasslands are cleared in order to compensate for agricultural land converted for biofuels production.

The new legislation was meant to introduce different...

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