Environment and Natural Resources Programme • Volume 8 • Number 14 • 25th July 2008

Biofuel Mandates under Review

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The biofuels target set by the US and EU- which spend billions of dollars each year supporting their biofuels industries - are continuing to be put into question.

In the US, Texas governor Rick Perry is asking the Environmental Protection Agency (EPA) to waive the national biofuels mandate for a year, while in the EU a group dealing with environmental issues within the European Parliament has voted to revise the European mandate to derive ten percent of transport fuels from renewable sources by 2020. An EU expert group is continuing its work to hammer out sustainability requirements for biofuels.

Meanwhile, a study by the Organisation for Economic Cooperation and Development (OECD) adds to well-known concerns that biofuels, while costing tax payers billions, are not effectively addressing the climate problem, and a World Bank document suggests that 75 percent of the increase in food crop prices can be linked to biofuels production.

EPA to decide on biofuels waiver

In the US, Texas governor Rick Perry wants the EPA to cut its 9 billion gallon mandate for ethanol production - set in an energy bill from December 2007 - by half this year due to high corn and feed prices. His emergency waiver is supported by a coalition of food, livestock and environmental groups. They are, however, pitted against farmers, carmakers, ethanol and other biofuel producers. The public has been exceptionally active on the issue, submitting 15,000 comments to the EPA.

“This is a critically important decision that will determine the future of biofuels in this country,” said Brent Erickson, a lobbyist at the Biotechnology Industry Organization. “There will be a dramatic reaction from whoever loses.”

A coalition of 12 Republican Senators and 50 Republicans in the House of Representatives have also asked for a rollback of the US biofuels mandate, because it “is clearly causing unintended consequences on food prices.”

On 22 July, the EPA decided to postpone the decision on the waiver until August. The EPA can only approve or reject the waiver. Sky-high corn prices have come down in the last weeks and days.

EU biofuels mandate under scrutiny

On 7 July, the Environment Committee of the European Parliament voted to in favour of a modification the EU biofuels target. According to the Committee, Europe should derive four percent of its transport fuels from renewables in 1015, after which a major review of the target would take place.

The Committee also supported a stronger focus on electric or hydrogen cars, as opposed to just biofuels. Environmental lobby groups have stressed the need to focus on cleaner cars. Friends of the Earth, speaking ahead of the vote of the Environment Committee, said that instead of the target “we want measures that will double the fuel efficiency of new cars, a real climate change solution.”

The Committee has also eyeing imports from Brazil. “My analysis shows the only country where we can sustainably import substantial quantities of agri-fuels to the EU at the moment is Brazil,” said EU lawmaker Claude Turmes. “Such an agreement would be a test case, with tough criteria both on sustainability and social issues,” he added. “At the same time, Brazil would have to show us it can halt deforestation.”

These sustainability criteria, which would apply to home-grown and imported biofuels alike, are still being hammered out by en EU expert group. Meeting in early July, the group generally agreed on criteria related to biodiversity and human rights. The experts still disagreed on what the greenhouse gas savings of compliant biofuels would have to be. Ethanol from sugar cane - the main feedstock used in Brazil - reduces greenhouse gas emissions by at least 80 percent compared to fossil fuels. Biofuels produced from wheat, sugar beet or vegetable oil, the main feedstocks in Europe, rarely provide emission savings of more than 30 to 60 percent. Savings from corn-based ethanol are generally less than 30 percent.

At the end of the meeting, one participant commented “I see a philosophical challenge, as we’re taking more care over the vegetable oils you put in your car than the oils you put in yourself through what you eat. He added that “If you put that same oil in chocolate, nobody would say a thing.”

Individual European countries have also questioned the biofuels mandate and made comments on the sustainability criteria. The UK government commissioned a comprehensive report on the topic. Released on 7 July, the Gallagher report detailed the knock-on effects of biofuels production and use. According to the report, indirect land use change impacts of biofuels production have not been adequately addressed. The report called for the incorporation of social issues, such as land rights, into the sustainability criteria for biofuels. While generally taking a positive stance on second generation biofuels, the report noted that their production should not displace food production on agricultural land.

The final fate of the biofuels target will be decided along with the European energy and climate package as a whole by the end of the year.

OECD report slams biofuels

In a new report, “Economic Assessment of Biofuel Support Policies,” released on 16 July, the OECD detailed how the EU, US and Canada spent EUR11 billion to support biofuels in 2006. This spending is expected to rise to EUR25 billion per year by 2015 -bringing, however, only a 0.8 percent reduction in greenhouse gas emissions from transport.

The report therefore recommended the three countries to consider implementing other, more cost-effective strategies to deal transport emissions. The OECD suggested a focus on lowering energy consumption in the transport sector, and policies to free biofuels markets and trade, which would lower costs and lead to higher efficiencies.

The report further highlighted risks posed by biofuels, which is said “will contribute to higher food prices over the medium term and to food insecurity for the most vulnerable populations in developing countries.” While the OECD linked the current use of food stocks for biofuels to higher food prices, it said the effect should not be overestimated. “Current biofuel support measures alone are estimated to increase average wheat prices by about five percent, corn by around seven percent and vegetable oil by about 19 percent over the next 10 years,” according to the report.

These figures are substantially lower than figures from a World Bank report leaked in early July, which said the percentage was as high as 75. According to the World Bank report, food prices rose by 140 percent between 2002 and February 2008. Only 15 percent of that rise was attributable to higher energy and fertiliser costs, with biofuels being the main driver. Biofuels production distorted food prices “by diverting grain away from food for fuel, by encouraging farmers to set land aside for biofuel and by sparking speculation in grains, driving prices up higher,” said the report.

ICTSD reporting; “OECD report says massive biofuel subsidies not helping to cut greenhouse gases”, AP, 17 July 2008; “OECD: Biofuels Ineffective at Curbing Global Warming,” ENS, 17 July 2007; “Biofuels Blamed for Food Price Crisis - Report,” REUTERS, 7 July 2008; “EU Backs Away from Biofuel Goal, Eyes Brazil Accord,” REUTERS, 7 July 2008; “Human Rights, Rare Species on EU Biofuels Agenda,” REUTERS, 1 July 2008; “EU launches investigation into US biodiesel imports,” EU RELEASE, 13 June 2008; “Ethanol industry braces for EPA decision on its future,” IHT, 22 July 2008; “EPA postpones decision on ethanol requirements,” AP, 22 July 2008.