EU biofuel policy, stable after two decades of fluctuation?

As businesses and investors digest the volumes of climate legislation adopted in the 2019-2024 term, can they bank on predictability, or are there more changes to come?

The current EU legislative term has introduced a raft of new environment and climate legislation since 2019 following the unveiling of President Ursula von der Leyen’s Green Deal. The EU has committed to being carbon-neutral by 2050 and adopted various pieces of sector-specific legislation as part of the Fit for 55 package, from decarbonising transport to enhancing energy efficiency in buildings.

Transport has been a major focus of this process. The new Renewable Energy Directive which was revised last year, which will require 42.5% of EU energy to be renewable by 2030, The revision particularly impacts transport. It introduced a a binding target for EU countries to either reduce the greenhouse gas intensity of the transport energy used by 14.5% or achieve a 29% share of renewables within the final consumption of energy by 2030.

Additionally, the text sets a target of 2.25% (in real energy terms) for advanced biofuels such as that from waste and residues.

Complicated legislative path

But the EU has had a long and complicated legislative journey with biofuels. After first promoting their use with new legislation in 2008 requiring them to make up 10% of road transport by 2020, the union then pulled back after concerns emerged about indirect land use change (ILUC) and crops being used for fuel instead of food.

In 2015, EU legislators decided to place a 7% limit on how much crop-based biofuel can be used in the road transport sector, restricting the amount of “first generation” biofuels that could be used to meet its renewable energy targets. But definitions have been somewhat unclear. An analysis by the European Court of Auditors published late last year found that “the lack of policy predictability may increase risks for private investments and reduce the attractiveness of the [biofuels] sector.”

“The EU framework for biofuels is complex and has changed frequently over the last 20 years,” Nikolaos Milionis, the ECA member who led the audit, concluded. “Biofuels are meant to contribute to the EU’s climate-neutrality objectives and enhance its energy sovereignty. With its current biofuels policy, however, the EU is driving without a map and runs the risk of not reaching its destination.”

Urgency to drive forward now

Dickon Posnett, President of European Biodiesel Board (EBB) which prepresents biodiesel producers, said at a recent Euractiv event that though this latest round of legislative changes has provided more certainty, there are still unknowns. “It’s very important for the biodiesel industry to have that support now, so while we see the urgency to drive future [road] fuels, future sustainable aviation fuels, electrification, it’s hard work to develop that and get the infrastructure in place,” he said.

Posnett remarked that if Europe takes its eye off the ball now, the fuels that are displacing fossil fuels very efficiently at the moment, will be less attractive to investors.

“The comparator should be fossil fuels, and in the biodiesel world it should be fossil diesel,” he added. “Anything that’s better than that should be maximised in my view. Yes it gets more complicated, and there are various debates that have happened with ILUC etc, but…there’s real advantages which would be a mistake to lose. And those are advantages we’re not seeing in ReFuelEU and FuelEU Maritime.”

ReFuelEU was launched by the European Commission in 2022 after Russia’s invasion of Ukraine in order to rapidly shift the EU away from Russian fossil fuel imports, and was passed by the European Parliament in September last year – paired with a dedicated law for maritime fuel. Speaking at the event, Czech Liberal MEP Ondrej Kovarík said all these various pieces of legislation should stay as stable as possible, although some updating will inevitably be needed.

Better predictability

Kovarík remarked that: “Once the regulatory framework is set, we should try to stick to it in order to provide for better predictability – but it doesn’t mean that we shouldn’t address some concerns that still exist.” He added that the possible use of CO2-neutral fuels, including biofuels in road transport for heavy-duty vehicles and passenger cars is something where we still have work to do.

In his view, he thinks the next mandate will be a lot about the implmentation: “(…) there’s a lot that has to be done in terms of secondary legislation and standards. But this was a marathon of legislation that went through in this mandate, but it maybe didn’t take into account all the variables.”

For instance, Kovarík said, the revision of the Common Agricultural Policy with its accompanying climate requirements impacting biofuels was done before the Fit for 55 package was completed: “It was not fully consistent. So the next mandate will be about reviewing the Commopn Agricultural Policy. Should we make sure that these are aligned so it provides a consistent regulatory framework for the sector on all fronts? I think yes.”

Despite this, he said he would not call for revisiting every piece of the Fit for 55 package because that would only create more uncertainties in the market, adding: “But yes we can have some targeted modifications, which is possible with the review clauses.”

Investment framework

Zlatko Kregar, a policy officer for sustainable and intelligent transport at the European Commission, said at the event that the EU executive is confident that the several pieces of legislation impacting the biofuel sector will provide a good framework for investment going forward.

“We expect these pieces of legislation to have an effect of increasing the usage of renewable energy in transport,” he said, noting that the EU’s current emphasis on diverting away from Russian fossil fuels has been a game-changer.

Kregar commented: “Things have changed so much in the past four years when we’ve had a double crisis – with Covid and with the Russian aggression in Ukraine we saw that our energy security and the security of global value chains is not something we can take for granted. Biofuels, or more broadly renewable fuels, can substitute [some of] our imported fossil fuels.”

[By Dave Keating I Edited by Brian Maguire | Euractiv’s Advocacy Lab ]

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