Impacts of the EU biofuel policy on agricultural markets and land use

The European Union's Renewable Energy Directive (RED)1 sets an overall target of 20% of the EU's energy used to come from renewable sources by 2020. As part of this target, at least 10% of total transport fuel consumption is to come from renewable energies (RE). In parallel, the Fuel Quality Directive (FQD)2 requires fuel suppliers to reduce the carbon intensity of road fuels they supply by 6% in 2020. The EU Member States were required to report their expectations and plans on how to meet these targets in National Renewable Energy Action Plans (NREAP) by 30 June 2010, including the technology mix and the trajectory to reach them. However, in the end the extent to which the 2020 mandate will be met is uncertain. During the 2012 Workshop on 'Commodity Market Development in Europe – Outlook'3, held in Brussels, many participants highlighted the difficulty to reach such a level of biofuel consumption. In addition, according to the 2012 ECOFYS report on renewable energy progress and biofuels' sustainability, in 2012 the objectives for transport were already not being met. The European car industry is indeed not ready to use blends with high shares of biodiesel and ethanol. Moreover the contribution of second-generation biofuels towards meeting the target is expected to remain small. Furthermore the repeated droughts in recent years have put pressure on food prices and put forward the world food security debate. The use of food crops to produce biofuels instead of feeding the world has been criticised. Sustainability of biodiesel is especially questioned. In order to reduce the indirect land use change (ILUC) which may be caused by higher demand for food and feed crops for biofuel, on 17 October 2012 the European Commission (EC) published a proposal to amend the RED (COM(2012)595). It proposed to cap the amount of first-generation biofuels that can count towards the 10% renewable energy target at 5%4. In addition, the use of advanced biofuels, with no or low ILUC emissions, would be promoted by weighting their contribution towards fulfilling the target more favourably. The estimated ILUC emissions are also included in the greenhouse gas balance of biofuels for the purpose of compliance with the reporting obligations under the RED and FQD. Therefore the development of the biofuel market is highly uncertain, especially in the European Union (EU). This report aims to analyse different scenarios that could occur in the EU in the years to come.