October 29, 2012
A draft proposal from the Commission to amend Directives 2009/30/EC and 2009/28/EC seems to attest a radical change in the promotion of biofuels in the European market, one of the most controversial fields of EU policy. The draft, leaked earlier in September, aims to address the adverse effects on food prices and land-use change resulting from the EU support to the biofuel industry, by encouraging the transition from first-generation biofuels – produced from food-crops such as wheat, sugar and rapeseed – to second-generation biofuels. Also known as ‘advanced biofuels’, they are obtained from non-food sources such as biomasses, algae and municipal solid waste, and therefore deliver higher greenhouse gas savings when the full production circle is considered.
By Enrico Partiti
The new Directive is meant to amend the ‘Fuel Quality Directive’ (2009/30/EC) – which lays down technical standards for the quality of fuels used in transportation, and in particular the requirement that Member States have to reduce by 6% the greenhouse gas emission of all transportation fuels by 2020 – and the ‘Renewable Energy Directive’ (2009/28/EC), which establishes a framework for the achievement of EU climate change and energy policy objectives. The latter also sets the requirement that 10% of transport fuels in the EU shall originate from renewable sources by 2020. It provides that biofuels shall respect a number of sustainability criteria in order to account for the national targets and to qualify for financial support. Among the criteria to be respected, biofuels shall not be obtained from raw materials cultivated on land with high biodiversity value or high carbon stock. Biofuels producers are required to show the environmental impact of their products by providing information to Members States, possibly by means of a recognized voluntary certification scheme.
However, the Renewable Energy Directive, as it currently stands, does not address the increased carbon emission that occurs because of the so-called ‘indirect land use change’ (or ILUC). When food-crops are employed for biofuel production rather than human consumption, the restraint on the supply side has the effect of increasing food prices and requiring that new and previously uncultivated land is put to use, which can result in substantial carbon emissions. Although the issue remains contentious among scientists, policy officials and biofuel producers, and it has caused a two-year delay in legislation, new scientific studies have proven that biofuels from food-crops do not seem to contribute to lower carbon emissions reduction than fossil fuels when the overall production cycle and IULC-related emissions are taken into account.
Moreover, according to studies and independent reports from many environmental NGOs and international organizations such as IIED-FAO and the World Bank, biofuels policies are fueling a global rush for cultivable land, especially in developing countries, which is known as ‘land-grabbing’. Biofuels producers, mostly from Western countries, are taking control of vast portions of land for export in their home countries, stripping local peoples of their land and further exacerbating the surge of food prices; the FAO food price index has more than doubled in the past eight years.
The draft Directive acknowledges the failure of the current regulatory regime and, by invoking the precautionary principle, it attempts to tackle the problem at its root by discouraging the use of first-generation biofuels. It does so by capping the contribution of first generation biofuels to the attainment of the Renewable Energy Directive targets to 5% of the final energy consumption for transport in 2020. It also sets requirements for the improvement of the overall efficiency of biofuel production processes. Most importantly, the draft Directive provides higher market incentives for biofuels with low ILUC-related emissions and it actively seeks to encourage market penetration of second-generation biofuel by envisaging to stop the subsidization to ‘traditional’ biofuels in the year 2020.
The planned elimination of subsidies for traditional biofuels has worried the biofuel industry, a business estimated to be worth 17 billion euros and providing some 50,000 jobs, that vocally protested against the swift regulatory change and its unpredictable consequences on the sector. In particular, producers claim that the 5% limit, close to the current 4.5% demand of transport fuels met by crop-based fuels, will basically halt industrial development. On the other hand, environmental NGOs have welcomed the Commission proposal as a first step towards the right direction, but keep on urging the EU legislators to completely ban first generation biofuels. A recent report by Oxfam has shown that the land used to produce biofuels for the EU market in 2008 could have fed 127 million people for the entire year. The same report has also highlighted the cost borne by German consumers for supporting the biofuel industry subsidization, which is estimated around € 30 per year.
The leaked draft, however, represents only the first step of a long legislative process that will probably deliver a different final text, also because the proposed regulatory framework appears to raise some doubts of consistency with WTO obligations. WTO rules provide that Member States shall not discriminate between ‘like’ products because of their origin. For a finding of discrimination against imported products vis-à-vis ‘like’ foreign or domestic products, it will be crucial the determination of whether ‘traditional’ biofuels can be considered as ‘like’ ‘advanced’ biofuels. Moreover, the unfavorable regime for ‘traditional’ biofuels could be seen as tantamount to a de facto ban, and thus inconsistent with Article XI of the General Agreement on Tariffs and Trade.
In spite of the legal problems and the intense lobbying of industry and environmentalists, the Commission is resolute to continue its difficult task of meeting the 2020 environmental targets while countering at the same time the negative effects of EU policies. The interests at stake are just too high for giving up.
Enrico Partiti LLM is doctoral researcher at the Amsterdam Centre for European Law and Governance. His personal page can be accessed here.