EU Proposes Drastic Changes to Biofuel Policy

By Erin Voegele | October 18, 2012

Earlier this week the European Commission officially published a proposal that would make drastic changes to the Renewable Energy Directive. Some of the major proposed alterations include setting a new 60 percent GHG reduction threshold on new production facilities, capping crop-based biofuels at 5 percent, including indirect land use change (ILUC) emissions in the fuel’s GHG profile, and offering greater incentives for fuels made from low ILUC emission feedstocks, which are essentially defined as waste materials.

While I can get on board with updating the RED to provide greater incentives for second-generation biofuel production, I think most of the proposed changes are going to serve to stall development in the European biofuel sector.

First, I think the ILUC requirements will do more harm than good. While ILUC accounting may seem good to some in theory, the science (at least today) is far from accurate. The global economy is far too complex to make simple predictions about land use change. There are countless factors that impact a farmer’s decision of what to grow and where to grow it. People were clearing forest for farmland far before biofuel  production became prevalent, and I’d guess they’d still be doing it even if there was zero biofuel production in the world. Maybe someday we’ll be able to determine this kind of cause and effect relationship with sufficient accuracy, but we’re certainly not there yet.

Second, studies have shown time and time again that biofuel production has little if any impact on food prices. Capping crop-based biofuels at 5 percent isn’t going to do anything to reduce global food prices, but it will chill investment in a growing industry—not exactly the best way to deal with the financial mess Europe currently finds itself in.

If you take ILUC out of it, I don’t necessary think it’s a bad thing to set a higher GHG reduction target for biofuels. That’s exactly what the RFS has done in the U.S., and it seems to be helping drive investment in new and emerging technologies.

I also think it’s great to establish better incentives to spur development of and commercialization of technologies that can produce fuels and energy out of waste.

It’s too early to determine how the proposal could impact the U.S. biofuel industry—or the global biofuel industry for that matter—but it’s certainly an issue we’ll be watching closely.