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Platts Webinar – European Road Fuels

Submitted by on July 9, 2014 – 7:20 pmNo Comment

by Olatomiwa Bifarin* (Advanced Biofuel USA) Tim Worledge, the Associate Editorial Director of Platts Agriculture relayed some of the history and the status quo of the biofuel industry in Europe during a webinar hosted by Platts and Aspect Enterprise Solutions on the 1st of July, 2014. He attempted to answer the question – Is biofuel facing brighter times? – While he discussed, in general, road fuels in Europe. Below are some of the focal points of his presentation.

Biofuel facing brighter times?

Even though biofuels are part of the energy mix, it has faced torrid times since its introduction in Europe, and from the European angle – it has seen mixed success. The Renewable Energy Directive (RED) and the Fuel Quality Directive (FQD) are the European regulatory bodies involved in bringing biofuels into the energy mix, as they responsible for underpinning policy.

In spite of the torrid times experienced by the biofuel industry, over the past few months, several auspicious factors started emanating in favor of biofuels. The factors drift around – energy security, climate change, advanced biofuels and the double counting initiative.

Climate change has continue to be a major concern for the citizens of the world. The recent austere weather conditions in the US over the last winter, pollution problems in China, and a host of others, seem to bolster the reality of climate change, hence propitious solutions – like biofuels – are more likely to be embraced. Also, the advancement of the second and third generation biofuels is a plus – gradually eliminating the polemic that vitiates the puissance of biofuels. Advanced biofuel has been touted as an essential tool in bringing additional social, environmental and economic benefits to Europe.

Double counting is another interesting initiative that has shot up demand for feedstocks like used cooking oil (UCO) for the production of biodiesel. Essentially, it is an initiative that considers the contribution of biofuels from sources like wastes, residues, non-food cellulosic material and ligno-cellulosic material to be twice that derived from other sources. The main goal is to diversify raw materials and to assuage the high cost of production that might be associated with the use of the new feedstocks.

Regardless of all of these, extant policy framework has not driven investments that participants within the European region would hope to see.

As stated earlier, the road of biofuel-fossil fuel mix has not been glossy. In 2009, based on the EU Renewable Energy Directive, the grand motive was to bring about 10% of the renewable fuels into the transport fuel pool in every EU Member State by 2020, however, the current proposal now stands at about 7%, a tangible set back.

Challenges in legislative terms

As expected, challenges in legislative terms are not non-extant. For instance, while the Europe institutions have broadly adopted positions on the Indirect Land Use Change (iLUC), still, significant disparity exists in the cap proposed – the European Commission, Parliament and Council are proposing 5%, 6% and 7% cap on crop-based biofuels respectively. Given the fact that several countries make up the EU, with different financial status and agricultural settings, verily, a consensus path on this issue might be a difficult one to plot. That aside, we should note that iLUC – a measure of the unintended consequences of replacing food crops with energy crops, including emissions from the clearing of forest land, peat bogs, wetlands or grasslands – would inherently and effectively hinder the development of first-generation biofuel production.

Trade disputes are also a hot issue – the anti-dumping duties on biodiesel that applies to Argentina and Indonesia has made it difficult for them to export biodiesel into the Europe region. This has also gone a long way to distort the trade flow. In the 2012 biodiesel trade flows, more biodiesel came out of Indonesia and Argentina but export tax hikes for biodiesel changed the game plan. From the 2013 trade flows, exports from Indonesia and Argentina to EU decreased in the first quarter with Argentina seeking new outlets. A similar trend also applies to the US; the United States is also subjected to anti-dumping measures on ethanol and biodiesel by EU.

Blend rates – now and before

In general, there has been an ‘amount’ of success in getting biofuel into the road fuel pool. In the case of gasoline, in 2006, just about 1% of the total fuel pool was fuel ethanol; presently, it hovers around 5% with a lot of people looking for favorable policies that will help increase the blend rates.

In the same vein, the blend rate of biodiesel has also increased. Around 2006 when Europe was not making enough diesel to meet its own needs, biodiesel lent a supporting hand, and within 3 years there was a quick adoption which increased the blend rate to about 5%. It reached the peak at 6% in 2011, however, at the onset of double counting it faltered – receding back to 5%.

Given the thumbnail description of Europe’s biofuel industry which is riddled with major challenges – primarily legislative, it is quite patent to state that the progress in the industry is anything but enticing. Important to point out, is the revision of the 2009 RED directive – to bring about 10% of the renewable fuels into the transport fuel pool in every EU Member State by 2020. Today the current proposal is 7%. This realization in a nut shell characterizes the European apocryphal commitment to biofuel, and consequently will thwart investments into the biofuel market.

Jak Riley, Business Development Manager from Aspect Enterprise Solutions also featured on the webinar.

 

*Olatomiwa Bifarin is studying for his Masters degree in Biotechnology at The Catholic University of America. As an intern at Advanced Biofuels USA, he represents the organization  and reports on events in Washington, DC, and nearby areas.

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